SIC 5051
METALS SERVICE CENTERS AND OFFICES



This industry comprises establishments primarily engaged in marketing semi finished metal products (except precious metals). Products of the industry include aluminum and copper (sold in bars, rods, sheets, pipes, plates, etc.), iron and steel products (such as rough castings, bearing piles, flat products, and semi finished products), lead, mercury, tin and tin base metals, and zinc. The industry also includes establishments engaged in the wholesale distribution of wire products (such as screening and bale ties), metal bars, nails, and metal tubing. Establishments primarily involved in the wholesale distribution of metallic ores (including precious metal ores) are classified in this industry. Establishments primarily involved in distributing semi finished precious metals are classified in SIC 5094: Jewelry, Watches, Precious Stones.

NAICS Code(s)

421510 (Metals Service Centers and Offices)

The U.S. Census Bureau reported a total of 11,250 establishments within this industry in 2001, 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; nonferrous metals do not contain iron.

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, while total industry sales were in excess of $7.3 million. In 2003, the number of establishments stood at approximately 11,975. Total annual sales for this industry were about $111,985 million in 2003. The average sales per establishment were about $13 million.

Ferrous metals service centers represented the largest segment of the industry, 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.

According to Purchasing, service centers supply a third of all the metal fabricated by manufacturing. 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 non-ferrous metals consumed in North America. Since the demand for total metals was expected to drop by 2 to 3 percent in 1999, metals service center shipments were expected to decline by about the same amount. Purchasing 's Metals Distribution Index was thus expected to drop from 148.8 to 142.6. Other industry analysts predicted that market share of service centers would grow, reaching 40 to 45 percent within a decade or so.

Metals service centers received shipments from mills and prepared 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. However, shipments were expected to drop to about 30 million tons in 1999. Aluminum center shipments increased from a little more than 2 billion pounds in 1994 to nearly 2.4 billion pounds in 1998. These shipments were expected to increase slightly in 1999. 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. SSCI also said that shipments reached a record of 28.8 million tons in 1997, compared to 27.1 million tons in 1995. Average daily shipments increased by eight percent in 1997 compared to the previous year. Statistics offered by the American Iron and Steel Institute (AISI) reported that the U.S. steel mills shipped 9,038,000 net tons, up from 7,577,000 net tons, or 19.3 percent in 2003. The U.S. aluminum shipments were also expected to increase by two to three percent.

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 nine 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 iron, copper and steel market was expected to increase 544,000 tons, which would make it the highest shipment in history. The nonferrous metals had 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. Some analysts believe the overall demand will increase in 2005.

Following the general trend in the wholesale industry, there was significant consolidation through mergers of metals service centers in the late 1990s, with 1997 and 1998 being 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 to be renamed Harvy Titanium. In addition, according to Business Week, there were also a number of steelmakers that had to resort to Chapter 11 bankruptcy protection by 2003.

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 975 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.

The top 10 companies according to Supply Chain magazine, in terms of 2000 annual sales, were Ryerson Tull Inc. of Chicago, Illinois, with $2.86 billion; Thyssen Inc. of Detroit, Michigan, with $2.3 billion; Metals USA Inc. with $2.1 billion; Reliance Steel & Aluminum Co. of Los Angeles, California, with $1.73 billion; MacSteel Service Centers USA of Torrance, California, with $1.4 billion; Worthington Steel Co. of Columbus, Ohio, with $1.2 billion; Samuel Son & Co. of Mississauga, Ontario, with $1.19 billion; Rio Algom Metals Distribution Group of Minneapolis, Minnesota, with $1.15 billion; EMJ (Earle M. Jorgenson Co.) of Brea, California, with $1.07 billion; and Russel Metals Inc. of Mississauga, Ontario, with $1.03 billion. Ward's Business Directory 2000 also listed two Japanese subsidiaries: Marubeni America Corp. and Mitsui and Company, both of New York City, among the top leaders. Marubeni America Corp.'s total sales for 2003 were $3.5 billion.

Further Reading

American Iron and Steel Institute. "2003 Steel Shipments Increase 6.5 Percent From 2002," 13 February 2004. Available from http://www.steel.org/news/pr/2004/pr040213_ship.asp .

D&B Sales & Marketing Solutions, 2003. Available from http://www.zapdata.com .

"Metals & Machinery: Iron Stomach Needed." Business Week, 13 January 2003. Available from http://www.businessweek.com:/print/magazine/content/03_02/b3815716.htm?bw .

"Processing Distributors Keep Consolidating Ownerships." Purchasing, 6 February 2003. Available from http://www.manufacturing.net/pur/article/CA273571?stt=001&pubdate=02%2F06%2F03 .

"Service Center Forecast." AMM Online, 20 January 2000. Available from: http://www.amm.com/inside/2000/jan/0120si.htm .

Stundza, Tom. "Demand rebound won't be Hampered by Price Explosion." Purchasing, 11 December 2003. Available from http://www.keepmedia.com/pubs/Purchasing/2003/12/11/338039 .

Stundza, Tom. "Top 100 Metal Service Centers: The Big Keep Getting Bigger." Purchasing, 6 May 1999. Available from http://www.manufacturing.net/magazine/purchasing/archives/1999/pur0506.99/051mtop.htm .

U.S. Census Bureau. Statistics of U.S. Businesses 2001. Available from http://www.census.gov/epcd/susb/2001/us/US421420.HTM .

Ward's Business Directory of U.S. Private and Public Companies 2000. Farmington Hills, MI: Gale Group, 2000.

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