Market Leader

Aluminum scrap is being generated, processed and brokered at hundreds of facilities throughout North America.

But no matter where it is processed, there is an increasingly good chance that the scrap will ultimately be consumed at a smelting facility operated by Wabash Alloys LLC, Wabash, Ind.

Through both acquisition and the construction of new plants, Wabash Alloys has dramatically boosted its market share within the secondary aluminum segment in the past 15 years. With its most recent purchase of four smelting plants once operated by the former U.S. Reduction Co., Wabash Alloys is a major factor in the making of secondary aluminum smelted products used by foundries and other end users in North America.

 

WABASH: A MIRROR OF ‘80s AND ‘90s MERGER ACTIVITY

Wabash Alloys was founded in 1958 as a producer of aluminum ingots made from smelted aluminum scrap. The company took its name from its home city of Wabash, Indiana. The small northern Indiana city remains the site of the company’s headquarters and its single largest production facility. While 40 years of company history may not have brought a change to the company’s home address, Wabash Alloys has by no means stood still.

Beginning in the late 1960s, the company began looking beyond northern Indiana as a means of expanding geographically and of increasing smelting capacity. Its first acquisition was of a plant in Cleveland that remains a 95 million pounds-per-year producer of aluminum ingot, sow and molten aluminum. (Wabash Alloys prefers the term liquid aluminum.) Steel deoxidizing products are also produced at the Cleveland facility.

It has been in the 1980s and ‘90s, however, that Wabash Alloys has emerged as a powerful force in the secondary aluminum smelting industry. In the mid-‘80s, the company purchased two plants formerly operated by the Vulcan Materials Co., one in Milwaukee and the other in Benton, Ark., and also built a new smelting facility in Dickson, Tenn. “We went from being a two-plant company to a five-plant company rather quickly,” notes Wabash Alloys president Joseph S. Viland.

Viland came aboard in 1986, and the next year the company was purchased by Connell Limited Partnership, Boston. Both Viland’s management team and the financial backing of Connell Limited Partnership have been credited for providing the stability needed to allow Wabash to grow successfully.

After acquiring a Toronto smelting facility in 1989, the company took a few years off from adding further capacity. In the second half of this decade, however, Wabash has again made aggressive moves to bolster its market share. Last year, the company announced its plan to build a new smelting facility in Monclova, Mexico, a plant that will begin operating later in 1998. Also last year, Wabash Alloys purchased four plants from the former U.S. Reduction after the Munster, Indiana-based company filed for bankruptcy. (The four plants are located in Marietta, Pa., Russellville, Ala., Tipton, Ind. and Checotah, Okla.)

Viland estimates the company’s 1996 and 1997 production at 850 million pounds. “It would probably put us at about one-third of industry output in the U.S. for each year,” he notes. “We think that in 1998, with the acquisition of the U.S. Reduction plants, our production ought to be on the order of 1.1 billion to 1.2 billion pounds, but we’ll be serving a much broader group of customers in addition to our traditional foundry customers.”

 

THE BIG THREE AND BEYOND

As a result of its acquisitions and green-field expansions, Wabash Alloys now operates 11 plants (counting Monclova) with a combined production capacity of more than 1.2 billion pounds of aluminum alloys in several forms.

According to Viland, Wabash has become a major supplier to aluminum foundries at several Big Three auto plants as well as at Honda of America in Ohio. The company’s Dickson smelter is a 100 percent supplier to the Saturn division of General Motors in nearby Spring Hill.

“Seventy-five percent of our markets are auto-related,” says Viland. “That means we’re shipping either to the auto producers themselves or to their first-tier suppliers. The principal consumption has been for transmission parts,” he notes. But auto parts in which Wabash alloys can now be found include intake manifolds, cylinder heads and, more recently, engine blocks.

Other Wabash customers include those in the small-engine market (i.e. lawn mowers and outboard engines), as well as makers of appliances, barbecues and other miscellaneous equipment.

