Rapidly increasing demand for structural steel has led some suppliers in the United States to initiate a controlled order entry process to ensure that customers have an adequate supply of steel for the projects they are working on. With controlled order entry, rather than selling steel on a first-come, first-served basis that could allow a small number of buyers to corner the market on all available steel, customers purchase steel on the basis of how much they purchased in the past.

“We can talk to our customers and find out the real need vs. the speculative or hedge-buying need,” explained Joe Stratman, general manager of Nucor-Yamato Steel Company in Blytheville, Arkansas, the nation’s largest producer of wide flange. Nucor-Yamato’s action comes as steel shipments are up as much as 25% compared with a year ago.

According to Stratman, as the market strengthened beginning late last year, rolling cycles began expanding. (A rolling cycle is the time before the same size member is again produced by the same mill and varies between mills based on their product mix and equipment.) “As the cycles started expanding, people felt they needed to get out ahead of the market,” he said. “They’ll start buying further and further out. It originally grows by legitimate demand, but it expands by speculative buying.”

Yamato’s response was to discuss needs with their customers and when required to limit purchases based on previous levels of demand from a specific customer. “Controlled order entry is a way to meet the real demands of the marketplace on a timely basis,” he explained. “The controlled order entry process is expected to put us on a maximum 12-week cycle once it’s fully implemented.” Reportedly, rolling cycles are currently extended two or more weeks beyond that at Nucor-Yamato.

Steel Dynamics, Inc., another major supplier of wide flange, is using a similar process, though SDI’s rolling cycles are still typically at six or eight weeks. “We open up rollings 12 weeks out,” said James Wroble, SDI’s sales and marketing manager in Columbia City, Ind. “What’s different about this year is that people want to book further and further out. A year ago there was a noticeable pick-up in business. We were booked a month out, then five or six weeks. And then 12 weeks. We decided we’re not going any further than that because our customers really can’t predict any further out.” As with Nucor-Yamato, when there are more requests than a rolling can accommodate, purchases are based on a customer’s previous history. The situation is expected to ease drastically late next year when SDI brings another mill online with an anticipated capacity of 600,000 tons.

For fabricators who buy primarily from mills, the controlled order entry system is largely viewed as a positive. “It’s a plus for us,” reported James A. Stori, president of STS Steel, Inc. in Schenectady, New York “As a medium-size fabricator, it’s let me get back into the rolling schedules.” Stori also is optimistic that once the system is fully implemented rolling cycles will shorten.

“It should create a better balance between service center buying and fabricator buying,” he added.

Service centers currently sell approximately 70% of the structural steel used in buildings and fabricators who buy primarily from service centers are reporting adequate availability. “We typically buy 90% of our material from service centers and currently we’re buying maybe 98%,” said Stephen E. Porter, president of Indiana Steel Fabricating, Inc. in Indianapolis and current chairman of the AISC Board of Directors. “We’re having no trouble getting material from service centers. There’s no problem with material availability for both beams and tubes.”

There have been some reports of service centers “loaded to the rafters” with steel, but these extremely high inventories are probably in part due to the extended mill rolling schedules that result in higher service center stocks at the beginning of a cycle to carry over until the next rolling.

“Inventory is higher than normal, but in line with shipment volume,” explained Bill Jones, president and CEO of O’Neal Steel in Birmingham, Alabama. “Demand is very strong. We are able to buy our forecasted needs and our inventory is sufficient to support our customers.”

At Saginaw Pipe Co. in Saginaw, Alabama, inventory has never been higher. “Demand is high and people are starting to realize some sections are not easy to find,” explained Howard Wise, Saginaw’s CEO. “Fortunately, up to this point we’ve been able to take care of our customers.”

And Derek Halecky, president of PDM Steel Service Centers Stockton, California, agreed. “Our inventory is well positioned to meet the demand and expectations of our customers in the second half of the year for all structural products. We’re probably better positioned for today’s market than in previous demand spikes.”

Ron Hammond, CEO of Triad Metals International in Willow Grove, Pennsylvania, cautioned that availability is getting tighter and some shapes are becoming more difficult to get but “our inventory is constantly being replenished.” Marcus Lampros, owner of Lampros Steel in Portland, Oregon, agreed and cautioned that while inventory is adequate to meet demand for most shapes, service centers stock heavy shapes. “If you’re a fabricator who buys strictly from warehouses, be advised that distributors need to receive a premium for these sizes if they are going to stock them on a regular basis,” Lampros said. Jones added that he anticipates the structural market, both for wide flange and hollow structural sections, will remain strong at least through the middle of 2007. “Availability is tight [for HSS], but not as severe as beams.”

Independence Tube, the nation’s second largest producer of HSS, typically runs either a four- or eight-week cycle depending on the size of the section. “Unlike a few years ago, there’s no problem getting raw materials so we have no production problems,” said John Tassone, marketing manager with Independence in Chicago. However, most of the HSS producers no longer have large inventories but are instead selling off of their rolling schedule. “It’s required a mindset change at the service centers,” Tassone said. “Because the producers don’t have a lot of inventory on the floor, service centers have to plan ahead and book into the rolling. And most material is available within eight weeks out.”

Independence is opening a facility in Alabama and isexpected to be at full capacity by the end of the year.

Randy Boswell, vice president of North American Sales for Atlas Tube Inc. in Plymouth, Michigan, the nation’s largest HSS producer, agreed that HSS is widely available. “Lead times have come down from six-to-eight weeks earlier this year to four to five weeks today,” he said. “Our next cycle is sold out but future production runs are open.” Atlas’ production cycle is three-to-four weeks (meaning they produce every size they sell within that time period) and a little more than 70% of their sales are to service centers. “While supplies are tighter than a year ago, HSS is still readily available and on a good schedule,” he stated.