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'Corus may drive stockholders away '

STEEL

With five price rises in the past year and another scheduled for January, Corus has kept British stockholders on their toes.Here Rainham Steel's commercial director Trevor Webb warns the manufacturer not to push stockholders too far. Joanna Booth reports

TREVOR WEBB believes that Corus, the Anglo-Dutch steel manufacturer, could lose business if it keeps pushing up prices.

'I think Corus is shooting itself in the foot, ' says Rainham Steel's commercial director, shaking his head.'I really don't know what they're playing at.They've had a good run - five increases in 10 months. It's too early for another - they should have at least waited until February or March.'

With material coming into Britain from Korea, Russia, America, Poland and Brazil he thinks the company is risking customers moving to imported steel to find a competitive price.

'You've got the South Africans coming over on a more regular basis than ever before, ' he continues.

'And that's even without mentioning Arcelor. It's like they're asking for the floodgates to open. I honestly think they're making a big mistake.'

This year Corus supplied 80 per cent of Rainham's steel but this could change if prices become too high.

'We prefer to buy from Corus wherever we can, 'Mr Webb continues.

'But they have to be fairly competitive.The stuff we import is the same grade.There's nothing Corus can offer that others can't.'

Mr Webb believes the industry is only now seeing the effects of the August price rises, and that October's increases are yet to hit home.The initial price hikes in January caught stockholders unawares and they are running scared.

'We apply the price rises on the day of increase.That's why we get the benefit. In June and April everyone did the same and it worked OK. But in January a lot of people didn't think the increases were going to stick.They took a month or so to apply the rises, sold the stock they had and then found it very difficult to replace, ' says Mr Webb.

As a result of this scare many stockholders are now sitting on too much steel, Mr Webb reckons.'Everyone's got high stocks.They don't want to get caught out again. But they're having to turn them over to keep cash flowing and it's bringing the prices down.'

He says the price rises have not caused a problem for Rainham, partially due to its large scale and also because it applied all increases immediately.

Turnover is expected to hit £85 million by March, 2005, up from £53 million last year.Around 30 per cent of the jump is related to price increases but the rest shows a true growth in business, he says.

'People have had trouble this year in getting hold of supplies, so starting out with a healthy stock has put us in a good position, ' he explains.

Started in 1973 as a new and reusable steel supplier by current managing director Bill Ives, the business expanded rapidly in the boom of the 1970s. In the 1980s the company diversified and started to target builders and builders'merchants. Structural sections form the main part of Rainham's business.

'Traditionally we supplied to civil engineers, and recently we've worked more with fabricators and other stockholders, ' says Mr Webb.

Rainham also supplies reinforcing mesh and rod, and small amounts of steel sheet and bearing piles.As well as the original site in Rainham, the company has a yard in Barking, and two years ago opened up a large distribution depot in Scunthorpe.The location is ideally placed near to the Corus section mill and Immingham docks, with a good road network.

The price of land in the area was also a consideration.

'Land up in Scunthorpe is going for £35,000 an acre, tops, 'Mr Webb explains.'Around here in Essex you're looking in the region of £1 million an acre.You could put residential property on most of the land round here, so it's very expensive.'

Around 60,000 tonnes of the company's current total stock of 85,000 tonnes is stored at Scunthorpe, the base from which most of the large fabricators and stockholders are supplied.A 2.8 ha site at Barking holds Rainham's 6,000-tonne stock of tubes.

The main office in Rainham handles all sales and accounts and has a small yard to store steel sheet piles.Mr Webb would prefer to keep all the company's office activities on one site but this is proving impossible.

'We've got a purpose-built office here.We built it with a view that it would be big enough to accommodate any growth and outlast all of us but it hasn't.We haven't got an inch a space, ' he says.

So in the next year the company will build a 1,000 sq m office block on the Scunthorpe site, for which they already have planning permission.

This is not the only development scheduled for the 14 ha site.There are 11 existing gantries and Rainham has planning permission for seven more, three or four of which will be added next year.

There is also planning permission for a 10,000 sq m warehouse for processing and shotblasting activities but building this is not an immediate goal.At the moment the firm subcontracts out all its processing activities, the bulk of the work going to Steel Centre 4, based in Scunthorpe.

'They give us a very good service and things will remain as they are for the moment. But if it gets to a scale where they can't handle it we'll have to do it ourselves, ' says Mr Webb.

'Eight years ago I never thought we'd grow this much, ' he adds.'But we've just kept going.Other than Corus we're the biggest seller of steel sections in the UK.We're currently doing 130,000 tonnes per year - that's just in sections.'

Mr Webb theorises that the slim tiers of management at Rainham has helped the company grow so quickly.He works closely contact with founder and managing director Mr Ives and operations director Richard Carr to shape company policy.

'Between the three of us we can usually come up with an idea.Then we can implement any changes immediately, which made it easier to deal with the price rises. It's not one of those places where you spend half the day locked away in meetings, ' says Mr Webb.

Mr Webb started off at Rainham 28 years ago in the weighbridge office, checking the deliveries in and out.He moved into sales and worked his way up to director level.All three directors are passionate about the company.

'We're all here every day, from eight till half patt six.We don't play golf.

This is what we enjoy doing. So I think Rainham will keep growing, ' says Mr Webb.