Industry Reports

A Quick Look Inside the Metal Wholesaling Industry

A Quick Look Inside the Metal Wholesaling Industry steel pipes steel tubes photo

Continuing our metal theme from two weeks ago, I’m focusing on the metal wholesaling industry for today’s post.

Here’s a quick look inside the metal wholesaling industry based on a July industry report from IBISWorld.

Metal Wholesaling: A Brief Industry Definition

The metal wholesaling industry consists of companies which distribute iron, steel, brass, copper, aluminum, and other nonferrous products and metals to various industries like utilities companies, construction firms, and machinery manufacturers.

Key Names in the Metal Wholesaling Industry

The metal wholesaling industry has a low market share concentration with no major players, but three companies do stand out:

  • Reliance Steel and Aluminum Co. (4.6% market share): a metal service center company serving 13 countries and 40 U.S. states. Their June 2019 revenue was $2.884 billion.
  • Kloeckner Metals Corporation (2.3% market share): A Roswell, Ga.-based subsidiary of Kloeckner and Co. SE, an independent German metal and steel distributor. Kloeckner & Co. SE reached a total revenue of €6.8 billion in 2018.
  • Ryerson Holding Corporation (2.2% market share): This Chicago-based metal distributor and processor works throughout the U.S. and has operations in China, India, and Brazil. Their Q1 2019 revenue was $1.23 billion.

3 Key Factors that Drive – Or Hinder – Industry Growth

IBISWorld identifies a few key external drivers that propel or stall growth in the metal wholesaling industry.

They include:

  • The world prices of steel and aluminum
  • The industrial production index (IPI)
  • The oil and natural gas price index
1) World Steel & Aluminum Prices

Steel drives most of the revenue for this industry. When world steel prices are high, the industry grows, and when world steel prices are low, the industry revenue and profit margins decrease because of inventory devaluation.

The same goes for the price of aluminum, which is the third-largest revenue generator for the metal wholesaling industry. High aluminum prices = revenue growth, and low aluminum prices = stalled revenue growth.

2) The Industrial Production Index (IPI)

Now, let’s look at the industrial production index (IPI) and how this affects the metal wholesaling industry.

Investopedia defines the IPI as “a monthly economic indicator measuring real output in the manufacturing, mining, electric and gas industries, relative to a base year.”

IPI measures the levels of production, capacity, and capacity utilization of the mining, manufacturing, and utilities industries.

The mining and manufacturing industries buy products from companies in the metal wholesaling industry, so when they have a higher output (and inherently, higher IPI), they buy and use more metal products.

This leads to an increase in revenue for the metal wholesaling industry.

3) Oil and Natural Gas Price Index

IBISWorld defines the oil and natural price index as “a weighted average price index of US crude oil and natural gas prices.”

Low prices for natural gas or crude oil lead to reduced drilling. Less drilling means a decrease in demand for metal products from metal wholesalers and distributors.

But when oil and natural gas prices are high, there’s an increase in demand for metal products.

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Current Industry Performance

From 2014-2019, the metal wholesaling industry grew at an annualized rate of 0.7% per year due to three main reasons:

  • Volatile metal prices
  • An oversupply of aluminum, steel, and other products
  • Decreases in steel and aluminum prices/price

Anticipated Industry Performance

IBISWorld predicts that from 2019-2024, the metal wholesaling industry will experience a slight uptick in growth to an annualized growth rate of 1.0% from 2019-2024.

 A Quick Look Inside the Metal Wholesaling Industry IBISWorld Metal Wholesaling Industry US






Source: IBISWorld 

Potential industry growth could stem from factors such as:

  • An increase in industrial production from machinery manufacturers, transportation equipment manufacturers, metal fabricators, heavy construction companies, and mining companies
  • A steady increase in the price of aluminum
  • Less vitality in world metal prices

As a result, the metal wholesaling industry may continue to be one of the largest industries in the U.S.