How did Wabash successfully build itself into a preferred supplier to some of the nation’s largest manufacturers?  “Good management,” quips Viland.

While his response is meant to draw laughs, it would be difficult to argue otherwise. In a cyclical industry that is also dependent on the whims of commodity pricing, good management and strong ownership have been critical to Wabash Alloys emerging as an industry leader.

“I think we recognized where the growth in the industry was going to be,” says vice president of scrap procurement Jim Diamond. “We have also been able to identify those customers with whom we could form an allegiance for the long haul as opposed to thinking only of short-term business opportunities,” he adds.

A look at the geography of Wabash Alloys’ expansion lends credence to Diamond’s observations. The company has expanded its presence in the Great Lakes industrial basin—a region once labeled as the “Rust Belt” that has witnessed a measurable renewal as an economic powerhouse in the 1990s.

At the same time, Wabash now has facilities in the southern U.S. and Mexico, areas that have experienced some of the most significant economic growth in the last two decades.

The financial backing of Connell Limited Partnership has been critical to allowing Wabash to pursue its growth strategies. “It’s a financially strong company that provides us the means to operate efficiently. They have the financial strength and stability that have supported the growth,” says Viland.

 In addition to the management and ownership strength, Viland offers his straight answer on the success of Wabash Alloys: “The success of Wabash has been due to three things. One, the people who work for the company. They are a very dedicated group. They simply are very good at what they do. Second is our reputation—it continues to open doors for us. Third is our efficient and customer-friendly method of operating. We have a dedication to customer satisfaction and service. We are constantly working on reducing our costs so we can be even more competitive in a competitive environment.”

MOVING MOLTEN METAL

Aluminum ingots are probably the most commonly-envisioned form of foundry feedstock to those with only a passing familiarity with the secondary aluminum industry. In the past two decades, however, a quiet revolution has taken place.

According to Viland and Diamond, some two-thirds of Wabash alloys are now shipped in the form of molten (or liquid) aluminum. “I think we were pioneers in liquid shipping within the secondary aluminum industry,” says Viland. “It has been a winning strategy. It allows us to efficiently ship to large customers,” he adds.

“We probably ship in excess of 65% of our material in molten form,” notes Diamond. “It saves the customer several cents per pound by using liquid metal instead of ingot. It saves them energy costs and the cost of product that would be lost during the re-melting process.”

The alloys in molten form are moved by truck in insulated crucibles that can hold up to 15 tons of product. Though Wabash Alloys began shipping products in molten form as early as 1964, it has been in the past two decades that customers have shifted in large numbers to liquid aluminum.

 

HUNGRY FOR SCRAP

With virtually everything the company makes being derived from aluminum scrap, Wabash Alloys’ growth in production capacity has, naturally, resulted in a matching increased appetite for scrap.

 “We have scrap buyers located at all our plants,” says Diamond. “We only centralize some aspects of scrap purchasing at our corporate headquarters here in Wabash,” he adds.

“The vast majority of our scrap is purchased within a 200-mile radius of the plant that consumes it,” Diamond continues, while also noting “we’re always seeking out new sources. We purchase worldwide.”

Scrap arrives at Wabash facilities in virtually any form imaginable. “All our plants have processing capabilities for all kinds of scrap. About two-thirds of the scrap we receive we have to process before we melt,” says Diamond. Incoming scrap items may be subject to shredding, drying, and magnetic separation before being sent to the smelter.

The scrap can arrive in such varying forms that even Viland is still occasionally intrigued by certain shipments. One recent example: a mound of small, thin, perfectly-round aluminum disks. The source of the quarter-inch wafers? They were punch-outs from the tops of cleanser canisters.

The Monclova, Mexico plant will present a new challenge for Diamond’s department, since Mexico does not produce nearly as much obsolete scrap as most areas of the U.S. “I think it can properly be said that Mexico has a negative scrap base,” says Diamond. “We’ll be shipping scrap in from the U.S. and other countries.”

