Why This Matters to Distributors: Reliance is using processing services, domestic supplier relationships, and existing facilities to capture infrastructure business. Its expansion shows why distributors must weigh a contract’s service requirements and operating costs alongside sales volume, particularly when material is scarce and prices are rising.
Reliance plans to devote about $150 million to growth investments this year as the metals distributor expands its processing capabilities and infrastructure business, including a border wall contract that could generate shipments into early 2028.
The company is also pursuing demand tied to data centers, semiconductor production, manufacturing, and aerospace. Executives said those markets, combined with stronger metal prices and increased border wall shipments, helped drive record third-quarter sales.
About half of Reliance’s approximately $300 million capital spending budget for 2026 is allocated to projects that add capabilities, improve service, expand its geographic reach, and increase sales in targeted markets, President and CEO Karla Lewis said during the company’s Oct. 22 earnings call.
“And we continue to evaluate acquisition opportunities and stand ready to execute the right opportunities quickly,” Lewis said.
Reliance reported third-quarter sales of $5.21 billion, up 42.8% from a year earlier. Net income attributable to the company increased 112.6% to $402.9 million. For the first nine months, sales rose 28.5% to $13.87 billion, while net income increased 59% to $990.7 million.
The results reflected both higher prices and increased shipments. Executives said Reliance’s ability to obtain material, process it to customer specifications and move additional volume through existing facilities supported the expansion.
The border wall contract has become a significant source of that business. Reliance began shipping material in April and reached a steadier delivery pace during the third quarter, Lewis said.
Under the arrangement, Reliance receives metal from its suppliers and releases it to government subcontractors as directed. Lewis said the work had proceeded without major disruptions.
“So, we think this is a good run rate for us based upon the contract and the activity under the contract,” she said.
The first phase represents $1.45 billion in approved funding and is expected to be completed during the second quarter of 2027. Reliance has also begun securing orders under a proposed $800 million second phase, although the full amount had not been finalized at the time of the call.
Lewis said orders already secured represented more than half of the estimated second-phase value. The duration of the work will depend on further government orders and the pace of deliveries and installation.
“So, we think this should run through 2027, depending if they execute the full amount of Phase 2, it could run into early 2028,” she said.
Lewis described the assignment as larger than any comparable project Reliance had previously handled. But its appeal rested on more than size: The company could serve it through existing infrastructure without adding proportionate operating costs.
“It’s not just about size, it’s about what do they need? Can we service that well?” Lewis said. “The border wall, as we mentioned, we were able to leverage our existing infrastructure.”
Although the project carries a lower gross margin than Reliance’s average, its lower operating cost per ton makes its pretax profit margin higher than the company average, executives said. That makes the expense of handling and delivering the material an important part of evaluating the contract.
Reliance would consider additional projects with similar characteristics, Lewis said, including military-related work. The company would assess whether customer requirements fit its capabilities and financial objectives.
“We do service various different types of projects out there, including a lot on the military side, and we continue to look at those opportunities as they’re available,” she said. “And we certainly would do more business like this if the opportunities were there, and the profile fit.”
The border wall business accounted for much of Reliance’s recent shipment growth. Third-quarter tons sold increased 15.6% from a year earlier, including a 9.4-percentage-point contribution from the project.
Shipments increased 4.3% from the second quarter. Excluding border wall work, they rose 0.6%, exceeding management’s expectation of a seasonal decline.
Other infrastructure markets are also supporting growth.
Nonresidential construction represented slightly more than one-third of quarterly sales. Executive vice president and chief operating officer Steve Koch said data centers, related energy infrastructure, heavy civil construction, and public infrastructure supported demand despite material shortages.
General manufacturing accounted for another third of sales. Shipments increased from a year earlier, supported by industrial machinery, including data center equipment, as well as shipbuilding, military applications, and construction machinery.
Semiconductor demand strengthened as well, creating opportunities for Reliance’s specialized processing operations.
“Lastly, demand in the semiconductor market strengthened meaningfully,” Koch said. “We’re seeing momentum accelerate, supported by increased data center activity.”
Chief financial officer Arthur Ajemyan said the semiconductor recovery was changing the mix of Reliance’s stainless steel business. Products sold into that market have higher average selling prices because of the processing the company performs.
Reliance spent $79 million on capital projects during the quarter. Executives said investments across the company’s operations were helping it handle additional business and meet customer requirements.
Aerospace represented approximately 8% of quarterly sales. Koch said commercial demand improved as aircraft manufacturers increased production and backlogs grew, although elevated inventories remained a concern. Defense and space activity remained strong.
Automotive accounted for approximately 4% of sales and is served primarily through toll processing operations, which process customer-owned metal. Koch said those operations adapted to changing production requirements as demand improved from a year earlier.
Across those markets, material availability is becoming an increasingly important competitive issue.
Koch identified carbon plate, hot-rolled coil, specialty wide-flange beams, and heat-treated aluminum plate among products facing supply constraints. The aluminum products serve aerospace, semiconductor, and general engineering customers.
Lewis said employees were working to obtain material and allocate it appropriately, with an emphasis on supporting established customers. Relationships with domestic mills remain central to that effort.
“We want to be able to control our inventory lead times,” Koch said.
Reliance imports some products, particularly in regions traditionally served by overseas suppliers. But executives said freight costs, delivery times and uncertainty surrounding international conditions complicate purchasing decisions.
Lewis said those risks were encouraging caution across the industry, even when overseas prices appeared attractive.
“There’s risk with the time involved, there are a lot of higher costs for freight right now, uncertainty because of some of the events going on in the world,” she said.
Reliance is also limiting its exposure to excess inventory as prices rise and supplier lead times lengthen. Koch said the company is watching for duplicate orders and buying locally and regionally to match customer demand.
“As lead times are extended, we’re keeping a close eye,” he said. “We’re making sure that we’re not over-ordering, double ordering.”
Ajemyan said inventory turnover improved 10% from a year earlier, limiting the amount of cash tied up in stock despite higher prices and increased shipments.
“So, to put it another way, our inventory levels would have been over $300 million more had we not had the inventory turn and working capital metric improvements that we’ve had this year,” he said.
Higher volume is also helping Reliance absorb rising labor, freight, fuel, and employee benefit costs. Additional shipments spread existing operating expenses over more business, although stronger profitability also increases performance-based compensation.
Lewis said the company’s market share gains extended across several carbon steel categories, including flat-rolled products, plate, and long products. Some gains came in markets where Reliance historically had a smaller presence relative to overall consumption.
“And it’s not just about tons gains, it’s also balancing with the profitability and going after the right pieces of business,” she said. “And we think our teams have been doing a very good job of balancing that.”
For the fourth quarter, Reliance expects shipments excluding the border wall project to increase 4% to 6% from a year earlier. Including the project, the company forecasts growth of 13.5% to 15.5%, while anticipating the usual seasonal decline from the third quarter.
Customer optimism and backlogs support continued demand into 2027, Lewis said. Material availability, however, could limit how much of that demand Reliance can fulfill.
“Organic growth, though, could be tempered by supply availability next year given tight supply,” she said, while adding that the company expects to obtain enough material to continue gaining business.
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