Reliance Steel 2Q15 Earnings Call Notes

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Strength in aerospace, automotive and non res construction

“the aerospace and automotive end markets remain strong and we see ongoing opportunities for continued growth in these markets. We also continue to be encouraged by slowly improving momentum in our activity levels in the nonresidential construction market our largest end market. ‘

Pricing softer than expected for commodity types

“Pricing for all commodity types continued to weaken as the second quarter progressed, primarily due to historically high level of imports, supported in part by the strength of the U.S. dollar. In fact, pricing was even softer than we had projected heading into the second quarter.”

Have seen prices start to firm though

“On a positive note we have started to see pricing begin to firm with certain products in recent weeks. And we’re cautiously optimistic that overall metal prices will trend modestly higher in the second half of 2015.”

Non res has improved but well below peak levels

“Nonresidential construction is our largest end market and although we have seen demand continue to improve, it remains well-below the peak levels. We are optimistic that this important market will continue to improve gradually throughout 2015 and 2016. ”

Second quarter tons were down y/y

Given the market conditions discussed earlier our 2015 second quarter tons sold and average selling prices were down compared to the 2014 second quarter as well as the 2015 first quarter.”

Not seeing any change in behavior from OEMs other than that they know prices are down

“The behavior of the OEMs has not changed dramatically other than the fact that they have seen prices going down, so they’re being more conservative on their buys. So and Metals USA has gained more momentum on the smaller order size business because of the environment that they’re now in Reliance Steel.

But you know as far as the OEMs we’re just seeing the OEMs reduced their buying patterns. It’s not like they’re cutting back their tonnage, they are just buying it more frequently more often, okay and just being cautious of the fact that metal prices are under pressure due to offshore – you know. But they’re not – we don’t see a lot of buying OEMs going outside of the country it is still remaining pretty much with the domestic producers, so we’re not seeing any change in behavior there.”