Service Centers
Reliance Seeing Healthy Demand, Limited Impact from UAW Strike
Written by Laura Miller
October 26, 2023
Reliance Steel & Aluminum Co.
Third quarter ended Sept. 30 | 2023 | 2022 | % Change |
---|---|---|---|
Net sales | $3,623 | $4,247 | -15% |
Net earnings (loss) | $296 | $394 | -25% |
Per diluted share | $4.99 | $6.45 | -23% |
Nine months ended Sept. 30 | |||
Net sales | $11,469 | $13,414 | -14% |
Net earnings (loss) | $1,067 | $1,493 | -29% |
Per diluted share | $17.92 | $23.98 | -25% |
Reliance Steel & Aluminum Co. is anticipating overall demand to remain healthy through year’s end despite some weakening in some sectors and normal seasonality.
The Scottsdale, Ariz.-based service center behemoth made the comments in its third-quarter earnings report, in which it showed year-over-year declines in sales and income (see chart above).
Reliance president and CEO Karla Lewis said overall tons sold were down slightly more than anticipated.
Sales of carbon steel products declined 4.6% sequentially to 1,150,600 net tons, but this was a rise of 1.7% from the year-ago quarter. This reflected seasonality and lower demand for carbon flat-rolled products due to price declines and “cautious customer behavior,” the company said.
Average Q3 selling prices of carbon steel products were down 2.3% from the prior quarter and 17.2% from Q3’22.
Outlook
Reliance expects tons sold in Q4 to be down 4-6% sequentially, “consistent with seasonal trends.” Compared to last year’s Q4, however, tons sold should rise 3.5-3.5%, it said.
On pricing, Reliance believes “many products will be near trough levels in the current cycle at some point in Q4 2023, with certain products leveling off or increasing modestly.”
Reliance is bullish on demand, given government spending initiatives and nearshoring activities in the manufacturing sector.
The non-residential construction is the largest end market for the service center group. The sector saw improved demand during Q3 compared to Q3 last year, and demand should remain healthy in the current quarter, “based on current customer sentiment and backlogs, subject to normal seasonality,” it said.
Demand from the broader manufacturing sector is expected to decline in the current quarter, mostly due to seasonal factors.
UAW Strike’s Impact on Reliance
On the company’s Q3 earnings call with analysts, Lewis commented that 60-65% of Reliance’s tolling business is automotive-related, and a portion of that goes to the “Big Three” Detroit-area automakers’ facilities where the UAW’s strike is occurring.
The company has so far seen limited impact from the strike, Lewis said, noting, however, that the company is expecting to see more of an impact in the current quarter.
But “even if there is a broad expansion [of the strike], it will not be material to Reliance as a whole in Q4,” she noted.
Reliance is optimistic about long-term demand for its toll-processing services but is cautious for the current quarter due to the UAW strike.
Laura Miller
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