Looking around Sun Steel's Chicago Heights plant, you wouldn't know that steel is in short supply.

At any given time, there's about 30,000 tons of it piled on the floor of the 150,000-square-foot plant, 2500 Euclid Ave.

But the shortage is indeed very real, and it's an issue for Craig and Jim Bouchard, two brothers busily working to buy up companies in the steel services sector.

Their Feb. 9 purchase of Sun Steel is just the second for their company, Esmark, which they formed this year to acquire companies that process steel. Their first acquisition, completed in June, was Electric Coating Technologies, a metals coating and finishing company in East Chicago, Ind.

The Bouchards spent $20 million for both Sun Steel and ECT, which are expected to have combined revenue of about $100 million this year.

With Esmark, the Bouchards have revived the name of a former consumer products conglomerate that was assembled in the 1980s by Donald Kelly, a family friend of the Bouchards. Esmark's holdings at one time included Beatrice Foods and brands such as Tropicana juices and Swift meats.

Esmark, which operates from Sun Steel's offices, is among three bidders for an Indiana steel services company and intends to make an offer for another Chicago-area firm. Esmark wouldn't name the companies, but they have combined sales in excess of $200 million, James Bouchard, Esmark's chief

executive officer, said.

There's a wave of consolidation going on in the steel services industry, and Esmark is scouring the Midwest for buying opportunities, said Craig Bouchard, CEO of the Bouchard Group, a holding company for Esmark and the brothers' other interests, which include real estate.

"We have an opportunity to buy some fine companies, not terrible turnaround companies," he said.

Established 1945, Sun Steel does slitting, blanking and embossing of steel. The company's customers include automotive suppliers, agricultural equipment manufacturers, appliance makers and outdoor furniture companies.

Sun's annual sales are about $65 million, said Tom McKenna, Sun's chief operating officer. The company delivers to customers in 28 states.

"We have a very diverse customer base so we don't live and die with any one particular industry," McKenna said.

Lately, however, Sun Steel has had to play favorites with its customers because of a worldwide shortage of steel. Prices for steel have jumped 60 percent within the last six months, Craig Bouchard said.

"This is a shock to the entire system," he said.

China's insatiable appetite for steel is a factor, and steelmakers around the world also are paying top dollar for key ingredients in making steel, such as iron ore and metallurgical coke.

Steel imports to the U.S. reached 2.3 million tons in January, up 35 percent from December, according to the American Iron and Steel Institute, which represents steel companies. January's figure was the highest one-month import total since January 2003.

"Because this raw materials crisis is global, steel users around the world are experiencing similar increases in their steel costs," said David Sutherland, chairman of the steel institute and president and CEO of IPSCO, a North American steelmaker headquartered in Lisle.

While Esmark has "good relationships" with major U.S. steel producers and relies on imported product as well, it isn't getting all the steel it needs, Craig Bouchard said.

The shortage "is quite significant, our customers are hurting," he said. "We are trying our best to make sure our customers are taken care of."

McKenna said Sun Steel has been forced to focus on its "core" customer base.

"We can guarantee them steel, but we can't necessarily guarantee them the price," he said.

In for a penny, in for a pound

The company, located in Carthage, Mo., makes fluorescent light fixtures used in offices, hospitals, factories and other settings. It's been a Sun Steel customer for more than 30 years.

Compared with last summer, Patrick said her company is paying about 6 cents more per pound of steel. That might not sound like much, but consider that H.E. Williams gets four or five truckloads of steel per week from Sun Steel, with each truck carrying 40,000 pounds, Patrick said.

Still, Patrick said she's grateful to have a steady supply of steel.

"I'm very thankful we have a good, long-standing relationship with them (Sun)," she said. "I am not worried about availability."

Patrick said friends of hers who are purchasing managers for steel-consuming companies haven't been so lucky.

"I have friends at other companies who are scrambling" to find steel, she said. "It's been a nightmare for a lot of folks."

The steel shortage is prompting some of the consolidation in the services sector, with smaller operators unable to guarantee a steady supply of steel to their customers, Craig Bouchard said.

By increasing its size, Esmark hopes to "gain greater purchasing power" in a period of tight steel supplies, James Bouchard, a former U.S. Steel executive, said.

Sun Steel typically has about 4,000 tons of finished product waiting to be shipped, and another 26,000 tons of raw steel awaiting processing. However, the company over its inventory of coiled steel about every other month, said Dave Brewer, vice president of operations.

The plant has four slitters that can slice coiled steel into widths as narrow as one inch, while a blanking line chops steel into rectangular shapes. The Bouchards said a steel blanking line from Electric Coating Technologies will be moved to Sun Steel.

Sun also does embossing of steel, giving the metal a textured surface. The bumpy metal skin of a refrigerator, for instance, is the result of embossing, Brewer said.

"It's not just for aesthetics," he said of embossing. "There's a maintenance factor because (the embossed surface) resists fingerprints."

Sun Steel began on Chicago's South Side and moved to Chicago Heights in 1970, taking over a vacant foundry that was built in 1914, McKenna said.

Perhaps Sun Steel's most famous employee was Park Forest native Thomas Moore. A wrestler and football player at Rich East High School, Moore worked at Sun from 1969 to 1971, McKenna said.

"He would tell the guys he worked with he was going to be an actor," McKenna said.

Moore was right, later achieving a successful acting career as Tom Berenger.

Mike Nolan may be reached at mnolan@dailysouthtown.com or (708) 633-5952.

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