EUR 850.00 For Business Accounts Only

Morningstar | Favorable Steel Market Conditions Have Boosted Profits for Reliance Steel & Aluminum

Reliance Steel & Aluminum is the largest player in the highly fragmented North American metal service center industry. Given that metal service centers purchase and resell roughly half of all metal products manufactured in the United States, Reliance is a key customer for many large domestic steel mills. The company plays an important role in the supply chain for end users of a wide variety of steel, aluminum, and alloy products by purchasing large volumes of metal and processing it to meet customer specifications. In many cases, the end users of these processed metal products are too small to invest in processing equipment of their own and require shipment volumes below the minimum order size needed to receive shipments directly from mills.Reliance’s role is that of an intermediary, as the company distributes over 100,000 product types to over 125,000 customers. Reliance reduces the impact of volatile steel prices on its bottom line by purchasing metal at spot prices and quickly selling finished goods that reflect the going market price for the raw materials, rather than entering into supply contracts with customers without short-term price adjustments for input costs. To efficiently manage working capital and better serve its customers, Reliance provides just-in-time delivery services, delivering nearly half of its shipments within 24 hours of the order being placed. This helps alleviate competitive pressures from foreign producers, as imported goods take much longer to reach U.S. customers.Reliance has been profitable every year since its 1994 initial public offering and has predominantly driven growth by acquisition. Since going public, the company has consummated over 60 acquisitions, an average of nearly three per year. Reliance's largest acquisition to date was the $1.2 billion purchase of Metals USA in April 2013. We anticipate that management will continue to pursue M&A opportunities as the industry undergoes gradual consolidation.