Even in established markets, it can be a challenge for Wabash to obtain enough scrap to ensure that their smelters keep running 24 hours a day, seven days a week.

“As we grow, we have to reach further and wider into the scrap stream for material,” says Diamond. “Our competition makes us work harder at the job of scrap procurement,” he notes. “The most difficult challenge that the secondary industry has faced in the last ten years—and will face in the next 20—is that consumers of scrap at levels above secondary smelters are both influencing our marketplace and entering our marketplace for raw materials.”

Suppliers of scrap to Wabash, says Diamond, “range from the smallest yard that delivers a couple thousand pounds a week to the largest government bids and everything in between. Our supply base is dominated by scrap dealers and processors. We fill in the shortfall with prompt scrap from primary plants and with imported scrap.”

Though quick to note the growing challenges of feeding Wabash’s smelters, Viland and Diamond have neither lost theirs senses of humor nor their ability to remain optimistic.

“When it comes to scrap, there are no problems—only solutions,” quips Viland, who also refers to his job as “an invigorating” one.

“We are a huge scrap consumer and we’ll go to anyplace on Earth to find scrap to melt,” remarks Diamond regarding the scrap purchasing strategy of Wabash Alloys.

 

THE ROAD AHEAD

The smelting capacity added by Wabash Alloys in 1997 and 1998 has almost certainly helped it secure a place as an industry leader for some time.

But a set of challenging conditions also seems to ensure that Viland and the rest of Wabash’s leadership team has not reached a point where they can sit back and watch the earnings accrue. Scrap procurement tops that list of challenges.

“I think the conflict between the primary producers consuming scrap and secondary producers consuming scrap will become greater,” says Viland. “It’s fine as long as there is enough to go around. One of the difficulties for us, of course, is that the primary producers have the opportunity to melt mined material. We don’t have that opportunity.”

Scrap procurement is just one factor in the competitive equation, Viland adds. “I think the industry has become more competitive over the last ten years. Those companies that were not able to keep up with cost controls have fallen by the wayside.”

Despite the challenges existing, Viland and Diamond are confident Wabash Alloys has charted a winning course.

“Wabash epitomizes the upper echelon of the industry, both in our strength and our approach to marketing—in buying and selling,” says Diamond. Regarding corporate culture, he says, “Even though we are a big business, we are a family operation.”

Wabash will not necessarily rest after its active 1997, Diamond notes. “We are constantly looking at expansion and growth, because we really believe the industry is doing the same. There is no project we won’t look at.”

“1997 was and 1998 should be, by and large, good years for Wabash and the industry,” says Viland. “The increased use of aluminum in automobiles—especially in engine blocks—has created market growth for the industry,” he adds.

“I think I’m fortunate to have an exciting job in an exciting industry,” Viland remarks. “Things are changing constantly and we, as a company, have to adapt to that change.”

The author is managing editor of Recycling Today.

 

Sidebar

 

Solid Backing

The best growth plan conceived can be stopped by one shortcoming: a lack of financial resources to carry it out.

Since 1987, Wabash Alloys has been owned by Connell Limited Partnership, Boston, one of the nation’s 150 largest privately held firms, according to Forbes magazine.

The company was formed in 1987 to purchase Wabash Alloys and other industrial products companies formerly owned by Ogden Corp. It initially included Cleveland-based scrap processor Luria Brothers, which was sold to Philip Services in 1997. Other Connell divisions include Danly Die Set, IEM, Mayville Metal Products and Yuba Heat Transfer.

All of the companies make metal prorducts or industrial products. William Connell, founder of the partnership and himself a member of the Forbes “400 Richest People in America” list, has professed his belief that America can still compete in the manufacturing sector. “We can produce steel more cheaply in this country than anywhere in the world,” he told Forbes.