April 2017 - The metals sector is so many things at once. It’s often innovative, but it’s historically been frequently slow to adapt to a fast-moving world of change. One good thing about a gradual recovery period following a devastating global recession, however, is it gave service centers and processors a bit of breathing space. They examined their assets and their people and made hard choices about what to keep and whom to groom for tomorrow and what to jettison. They took their time bringing in the right people, retooling their shops, getting involved in new markets, product lines, capabilities and technology.
So, 2017 appears to be the exact right moment to use all those skills and capabilities and finally fill up the plant with orders, turn them around, create the best brands and the best quality and show the world just how strong and capable they really are.
We have been almost gobsmacked by the positive response this spring when we ask people, “How’s business?” An Ohio machinery builder told us, “We’re busy. We’re feeling optimistic. Things are picking up.”
According to the Institute for Supply Management (ISM), Tempe, Arizona, the manufacturing sector has been in growth mode for six months. The manufacturing PMI rose 1.7 points between February and March, the New Orders Index increased 4.7 points, Order Backlogs jumped 7.5 points and the Production Index is on the rise.
A metals producer surveyed by ISM reports: “Bookings are heavy early in the season. [We] expect a robust first half.”
U.S. total non-farm payroll employment increased by 235,000 in February, and the jobless rate was 4.7 percent. Construction, manufacturing and mining were among the sectors hiring more people.
One of the key survival steps that metals companies took during the downturn and rebound was to diversify. For example, Olympic Steel Inc. entered the stainless steel business and that’s its biggest growth market right now. Reliance Steel and Aluminum expanded its aluminum coil processing capacity in order to meet the greater need for automotive-grade aluminum and that’s been a home run so far. For more insights into the service center prospects, read our service center outlook.
But because “service” is the key identifier of the distribution industry, companies never forget what’s most important: Relationships. Holman Head, O’Neal Industries president and COO, says, “Relationships are still more important in distribution than anything else, and that will always be the case.”
Lonnie Terry, who retires this month following a 20-year stint as president of the North American Steel Alliance, built his career on relationships and treasures those connections.
One might not yet be confident enough to buy a Rolex, but given pledges of federal spending on infrastructure, and the fact that 520 more oil and gas rigs were operating mid-March in the U.S. and Canada, compared with a year earlier, window-shopping isn’t out of the question. MM