Summary of the Steel Sector following NEASS AGM 2017

Following the recent NEASS AGM Colin Sanders gives us this summary of the current state of the sector.

It is widely recognised that 2016 was a year of two halves with price increases  (long overdue ) having a positive effect for stockholders. I think the biggest concern for members is that of Insurers matching an increased buyer requirement.  At present, accounts being filed are generally around Feb-May 2016 prior to the positive impact and it was generally felt that Insurers weren’t matching expectations of either buyer or seller. You could argue the same with credit reference agencies but insurers are still a little cautious following some big pay-outs from the likes of Caparo and Drawn Metal failures.  Neither were expected and resulted in substantial pay-outs particularly from the major insurers.

Insurers will claim that they support the sector but it’s essential to assist yourselves by having the most up to date financials as possible, so ensure you badger your buyer for draft and management accounts and make these available to insurers to use as a weapon to get that limit increase.

From a Graydon perspective, we are seeing very few insolvencies which is good but we are seeing an increasing number of companies entering payment plans.  Cash, or a lack of is an ever increasing problem. The ever increasing threat of fraud is also a potential nightmare. Many of our clients have been hit or attempts have been made. This might be a good time to re-inform members about the NASS Credit seminar coming up in May. One presentation will be on fraud, what to look for etc by yours truly.

Generally though, insolvencies increase when companies expand, usually too quickly and without major financial support. Expansion and the time frame is uncertain, much like steel prices in the second half of 2017.

There are positives though, particularly those who supply into automotive and to a certain degree, commercial construction. The latter needs desperately, infrastructure spending by the Government on a large scale but sadly, we are still in a period of austerity and likely to be so for some time. Yellow goods manufacturers are also enjoying an upturn Bad areas ? The oil and power sector and Brexit also brings its own uncertainties.

Graydon UK run stockholder credit control meetings every quarter – further details can be found within the minutes from the NEASS AGM below:

Neass AGM 2017 Minutes

Further updates on the state of the industry the credit issues and the underwriting market can be read here.