Metals Service Centers and Offices

Industry Snapshot

According to Dun & Bradstreet's Industry Reports, there were 14,935 metal service centers and offices in the United States in 2010. Together these establishments employed 162,681 workers and generated annual sales of $68.2 billion. Steel and ferrous metals represented the largest categories in the industry, accounting for 20 percent and 16 percent of total revenues, respectively. Illinois accounted for the largest number of employees in the industry, with 21,689, followed by Texas with 15,746 and California with 13,722, whereas the highest percentage of sales came from New York, which had $14.2 billion in 2009 revenues, or about 21 percent of the nation's total. The second and third top-earning states in the industry in 2009 were Illinois with $11.1 billion and California with $8.3 billion. Texas and Florida rounded out the top five in terms of revenues, with $7.4 billion and $4.4 billion, respectively.

Background and Development

According to Purchasing, service centers supplied a third of all the metal fabricated by manufacturing in the late 1990s. These service centers shipped an estimated 32.8 million tons in 1998, an increase of 4.1 percent compared to the previous year, out of the 128 million tons of ferrous and nonferrous metals consumed in North America.

Metals service centers receive shipments from mills and prepare products for manufacturers and other end users. Both aluminum and steel service centers suffered from a nationwide economic downturn during the early years of the 1990s. As the economy recovered, so did shipments. Steel service shipments increased from about 27 million tons in 1994 to around 30 million tons in 1998, according to Purchasing. Aluminum center shipments increased from a little more than 2 billion pounds in 1994 to nearly 2.4 billion pounds in 1998. Copper center shipments peaked in 1994 at more than 500 million pounds, then declined in 1998 to around 460 million pounds.

According to statistics offered by the Steel Service Center Institute (SSCI), almost 45 percent of domestically produced stainless steel and 30 percent of carbon industrial steel was purchased and distributed through steel service centers in the late twentieth century. Shipments reached a record of 28.8 million tons in 1997, compared to 27.1 million tons in 1995. Average daily shipments increased by 8 percent in 1997 compared to the previous year. Statistics offered by the American Iron and Steel Institute (AISI) reported that U.S. steel mills shipped 9.0 million net tons in 2003.

The U.S. Census Bureau reported a total of 11,250 establishments within this industry in the early 2000s, which were subdivided into three classifications: ferrous metals service centers (those operating with a warehouse), ferrous metals sales offices (those operating without a warehouse), and nonferrous metals service centers and offices. Ferrous metals contain iron, whereas nonferrous metals do not.

In 2001 the U.S. Census Bureau reported that this industry employed 162,222 workers. Establishments within the industry posted a combined annual payroll of $7 million for that year. In 2000 approximately 168,576 individuals were employed by metals service centers and offices. By 2003, the number of establishments had dropped to approximately 11,975. Average sales per establishment were about $13 million.

Ferrous metals service centers represented the largest segment of the industry in the early 2000s, numbering 5,840 establishments, with combined sales totaling $47.8 billion. Ferrous metals sales offices numbered 2,388, with $28.5 billion in sales. The 2,053 nonferrous metals service centers and offices had combined sales of $24.8 billion.

Also, in 2003, AISI reported that within the major metal markets, service centers and distributors were up 6.3 percent in 2003; automotive was down 5 percent; construction and contractors' decreased 8.4 percent; oil and gas was up 8.6 percent; machinery, industrial equipment, and tools were down 2.5 percent; appliances, utensils, and cutlery climbed 9 percent; containers, packaging, and shipping apparatus dropped 9.3 percent; and electrical equipment fell 10.2 percent.

The overall market was in a slow period and dropped 2.3 percent in 2003, followed by a 2.4 decline in 2002. The nonferrous metals segment, however, increased in 2003 to 1.05 million tons. This was the first time since 1999 that the nonferrous metals had seen this kind of demand.

Following the general trend in the wholesale industry, there was significant consolidation through mergers of metals service centers in the late twentieth century, with 1997 and 1998 peak years. One of the biggest during 1997 was the merger of Tubesales and Williams & Co. to form TW Metals of Exton, Pennsylvania. In the first quarter of 1999 there were seven acquisitions involving steel and aluminum centers.

The consolidation of the industry continued in 2003 when MacSteel Service Centers USA, a leader in the industry, acquired most of the assets of Baldwin Steel Co., located in Lawrence Harbor, New Jersey, from the Duferco Group. Rolled Alloys, a service center in Temperance, Michigan, acquired the Metals Aerospace International, a subsidiary of Metals USA, located in Santa Monica, California. The newly formed service center was renamed Harvy Titanium. In addition, according to Business Week, there were a number of steelmakers that had to resort to Chapter 11 bankruptcy protection in 2003. Mergers and acquisitions continued to abound in the metals industry into the late 2000s, with 2007 bringing a record $77 billion in transactions.

Customers also began putting more challenging demands on metals service centers during the same period. These included meeting promised delivery dates and consistently providing high-quality goods at competitive prices, according to Purchasing. New areas of customer service were also being added, including supply of finished parts and management of logistics. These developments were blurring the lines between service centers and independent processors.

The majority of service center companies were small; nearly 90 percent of the North American centers listed by Purchasing magazine had annual sales under $100 million. 39 percent had their corporate offices headquartered in the Midwest, while 72 percent operated service centers where most manufacturing is located. Construction was the largest market.

Current Conditions

Like many industries, metal service centers and offices suffered from the economic downturn of the late 2000s. According to Metal Center News, the steel industry started to "nosedive" in the fourth quarter of 2008 and continued on a downward spiral throughout 2009. Major domestic producers of steel saw a 35 percent drop in shipments and a 52 percent decline in revenues in 2009. However, some expected a slow recovery into the 2010s, as steel mills resumed operations and brought new capacity online. According to a August 2010 survey by of Precision Metalforming Association (PMA), 25 percent of metal forming companies expected an improvement in economic activity for the remainder of the year, whereas 57 percent predicted the economic environment would remain the same and 17 percent expected a decline. Nevertheless, 2010 was an improvement over 2009. Said William Gaskin of PMA, "Metalforming companies experienced strong increases in orders and shipments during the first half of 2010 from the very low levels of 2009."

An August 2010 report by IBISWorld also predicted that the U.S. metal wholesaling industry would recover by 2015. Although imports and overseas production would continue to provide challenges for the industry, according to the report, an increase in construction and machinery manufacturing would boost sales.

Industry Leaders

The industry leader in 2010, according to Metal Center News, was Reliance Steel & Aluminum Co. of Los Angeles, California, which reported revenues of $5.3 billion in 2009 and more than 9,000 employees. Second was McJunkin Red Man Corp. of Chicago, which had $3.6 billion in annual 3,650 employees. Ryerson Inc., also of Chicago, held the third position with 2009 sales of $3.0 billion and 4,060 workers. Rounding out the top five in the United States were ThyssenKrupp Materials of Southfield, Michigan, with $2.1 billion in sales and 3,000 employees, and O'Neal Steel Inc. of Birmingham, Alabama, with 2009 revenues of $1.6 billion and 3,300 employees. Other industry leaders, all of which recorded annual sales of more than $1.0 billion in 2009, included Macsteel Service Centers USA (Newport Beach, California), Namasco Corp. (Roswell, Georgia), Steel Technologies Inc. (Louisville, Kentucky), Carpenter Technology Corp. (Wyomissing, Pennsylvania), and Metals USA Holdings Corp. (Fort Lauderdale, Florida).