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Fresh paint and room to grow

May 31, 2017 | 08:00 PM | Michael Cowden


Kloeckner Metals Corp.’s flat-rolled division sees opportunity growing in a stretch of farmland located about 40 miles south of Chicago.

Kloeckner’s new 106,000-square-foot plant in University Park, Ill., could be doubled in size in less than five months on property the company owns, executives said during a recent interview with AMM at the grand opening of the facility.

And the operation could grow even bigger still should the Roswell, Ga.-based service center acquire adjacent fields, the company said.

“It was expandable. That was one of the justifications for this site,” Russ Delaney, president of Kloeckner’s flat-rolled group, said.

The new facility—which replaces a 100-year-old plant on Chicago’s South Side—was modeled after a Kloeckner operation located near ArcelorMittal SA’s AM/NS Calvert joint venture flat-rolled mill in Alabama, company officials noted.

Because designs for that unit were already in hand, it took only some four months to construct the University Park plant. And an expansion would take even less time because necessary utilities are already in place, officials said.

Although such an expansion might not take place for another two to three years, there is no question Kloeckner is committed to the Chicago area, even if the new plant is located in Will County instead of Cook County.

“If you’re going to be a leader in the industry, you have to be a leader in the Chicago market,” said Joey B. Johnson, vice president and regional manager for Kloeckner’s central region. “This is about 30 miles from our old location. So, retention of employees was a factor. If we had decided to build up on the North Side, we’d lose all our employees. And a lot of our customers are south—so it filled several needs.”

In addition, retrofitting an existing plant in Chicago would have been an expensive undertaking, Johnson went on to note. “All of the facilities we looked at were old and would have required major renovations. ... Basically, you were going to have to rebuild anyway. So, if you’re going to have to do that, why not look at a truly greenfield and do it right from the start.”

The new location will allow Kloeckner to source steel from a wider spectrum of domestic mills and to implement an import strategy, company executives said. The site is located near the intersection of major interstate highways, sports a rail spur from Montreal-based Canadian National Railway Co. (CN Railway) that runs directly into the plant, and has access to a barge unloading facility.

Improved logistics mean the new plant will be able to bring in imports from ports along both the Gulf Coast and the East Coast, company executives said, brushing aside concerns centered on whether potential trade actions by the Trump administration might impact that strategy.

A Section 232 investigation launched by the Trump administration might mean sourcing fewer tons offshore, company executives allowed. But a boost in infrastructure spending could offset that because it would help everyone along the steel supply, including Kloeckner.

Section 232, part of the Trade Expansion Act of 1962, allows the president to slap tariffs on imports if he decides they pose a threat to national security.

The scope and timeline of the 232 remained uncertain as this article went to press. Equally unknown is the scope and implementation schedule of the administration’s proposed $1-trillion infrastructure spending package.

Such uncertainties make the second half of the year hard to predict, Delaney said. “There are too many variables out there. We’re in a transitional period where prices seem to be fairly flat. They could go up. They could go down. And a lot has to do with what happens with these administration efforts. So, we have to be flexible with whichever way the market moves.”

That means carrying less inventory than the three months’ supply that used to be standard in the steel industry, he said. “I think two months’ (supply) is probably the target most of the industry is working toward now,” Delaney noted.  “And the mills—especially the mini-mills—are getting better about their controls internally to ship close to on time.”

No matter what course the administration might follow, Kloeckner’s primary goal—making the metals supply chain easier for customers to navigate—won’t change, company executives said.

“We have to compete in a global market. So there is a balancing act to these things,” Johnson said. “It’s easy to get excited about this or that and ‘Prices are up!’ But we’ve seen over the years that what goes up will come down.”

And when it comes to trade, China exports more than metals to the United States. It also exports cutting-edge technology, company executives said.

Kloeckner, for example, is installing chambers at a plant in Cincinnati that will allow it to coat steel via physical vapor deposition (PVD) on an industrial scale. The company partnered with China’s Double Stone Steel Ltd. (DSS) in 2014 to produce and market PVD products in North and South America PVD is currently only being performed in small batches in the U.S., Johnson said. So the chambers will be a “game changer” once they are operating, which he said should occur by yearend.

Installing the PVD chambers will allow Kloeckner to coat stainless steels efficiently in colors from gun metal to gold, company executives explained. One popular application involves coloring stainless steel to look like copper for stove hoods.

“It’s still a very expensive look and a lot more expensive than regular stainless steel but a lot less expensive than copper,” Johnson pointed out.

Such niche, value-added products along with aluminum toolboxes for pickup trucks are in the University Park facility’s wheelhouse, company executives said. And Kloeckner will continue to modify the University Park plant to serve evolving customer demand.

Future expansions could include the addition of laser equipment as well as roll forming or stamping capabilities, said Tony Munno, general manager and vice president-commercial of Kloeckner’s flat-rolled group. Future investments will also support the company’s ongoing push further downstream as it expands fabrication capabilities.

“We are not just focused on being in sheet and coil anymore,” Munno said. “And we’ve got fabrication expertise within the organization. We’re not just steel people trying to talk fab language.”

That downstream push is evidenced in Kloeckner’s acquisition of American Fabricators Inc., company executives said. Kloeckner Metals bought Nashville, Tenn.-based sheet metal fabricator American Fabricators Inc. in October 2015 for an undisclosed sum.

Future acquisitions of that nature could be on the horizon. “They (American Fabricators) became a larger and larger partner of ours ... so eventually when the owners decided they wanted to sell, it was just natural to sell to us,” Delaney said. “And I imagine we’ll see that happen in other areas as we grow the fab business.”

That’s not because Kloeckner looks to compete with fabricators but rather because it wants to simplify the process of turning an order into a delivered part, company executives said. Another way to advance the goal of becoming a “one-stop shop” for metals consumers is e-commerce, Delaney noted.

Buyers want to order steel and aluminum from service centers online like they do consumer goods from web sites like Amazon.com, Delaney said. Too often they aren’t able to, but Kloeckner is looking to change that after installing software from Walldorf, Germany-based SAP across its operations globally.

On the ground locally, that means customers can now simply scan certain items when they need to replenish them instead of filling out paperwork or picking up the phone. “That’s been very well received,” Delaney said. “We’re running a good bit of our revenue through that now, and it’s growing every day.”

Kloeckner hopes to eventually have a digital system in place that will enable customers to track orders from the mill to the skid they exit the service center on, Delaney added. One problem with that model has been the struggle on the part of some mills to keep pace with advances in information technology.

“Most of the mills have multiple legacy software systems. So it’s a challenge for them,” he elaborated.

That should change because digitalization benefits all parties: it allows service centers to operate with less inventory and mills to run more efficiently, Delaney pointed out. “Our vision is to eventually have an industry platform where we can be on it, some of our competitors can be on it, the mills can be on it, and our customers can go there and do their business buying (carbon) steel, aluminum or stainless online.”

High-level conversations on the matter are in the works between Kloeckner executives and their mill counterparts, Munno said. “We’re in a little bit of a consulting role with the mills, quite honestly.”

No matter what the mills end up doing, service centers can’t afford not to go digital, said Vincent Colorito, vice president of sales for the flat-rolled group. The reason: “We haven’t figured out a way to pass our inefficiency on to our customers in the form of higher prices,” he said.

Kloeckner Metals Corp. is a subsidiary of Duisburg, Germany-based Kloeckner & Co. SE. It consists of three business segments: flat-rolled, heavy carbon and special products groups. Other subsidiaries include Temtco Steel, Kloeckner Metals Processing and California Steel & Tube.



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