The past few years have been anything but friendly to the U.S. energy tube and pipe market. In June 2016, the number of rigs drilling for oil and natural gas plummeted to 404, down precipitously from more than 1,900 rigs in 2014.
At the same time and in a classic case of ill timing, numerous new oil country tubular goods (ICTG) mills came on stream, unleashing a surge in pipe capacity. Borusan Mannesmann Pipe U.S. Inc., a subsidiary of the Borusan Group, Turkeys largest steel pipe manufacturer, was one of them. The 300,000 ton-per-year electric resistance welded (ERW) OCTG mill was commissioned in late 2014, just before the U.S. rig count began to sink.
Through a series of actions, Borusan Mannesmanns Baytown mill managed to continue operating through the energy downturnthe only domestic ERW OCTG to do soand holds claim to being among the first pipe mills to ramp up when the market began to recover. In doing so, the company, which has been running two full shifts since March of this year, has earned AMMs 2017 Steel Excellence Award for tube and pipe producer of the year for the second time in a row.
Josh Croix, chief commercial officer, attributes the resilience Borusan Mannesmann has shown in part to the way the Baytown mill was set up, a configuration he described as a perfect blend of technology and efficiency.
There was no expense spared to create a pipe mill that is able to operate at a low cost, Croix said. While most pipe mills configure several processes in a direct line, or in direct succession with each other, we built our mill to allow us to perform different parts of the production process at different times without one part depending on the other.
But the design of the mill is just the beginning, Croix emphasized. He maintains that Borusan Mannesmanns innovative work ethic and lean Six Sigma culture is what really sets it apart.
The Six Sigma quality method to increase efficiency, reduce waste and maximize throughput is not commonplace in the energy tubulars business as many of the industrys dated, legacy facilities make it nearly impossible to implement, Croix pointed out. Borusans approach differs in that instead of waiting for a claim from a customer to make changes, daily studies of production data and feedback from the shop floor drive continuous improvement for quality-first manufacturing.
To further differentiate itself, Borusan Mannesmann has narrowed its distribution channels, a move which has allowed it to super serve those distributors which have supported the company during the market downturn, Croix pointed out.
When we first opened the mill we were taking orders from anyone who needed pipe, Croix recalled. By 2015, however, the company had pared its customer base to 26 compared with 49 when it first operated. Since then, it has sliced that number even further to about a dozen distributors.
This focus on our core distributor customers has allowed us to be more in tune with their needs, he said, and to make changes to better meet those requirements. Included among those changes are the addition of a radio frequency identification (RFID) pipe traceability system. The company has also added premium connections and some uncommon pipe sizes including true 6-inch diameter pipe to its product mix to help users remain profitable in an era of lower energy prices.
The partnership Borusan Mannesmann has forged with its steel suppliers has also paid major dividends, Croix pointed out. A year ago when hot-rolled coil prices were rising at the same time Borusan Mannesmanns customers were struggling to remain economically viable, the companys coil suppliers offered the pipe mill alternative contracts that enabled it to keep its costs down.
At the same time, we showed a commitment to them to buy domestic steel, even before import duties were imposed by the recent hot-rolled sheet trade case, Croix said. He noted that Baytown now buys domestic steel almost exclusively.
Employees have been major contributors to Baytowns success, Croix said, noting that many of the mills key employees stayed with the company during the downturn, cross-training for other jobs on the shop floor when the company needed to operate with a smaller crew. It is this sacrifice and commitment that enabled us to ramp up so quickly as business returned, he noted.
As the business returned, Borusan Mannesmann placed an even greater emphasis on safety on the production floor given the number of new employees, Croix said. This safety culture has resulted in bringing all levels in the company closer together, making sure everyone safely returns home to their families, he added.
Looking ahead, Croix said that Borusan Mannesmann plans to continue to drive efficiencies throughout its operations and to find new ways to better serve its customers.