Synalloy cuts outlook on prices, inventories

Chemicals and metals producer Synalloy today reduced its 2019 revenue guidance by 3pc amid margin pressure from falling prices, higher inventory levels and lower volumes.

The Virgina-based producer expects full-year revenues of $329mn, down from it prior outlook of $340mn, the company said in a guidance update.

Surcharges depreciated on a temporary surplus of welded stainless steel pipe, leading to an average 15pc slide in sales prices from a year earlier. Falling prices in turn have squeezed margins by 9pc.

Consolidation among master distribution companies also contributed to higher-than-normal inventory levels, according to the company. Tapping into the change, customers have reduced the size and frequency of stock purchases, which raised the freight cost per pound, while they also sought out more favorable pricing.

Sales prices for galvanized tube also fell, but Synalloy believes prices bottomed in May and will increase over the balance of 2019.

In addition, weakening demand from the energy market over the last several months has negatively impacted shipments of larger diameter tube. Shipments of heavy wall, seamless carbon tube from the Houston distribution center were down by 33pc in the year from a year earlier.

Declining sales across those markets was partially offset by better demand in others. The company highlighted demand for ornamental stainless tubing originating from American Stainless Tubing, which it acquired in December. Growth has also continued in storage tank product lines and specialty chemicals.