NEW YORK Universal
Stainless & Alloy Products Inc. has positioned itself to
grow in "undersupplied" premium markets and will avoid the
likely pricing "catfights" caused by capacity additions in the
flat-rolled market, president and chief executive officer
Dennis Oates said.
The Bridgeville, Pa.-based
company is in the middle of ramping up the North Jackson, Ohio,
plant it acquired in June 2011, conducting up to 144 heats on
its vacuum induction melting (VIM) furnaces in 2012 while
adding more vacuum arc remelt (VAR) furnaces in the second half
of the year.
The ramp-up will give the
company "an opportunity to get into markets we couldnt
service before," with the VIM furnaces producing 10 different
alloys over 2012 while the forging plant adds further
capabilities, Oates said in an interview with AMM.
"You can produce a piece in eight minutes on that forge, which
gives us shorter lead times that we can take to market. It also
cuts out outside forging work we were doing, so that profit we
were sending to someone else now stays with us."
The object of the expansion is
to position the company to capture a greater share of markets
that "have really solid long-term growth fundamentals," such as
aerospace and oil and gas, Oates said.
"With aerospace, youve
already got seven to eight years of backlog," he said. "I also
personally find it hard to believe that Americans will fly
around in 40-year-old airplanes while the rest of the world
flies around in brand-new airplanes, so I believe theres
a second wave of demand out there in the next 20 years."
So, too, the oil and gas market
should continue to yield solid demand, Oates said. "My view is
fossil fuels will still provide the majority of our energy 30
years from now. I dont see renewables being more than 15
to 20 percent of global energy supply by then."
The upshot is an increasing
demand for premium, specialty stainless alloys that supports a
growth in capacity, Oates said.
"On the premium side, its
an undersupplied market if you look at the needs out there;
its not a case where youve got double the capacity
needed and its going to get worse," he said. "When you
look at the flat-rolled side, its hard to look at all
that capacity and think there isnt a catfight about to
emerge thats going to lead to lower pricing, and Im
not in that business."
However, the company did endure
a difficult 2012 that concluded with a 24.2-percent drop in
sales and a 74.6-percent plunge in net income in the fourth
amm.com, Jan. 29).
"This industry is very cyclical,
and I think were seeing that now. It isnt that
Boeing (Co.) stopped producing airplanes; its that there
was too much in the supply chain, and you get a bit of
indigestion where things slow down a bit," Oates said.
"As we moved through the second
half of the year, we saw that hit all the mills50 percent
of our business is in distribution, so it hit us first. As we
got into the fourth quarter, all the uncertainty around the
fiscal cliff just amplified the conservatism out there in the
marketplace, to the point where in December some parts of the
business just stopped," he said.
Oates said business had already
picked up noticeably in January, citing an industrywide
60-percent sequential rise in monthly aerospace bookings, but
he acknowledged that destocking will continue to cause
headwinds in the first quarter of this year.
"Most of those folks are telling
us they need until March 2013 to get comfortable," he said.
"Well start to see some improvement, and then well
have one of those weird years where the second half of the year
is better than the first half."