SSTTAC July 1st Roundtable

I guess I’ll go first Skip.  I see new activities in renewable energy and transportation.

Any other comments?  Let me mention one thing that I learned in a meeting just a week ago with a group that provides major inputs into the nuclear business.  The comment that was very interesting was that when our current nuclear plants were first being built, the suppliers were being asked to provide materials which would last for say 30 years.  But now with the new nuclear plants that are being built, they’re looking for materials that will last 80 to 100 years.  For materials like stainless steel maybe that’s not so much of a problem.  But other components are not made to last for 100 years.  That’s not part of their plan.  So it may be that some materials are going to limit the lifetimes of new nuclear plants and provide a guideline for the other materials that are being provided as well.

Plymouth has been asked to get involved in 60-year design life cycles for the nuclear industry.  I don’t think I’ll be around if they want to make any claims.

We’re still bullish.  All indicators that we’ve looked at, including the purchasing manager index, CEO index and others reconfirm our bullishness.  The rate of growth that we saw in the first half of the year has tapered off, but we’re still growing and we’re still positive through the second half of the year.  But, as Rufino said I think there is a lot of uncertainty out there in the political arena that could change that progress quite quickly.  But we’re still bullish.

Our backlog is three times what it was a year ago.  I certainly have seen the improvement, as you all have.  But there is still concern with that unemployment number above nine percent that there still could be a dip, a second dip.  So I am cautiously positive.

I think the others covered it very well.  Sandvik saw an increase in the first quarter.  However, the second quarter is starting off very slow.  I think as Rufino indicated the distributors are now very cautious, again waiting to see how low nickel will go.  I truly believe the Gulf of Mexico disaster is affecting Sandvik’s business.   There are other sectors that will continue to be very strong no matter what, like the nuclear segment that was pointed out.  So I believe it’s a mixed bag.  It’s certainly better than it was two or three quarters ago.

I don’t disagree with anything anybody has said.  I think there are certain segments that look pretty good and certain segments that are pretty flat.  As Phil said, with what’s happened in the Gulf, if you’re in the offshore segment you’re going to be looking at some bad numbers for a while.

Yes, as a matter of fact we have a global contract with Schlumberger and they basically started to relocate a lot of their people to other parts of the globe as a result of what’s happening in the Gulf of Mexico.

The next question is essentially the quality question.  Why should purchasers buy from SSTAC members in preference to other companies?

I believe the quality; the method of manufacturing that we’re implementing is superior.  We have solid customer approvals, accreditations.  Shorter lead times.  Those are all certainly good reasons to buy domestically.

What new production capabilities have members developed, including certifications?

Well, we were fortunate a little bit earlier this year to achieve NADCAP heat treat capabilities.  That’s primarily required in Europe for the aerospace industry, but it’s also going to be moving here to the States as well from everything we’ve been able to ascertain.  What that means is it really minimizes the risk of field failures which of course the aerospace industry is very sensitive towards because you don’t want problems with an aircraft when it’s flying.  We also have NADCAP certification regarding reduce corrosion.  So there’s a longer service and shelf life for the tubing.

I think Salzgitter had some increase in capacity.  I think that’s worth mentioning.

Well it’s really just an upgrade of a whole lot of equipment and very, very little increase in capacity.  We’ve invested about $15 million the last two years in new equipment.  But the capacity is pretty much the same.  Capacity could even decrease if we decide to decommission some of the older soldering equipment and get rid of it entirely.

Okay.  The extrusion plant that’s owned by Sandvik has increased its capacity up to 15,000 tons from where it was a few years ago, which was about 10,000 tons.  That was done by working on some bottlenecks within the plant including billet preparation and bar preparation.  That’s new within the Sandvik organization.  Sandvik also opened up a control line processing unit in Houston.  That was built to service the global market for oil and gas activities.  And we’ve had approvals renewed, for example NIAC recertification for nuclear 18001.

With respect to the supply chain, what is the availability of raw materials and the capability to meet delivery requirements?

Well, we’re not a melter like Sandvik or Tubacex.  Ninety-five percent of the raw materials come from Europe, and everything is really in good shape now.  Lead times are pretty minimal.  You always have the August shut-down in Europe.  So you lose four weeks there.  But I’d say it’s about the same as it was this time last year, which is still a whole lot better than 2008, 2007.

Joe, how do you find the market with regard to raw materials, not so much as to stainless, but in nickel based alloys?  How do you see it?

As far as the nickel-based products, lead times are out there, nine - ten weeks for raw material.  Our backlog is three to five months out on the specialty stuff.

Thank you all.