European distributors and service centers operating in the flat steel segment are facing increasing pressure as integrated steelmakers expand their direct involvement in distribution, challenging the traditional supply chain and eroding the space for independent players. This was a central theme during a recent industry panel discussion held at the EUROMETAL 75th Anniversary Conference, attended by Metal Expert.
Participants expressed concern over the growing number of mills bypassing distribution partners and reaching out directly to end users, especially during periods of weak demand. “Mills supply half a truck of one product and half a truck of another directly to customers—something that was once the stockholder’s role,” commented Fernando Espada, managing director of Tata’s Layde Steel. This behavior, according to distributors, intensifies market volatility and undermines inventory management and profitability for independent players.
The discussion highlighted a broader systemic issue: a lack of stable rules of engagement between mills and service centers. “Distributors are being squeezed not between producers and users, but by the mills’ pricing practices and volume dumping at financial period ends,” noted Marcus Fix, managing director of DM-Stahl, adding that such practices severely impact margin visibility and long-term planning.
Panelists also compared the European and US distribution models. In the US, distribution and steelmaking are largely separated, with an estimated 85–90% of service centers independently owned. By contrast, in Europe around 30% of stockholding distribution—and slightly more than 50% of service center activity—is controlled by mills. Despite differences in structure, US players showed stronger financials, with EBITDA margins averaging 6.2% over 2016–2023, compared to 3.6% in the western Europe.
While there was no unified consensus on which model is preferable, many agreed that the European model leaves independent distributors more vulnerable, especially when mills aggressively pursue downstream sales. To address this, several speakers advocated for a shift in business strategy.
“The business model of distribution should be sharpened going forward and have a high specialization,” said Ulrich Becker, senior managing partner at Becker Consult + Beteiligungs.
According to conference participants, wide specialization exposes distributors to higher stock risks and price devaluation. Narrower specialization allows better alignment with end-user needs and improves the ability to charge for value-added services.
Another recurring point was the need to redefine pricing models to better reflect the true cost of services. Distributors called for more transparent pricing that separates material costs from services like cutting, logistics, and stockholding.
“What we see is that the successful companies are those who are able to show to the customer that they are providing the additional services and that has a cost. And customers have to pay for it,” Fernando Espada added.
The panel concluded that future success for European distributors lies in building value-driven, service-focused business models, rather than relying on scale or commodity flows. As market pressures intensify, those who can clearly articulate and monetize their role in the supply chain will be better positioned to survive.
Vlad Shementov
