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SCM investing $17M in new casthouse

Keywords: Tags  Service Center Metals, SCM, aluminum, Scott Kelley, Chip Dollins, expansion, new capacity, new casthouse remelt


CHICAGO — Service Center Metals LLC (SCM) is investing $17 million in a new aluminum casthouse that it plans to feed with scrap from its existing operations as it also looks to increase internal sourcing of billet.

The new remelt operation, which will be adjacent to the Prince George, Va.-based extruder’s existing presses, will have a capacity of 75 million pounds per year, with one furnace feeding two horizontal casting systems and a homogenizing furnace at the end, company executives said.

"We expect to be casting metal in April (2014). ... Everything is on schedule and on time," SCM president and chief executive officer R. Scott Kelley told AMM Aug. 28. "The big part that’s going to be helpful is we’re going to be able to recycle 100 percent of our own scrap."

SCM’s official groundbreaking for the expansion earlier this week—which also marked the company’s 10th anniversary of its first production—was attended by nearly 600 people, including Virginia Lt. Gov. Bill Bolling. But work on the project started in earnest in April, Kelley said, noting that while equipment has yet to be delivered the roof is already on the building that will house the new remelt system.

SCM already has two extrusion presses—nicknamed "Elvis" and "The Boss"—with a combined annual capacity of 100 million pounds, Kelley said. The casthouse expansion—whose two horizontal casting lines have been dubbed "Mick" and "Keith"—won’t target new business but will instead make SCM more efficient, Kelley said.

The company will continue to focus on its longtime business model of supplying service centers with a range of extruded products, including custom and standard shapes, pipe and tube, and rod and bar for machining applications, Kelley said. The difference: "We’ll have more control over our own billet," he said.

SCM extruded its first product from "Elvis" in 2003, and doubled the size of the plant and tripled its capacity in 2006 with the addition of "The Boss," Kelley said. The company had planned additional growth until the 2008 recession saw those plans called off, he said.

"Now that the company is doing very well—we’re at capacity in terms of our own presses—we felt like it was a good time, especially with a tight billet market," Kelley said. SCM has enough space to consider future expansion, although the company is focusing on the new casthouse for now, he said.

SCM decided to go with a horizontal casting process instead of a more conventional vertical process for cost and flexibility reasons, company vice president of operations Chip Dollins told AMM. "We looked at vertical casting as an option. But the economies of scale—digging a deep pit—means you need a plant with a capacity of somewhere close to 200 million pounds annually to make it viable." With horizontal casting, SCM can avoid digging a deep pit while keeping the option of expanding by adding another casting line, he said.

SCM doesn’t generate 75 million pounds of scrap per year, so it will continue to source from the local market—albeit at reduced volumes, Dollins said. Also facing changes is SCM’s trucking subsidiary, which in the past picked up scrap and hauled it to a toll processor that made billet for the company. The trucking subsidiary will continue to haul scrap but will focus increasingly on delivering finished products to customers, Dollins said. "We’re not going to send them to Los Angeles, but Chicago is a possibility."

If and when the company chooses to expand is largely a function of conversion costs, Dollins said. "If our assumptions are correct ... and the system saves us the money that we think it will, we would choose to add another casting line in the future to produce more of our own billet," he said, predicting that the expansion should pay for itself in about three years.

For now, SCM will simply scale back its billet buying, Dollins said. "Of course, if purchased billet costs continue to go up we would seriously look at adding another line to be more self-sufficient."


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