They had been chewing over the idea for almost a decade.
The concept was simple—Alexin LLC executives would construct an independent large-diameter billet caster within a 240-mile radius of almost half of the country's aluminum extrusion capacity. Located in the heart of the Midwest, the remelt plant would capitalize on the wave of consolidations that had permeated the aluminum billet industry since the turn of the new millennium and draw in customers looking to diversify their supply base away from the majors. Pair that with a construction market poised to rise forever, and startup billet caster Alexin LLC made an irrefutable business case.
Irrefutable, that is, until Sept. 15, 2008.
Less than nine months after breaking ground on its $58-million aluminum billet casting facility in Bluffton, Ind., Lehman Brothers—and the global economy around it—came crashing down, casting doubt on Alexin's meticulous plans to emerge as a new entrant in the world of aluminum billet. Alexin's expected customer base had all but evaporated overnight, and the plant hadn't even begun commercial operations yet.
"We were building and ramping up the plant and 55 or 60 percent of the customer base didn't want anything because they had contracts with other people for a portion of their business, and they were only buying a portion of their business. So there just wasn't a customer base," said Tom Horter, Alexin's president and chief executive officer.
Faced with a fight-or-flight situation, another fledgling company might have cut its losses and quietly back-stepped out of the picture, but Horter and his team of industry veterans had something else in mind.
"There was no choice. There was no option. The game clock started and you can't just say 'We're going to go back to the locker room for the first half'," Horter said. Instead, "we had to rewrite the playbook. The original playbook was enter a market, and the new playbook was enter a market that doesn't exist anymore. Everything had to change."
Alexin—an acronym for Aluminum Extrusion Ingot—threw its original business model out the window and sat down to brainstorm "the prudent and creative things" it could do to attract a battered and severely diminished customer base. "We changed everything—how we were organized, how we went to market, everything," Horter said.
Originally expected to serve primarily what Horter calls the "Michianohio"—or Michigan-Indiana-Ohio—region, Alexin was forced to look for customers upward of 600 miles away to fill its order book. Likewise, the company began to play up its ability to supply larger-diameter billet than many competitors in an effort to break into some of the less-traditional, large-scale extrusion markets like railcars and truck trailers.
"We had to broaden our geographical footprint and we really had to rely on our niche levers," said Horter, a veteran of all the big-name industry players, from now-defunct Cressona Aluminum Co., Alumax Inc. and Alcan Inc. to heavyweights Alcoa Inc. and Norsk Hydro ASA.
But it was Alexin's small-business approach that really helped it find its footing. "We designed our plant to make a great performing product, so we did creative things to get in doors," he said, citing special service offerings and marketing campaigns that only a Main Street operation could employ.
"There were a few customers that I traveled to with a small bundle of billet in my pickup truck and gave it to them and said, 'Here's a sample, run it.' In each case, those customers became regulars," Horter said. "One of the more positive things we've learned is you can out-hustle and out-create any bad situation. We faced the worse extrusion environment in the industry's history as a new player and succeeded. We just did it with prudence and hustle."
It paid off. By the end of 2009, the plant was running at its full 210-million-pound-per-year operating rate, just in time to capture the near-record spot billet premiums of some 11.5 cents per pound in mid-2010. And prices could go higher still, Horter said, if a U.S. International Trade Commission and Commerce Department trade investigation tacks duties on aluminum extrusion imports from China, giving the domestic extrusion market—and its billet suppliers—a welcome boost. By his math, even if the Chinese extruders only cut their export rate by half, the domestic industry will still need at least an additional 20 million pounds of billet per month.
With a rosier picture in store for the billet industry, Alexin is eyeing opportunities to expand, but only where they make clear sense. "Our growth will be additional plants when prudent," Horter said.
"We've got a cake recipe that works, but the market is still in the early summer of a redefining year. When you're faced with this much turmoil, you just want to do the prudent thing," Horter said. "Everybody walked out of their bunker at the beginning of this year and started assessing the damage. All we've done so far is organize the cleanup."