Distributor takes stock over steel
STEEL users must swallow the price pill if they want guaranteed supplies in a tightening world market, according to one Teesside distributor which is defying the industry trend by increasing stock levels.
Van Leeuwen Wheeler said it was prepared to “gamble on future demand” although it would not guarantee prices going forward.
“We have been in the steel business for many years and we have never seen the explosion that we have in the past four months,” said managing director Jeff Blakey.
Prices had risen by 35% to his customers and more increases were in the offing this summer. “But it doesn’t matter what price it is if you haven’t got it. We are acting as a buffer by saying we will increase volume and range, but unfortunately when you come to buy it, it will be more expensive. Some customers are saying they can’t pass the price on, but in reality they will have to or they will go out of business.”
He said the UK market for steel was “not bullish but steady”.
Lead times from European steel suppliers had increased to 26 weeks, largely as a result of competition with Asian and Eastern European buyers.
“We are buying metal now through to November and we do not know what price it will be until it arrives. In addition we have seen sterling strengthen 15% against the Euro,” said Mr Blakey.
He said the main problem for customers was liquidity.
He said while it was tempting to reduce stocks, the decision to expand the Middlesbrough plant by 40%, adding a further 40,000 sq ft was “essentially a question of balancing customer needs against market conditions”.
John McDonald, a consultant for the North-east with The Lean Consortium, which is leading a lean manufacturing programme on behalf of manufacturers association EEF next month, said most companies were anxious to reduce stock levels
“Stock holding exposes a company’s risk,” he said. “It’s fine if your client has given a firm commitment to take it off your hands, but if you buy on spec and you have a customer that changes his mind you end up with a warehouse full of stuff that you can’t move.”
Even so, many UK companies had increased stock levels recently in a bid to beat foreign competition.
“Generally, firms carry too much stock, but it’s keeping a lot of UK companies alive in the current climate because you can get things to customers much quicker.”
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