Reliance Steel’s RS unit, AMI Metals, Inc., has won a multi-year contract from Lockheed Martin LMT to provide aluminum flat rolled material for the latter's F-35 Joint Strike Fighter (“JSF”) program.
The F-35 JSF is an advanced fighter aircraft that combines stealth, speed and agility. It has been billed as the most advanced fighter jet on the planet.
The contract worth around $300 million runs Jan 1, 2017 through Dec 31, 2021. The requirements under the contract include value-added, just-in-time, cut-to-size and cut-to-shape processing of aluminum plate for use by a number of Lockheed Martin, Lockheed Martin Aeronautics Teammates and subcontractor facilities.
The contract builds on a long-term relationship between AMI Metals and Lockheed Martin. The companies have worked together for the last three decades on various programs.
Reliance Steel is seeing strong demand for its products across aerospace and automotive markets and expects sustained momentum in these markets in second-half 2015. Demand in the aerospace market is expected to be supported by higher commercial aerospace build rates. Strong demand is also witnessed in the automotive market, backed by the company’s toll processing businesses in the U.S. and Mexico as well as increased use of aluminum in the industry.
However, Reliance Steel continues to be challenged by weak steel industry fundamentals and soft steel and metals pricing. The U.S. steel industry has been hit hard by increased imports of cheaper steel products.
Prices for carbon steel products are expected remain soft in the near term. Excessive imports are keeping prices for flat roll and plate under pressure. Downward pressure on steel pricing is expected to continue through second-half 2015 due to imports.
Reliance Steel is a Zacks Rank #4 (Sell) stock.
Some better-ranked companies in the basic materials space include Global Brass and Copper Holdings, Inc. BRSS and NSK Ltd. NPSKY, both holding a Zacks Rank #1 (Strong Buy).
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