Metal stampers mostly buy steel from service centers, who provide steel processing services like cutting of steel slabs, tubes and bars and slitting of coil stock. While there are relatively few steel mills in North America these days, there are hundreds of service centers.
Reliance Steel & Aluminum Co. has agreed to buy Earle M. Jorgensen Co. in a $643 million cash-and-stock deal.
The deal, announced Wednesday, will bring EMJ’s 39 metal processing facilities in the United States and Canada under Reliance’s umbrella. The deal is expected to close in the second quarter.
And some analysis:
Reliance Steel-EMJ deal seen opening flood
Reliance’s acquisition […] could open the floodgates for a wave of consolidation among service centers, the key middlemen in the steel industry, analysts said on Wednesday.
“There are a lot more (deals) to do,” Charles Bradford, of Bradford Research/Soleil, said.
Another analyst, who requested anonymity, said: “This has been a consolidating industry for 25 years and as more (steel) mills consolidate there will be even more among service centers.”
So-called service centers are essentially middlemen, who buy and sell steel, between the big steel manufacturers and end-users. They hold steel inventories for sellers and sometimes do process steel to specifications for buyers.
“There are lots of economies to be made by being less fragmented,” said Bradford. “Often service centers will deliver steel.”
There are thousands of service centers, comprising some 40 percent of the steel market. But it is fragmented, with few of the companies having annual sales over $100 million.