leveland Metal Exchange, now CME, has grown and developed through twists and turns over its 26 years of existence as a metals distributor.
When the company launched in 1994, it was “buying secondary material and selling it to manufacturers that were able to use material with defects,” says CME Chief Executive Officer Randy Horvat.
Over time, the secondary market shifted and the company adapted, changing its business model to buying mill direct, then processing and selling prime material. Simultaneously, Cleveland Metal Exchange grew from having a regional footprint to having a national one, which is why the owners are rebranding the company as CME.
What was the driver for the change? Jeff Haas, president of CME, notes that in the steel business, mill processes improved and buyer competition for secondary materials grew, “which caused prices to rise, availability to shrink and margins to thin. Mills aren’t there to service the secondary market,” Haas says. They would rather earn profits from prime sales.
“As prices rose, it was no longer beneficial to pigeonhole ourselves as secondary suppliers. We found secondary to have a limited market, but a prime coil can be sold to anyone,” says Haas. “Last year, we did $75 million in sales.” Adds Horvat, “Our revenues continue to grow.”
What was the driver for the change? Jeff Haas, president of CME, notes that in the steel business, mill processes improved and buyer competition for secondary materials grew, “which caused prices to rise, availability to shrink and margins to thin. Mills aren’t there to service the secondary market,” Haas says. They would rather earn profits from prime sales.
“As prices rose, it was no longer beneficial to pigeonhole ourselves as secondary suppliers. We found secondary to have a limited market, but a prime coil can be sold to anyone,” says Haas. “Last year, we did $75 million in sales.” Adds Horvat, “Our revenues continue to grow.”
It has processing sites or depots in Camden, New Jersey; Baltimore; Atlanta; Mobile, Alabama; Chicago; Houston; and Los Angeles. “We sell nationally and into Mexico, Canada and Puerto Rico,” says Horvat.
we look for quality, price and the ability to ship to any port in the united states. 
“Our largest supplier of prime stainless is Outokumpu Americas. We also buy stainless from Mexico, Taiwan, Indonesia, Turkey, South Korea and Brazil. We buy aluminum from Turkey, Italy, Spain, Poland, Taiwan and Indonesia,” Horvat says, but the key to ensuring product integrity is putting feet on the ground.
“We have been to 90 percent of the mills to vet their quality, see the process, make sure we like what we see. We are direct importers. We have options to buy products from all different parts of the world.
“Between our creative purchasing and our ability to find all these different suppliers, we look for quality, price and the ability to ship to any port in the United States,” Horvat says. “We bring material into Florida, New Orleans, Houston, Baltimore, New Jersey.” CME places containers of merchandise at warehouses close to customers. “We may not have a service center in every city,” he explains, “but we found depots able to store and ship product weekly or monthly.”
Since CME has developed the prime business, it went from “100 percent transactional” (spot sales) to 65 to 70 percent transactional and 30 to 35 percent contractual, with quarterly, semiannual and annual contracts drawn up to satisfy customers’ needs. “Compared with six years ago, we never did anything like that,” Horvat says. “Back then, we only sold what we had on the floor.”
“One of our biggest values is being an importer of record,” says Horvat. CME uses toll processors or third-party warehouses to increase its footprint without building brick and mortar. This provides great flexibility on releasing loads of just-in-time material. Orders from customers’ stock will ship within 24 to 48 hours.
“More customers want JIT. They don’t want inventory on their floors before they are ready to put it into their machines. They want to buy it like they would from a distributor [rather than mill quantities].”
Risks are inherent in a commodity business. “If 232 went away tomorrow, my cents per pound will fall by 10 percent or so from when we created our import business. But stainless and aluminum will still be front and center. We reduce every cost we can and create programs for customers, and that gives us a bigger footprint,” says Horvat.
Additionally, CME is on the hunt for niche manufacturing companies to buy. “We may do some contract manufacturing and provide finished parts. We are looking at small and midsized companies that can benefit from our sales acumen.” CME is talking with customers who want finished parts. “We can save them money while increasing value.”
“We sometimes still hear customers saying we are known just for secondary. But initially, 30 years ago, that customer was making one widget. And now it makes many products. I tell them, ‘You have evolved. I am entitled to do the same.’ That’s the main message: We made a hard turn into the prime world,” says Haas. “That has been our transformation.”
Being in the prime market, says Horvat, “creates a lot more discipline. In secondary, you are fishing with a lobster net. In prime, you are fishing with a single line. Markets have changed, and we move forward with them.”