Proven Metal

Peter Nagusky (l), David Nagusky (c) and Rik Kohn (r).

COPING WITH COPPER. The Federal Metal Co. manufactures brass, bronze and custom-made Federalloy—a group of bismuth copper lead-free alloys developed in 1993 by company metallurgist A.R. Singh. The ingots are sold to brass and bronze foundries.

To make its product, Federal Metal relies on the nonferrous scrap stream—buying a full range of copper-based scrap, such as radiators, red brass, No. 2 copper and yellow brass, as well as zinc scrap and tin scrap.

The company buys primarily from large scrap dealers and wholesalers, not over the scale or from the peddler trade, says Rik Kohn, Federal Metal’s vice president of sales, who spent roughly the first half of his career at Federal Metal handling the company’s purchasing. That job today is managed largely by Peter, with the help of his colleague Frank Savena, who has conducted a number of metals ID seminars for the Institute of Scrap Recycling Industries Inc. (ISRI).

As a nonferrous consumer, the company is no stranger to the wild ride of the recent commodity markets, which have seen unprecedented high prices for copper. "I’ve only been purchasing scrap for 18 months. Initially, I was paying $1 for No. 2 copper, 55 cents for radiators and 85 cents for red brass," says Peter. "Now I am paying nearly double or more than double on those same basic red metal items. Fortunately, I am at a family business—that would get most people fired."

Peter says he and his colleagues in the industry are trying to work in uncharted territory. "I am doing business with people who have been in this industry for 40 years and are as confused as I am," he says. "That is a little scary and comforting at the same time."

Rik, who still dabbles in purchasing along with his sales duties, agrees that the current market is unlike anything he’s seen. "We’ve never paid more for scrap," he says. "The demand keeps getting stronger and stronger, and the supply, tighter."

Rik says the real question facing Federal Metal and other nonferrous consumers is, "Is this a blip on the historical radar screen, or are we really reaching a new world order where China and India and the rest of Asia are going to drive us to new levels?"

Rik says the skyrocketing prices have changed certain aspects of how business is done. "Ingot makers in general used to be very comfortable selling forward," he says. "Now, we’re all hesitant to sell very far forward because you are really exposing yourself."

Before the prices took off, Rik says he could quote a customer a price for a whole year. Today, that’s impossible. "Somebody’s going to lose, and that’s not a way to do long-term business," Kohn says. "Federal Metal wants long-term relationships with all our customers and suppliers. I don’t want to sell to you today for delivery in six months at a price one of us is going to regret."

BUILDING RELATIONSHIPS. The commitment to developing close, long-term business relationships is a central principal of Federal Metal’s business philosophy.

"Throughout our history, we sought out small-to-medium-sized foundries that needed something besides the lowest price—we wanted to partner with them," says David. "We carried that to the purchasing side as well, where we wanted to be partners with the people we bought from and sold to."

David credits his father, Mark, with developing the company’s business philosophy. He credits Rik, who joined the company in 1981, with playing an important role in making Federal Metal’s business philosophy an everyday reality.

Rik says Federal Metal excels at meeting customers’ unique needs, which often means modifying an alloy to meet individual specifications. "One [customer] wants better strength, one might want better yield, some customers might just want a pricing formula," says Rik. "We’re willing to sit down and brainstorm with customers and try to come up with unique solutions for them rather than a one-solution-fits-all or one-ingot-fits-all [answer]."

While Rik admits that pretty much any ingot manufacturer will tweak the composition of its product, he adds that Federal Metal sets itself apart by taking the lead in actively seeking special cases. "We all respond to our customers’ needs and requests," he says. "I think we as a company probably take the lead in more of those situations than others."

To better fill this niche in the industry, David established the practice of having a metallurgist with foundry experience on staff at Federal Metal. "If we’re to maintain close relationships with small to medium-sized foundries, or even the larger ones, having this expertise in-house often gives us a dramatic edge over competitors," David says. "There are a couple of other ingot makers that have this—many don’t. I think it gives us an edge, and it’s the way we want to do business."

Part of building close customer relationships is being an advocate for your customers, David says. The role often falls to Rik, who David only half-jokingly refers to as the foundry’s "ombudsman."

"There are some who are not willing to take ownership and, when something goes badly, they blame the customer," Rik says. "My assumption is that the customer is right until we prove him otherwise. When we get a complaint, problem or request, my job is to fight for that, not to the detriment of Federal Metal, but I’m going to bring that perspective to the table. When there’s a problem, we’re going to run toward it."

A company’s staff, the people handling the day-to-day business, can make all the difference in putting a business model into action, says David. He says this is especially true at a company like Federal Metal, which seeks to cement long-term business relationships. Having the right people helps all the facets of Federal Metal’s business philosophy fall into place, from extraordinary service to quick responses to inquiries to identifying customers’ individual needs. "We never wanted to be so big that we couldn’t have people on the front lines that take the responsibility for quoting or promising deliveries," says David. "Your people are what differentiates you."

Peter agrees and says this rings especially true in an industry like ingot manufacturing, which is plagued with overcapacity. "Making sure you have the best team is critical when competing in an industry with overcapacity," Peter says.

Even with a solid team in place, challenges persist as Federal Metal seeks to grow and apply its business model in a changing industry.

FOCUSING ON THE FUTURE. The volatile markets and increasingly global economy have placed a growing emphasis on communication in the industry, which makes adhering to the company philosophy of building relationships with customers and suppliers alike all the more important for Federal Metal.

The author is associate editor of Recycling Today and can be reached at jgubeno@gie.net.