Reliance Steel reports steel prices are softening

Reliance Steel & Aluminum Company (RS) is a $3.1B market cap company that “…provides value-added metals processing services and distributes a full line of more than 100,000 metal products. These products include galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass, copper, titanium and alloy steel..” The company reported earnings last Thursday (click here for the transcript of the third quarter conference call) and warned that “steel prices have begun to soften again after going up briefly at the end of the third quarter.”

The company discussed a wide array of pricing dynamics. Here are a few of the more notable examples that describe pricing in the steel industry today:

“Average prices per ton sold in the 2010 third quarter were up 20% compared to the 2009 third quarter and up 1% compared to the 2010 second quarter. For the 2010 third quarter, carbon steel sales were 52% of net sales; aluminum sales were 18%; stainless steel sales were 16%; alloy sales were 8%; toll processing sales were 2%; and other miscellaneous sales were 4%.”

“Steel prices have begun to soften again after going up briefly at the end of the third quarter. Pricing on our other metals seems to be more stable to up entering the fourth quarter, which we expect to be seasonably softer from a volume perspective than the third quarter.”

“…carbon steel pricing on most all products began to decline in July. A fair amount of imports came in during the July through September time frame that was ordered when the dollar was gaining strength. Imports, along with lackluster demand, helped drive prices downward. However, to keep things in perspective, flat-roll prices today are very close to where they were in January o 2010. If domestic mills continue to align production capacity with demand and scrap goes up along with raw materials, we could be close to the bottom of the pricing cycle and stay above the $500 a ton mark.”

“Midwest spot aluminum ingot averaged, for the month of September, $1.05 a pound and has traded at a relatively healthy range all year with a low of $.94 on a monthly average basis to a high of $1.11 a pound.”

“…the base price for stainless has remained flat so far this year. Nickel surcharges, on the other hand, have continued to be volatile. Nickel average monthly surcharges peaked in June at $1.27 a pound, fell to $.93 a pound in September and closed at $1.04 a pound in November. It appears our December monthly average surcharge will be $.05 a pound or higher.”

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