By Andrea Svendsen, Managing Editor.
Editor’s Note: This is a slightly extended version of an interview that first appeared in April 2017 issue of Light Metal Age, as part of a longer article on the the current status and outlook of the aluminum billet industry in North America. The original article included interviews from executives at Alexin, Hydro, Matalco, Nanshan America, UC Rusal, and Service Center Metals, each of which will appear online over the coming weeks.
Matthew Lanzer joined Service Center Metals (SCM) in 2003 as director of finance during the company’s construction and start-up phase. He was later named chief financial officer for the company. Before joining SCM, he served in management roles relating to finance and accounting with a pharmaceutical printing company and a global circuit board manufacturer.
What is the current status of SCM’s aluminum billet business? What are the main geographic markets that the company serves? What are the alloys you most commonly sell?
SCM has been in the marketplace as a billet provider for about two years. We have been casting billet for three years, mostly for internal use. Our current expansion is allowing us to enter the billet market in a greater way. The geographic markets we are serving are the east coast and the south of the U.S. Our most common alloys are 6061, 6063, and 6005A. (Editors Note: More on SCM’s recent expansion can be found in the article, “SCM Expands Billet Supply to North America: World’s Largest Horizontal Casting Facility,” in the April 2017 issue of Light Metal Age.)
How much of the company’s aluminum billet is made from prime versus remelt/recycled material?
It depends on alloy, but overall about 80% of our billet is made from recycled material.
How does SCM add value to its aluminum billet operations?
The best ways that SCM adds value to its customers is through service and quality. We want to provide service through the entire process. It starts with the customer inquiry or order, and goes through to the delivery of the material. Customers should not and will not tolerate poor service. A part of that is not having to wait a month or two for that material to arrive. That is an advantage we have as a domestic supplier. Our flexibility also plays into our service — being a nimble company, we can react to things much quicker than big companies. That flexibility is also present in our ability to offer multiple log lengths per delivery.
As a start-up company in 2003, we had the luxury of fostering a quality culture from the onset. All of our employees are highly motivated and understand the vision we have to be a leader in quality. Like our casters, maintaining that culture is a continuous process.
Has the company implemented any new technology developments recently to improve production efficiency, quality, and specification of the billet produced?
The casting equipment SCM purchased is the latest technology available. As such, it has features that make it very efficient with high quality. That would include items such as in-line ultrasonic testing, continuous homogenizing ovens with very tight heat ranges, and very specific log traceability/chemistry testing. Additionally, as a continuous caster, it has the ability to cast flexible log lengths at the same time — providing customers with the ability to improve recoveries.
How has the manufacture and supply of billet changed over the past decade? What do you predict for the future of the worldwide aluminum billet industry?
Perhaps the greatest change over the past decade has been the closure of several primary smelters in the U.S., where expiring power contracts and lower LME prices made smelting aluminum unprofitable. Since our inception in 2003, we have seen three smelter closings from our suppliers. Our decision to build a casting operation was driven in part by that evolution. We needed to control our own destiny.
Our prediction for the worldwide aluminum industry is that it will continue to evolve down the cost curve. Lower power costs are the main driver here. Whether it is access to lower energy via accessibility (like the Middle East) or due to green energy (like in Canada and Iceland), aluminum companies will continue to seek these out. The only other option is for a secondary remelt operation to serve a local/regional market. That is our approach.
The other significant change here has been the growth of billet casting outside of the U.S. Whereas in the past, most smelters were content to allocate their resources to P1020, now they appear to want to convert that material to billet. This has been evidenced by more billet casting out of the Middle East, India, and Russia. As a result, there is surplus billet in the marketplace — although that surplus is mostly confined to 7-9 inch diameter 6063.
How stable would you say the North American aluminum billet industry is at the moment? What are the challenges it is currently facing? What are the growth opportunities?
It is more stable than it has been in the past decade, but is still susceptible to market forces. There are still some U.S. primary smelters that are existing on “borrowed time.” If LME prices drop for an extended period again, or if long-term power contracts are not negotiated as needed, some of these smelters will need to shutter. We do not see much growth opportunities for new smelters, as power costs in North America are not globally competitive.
How much has the growth in the use of aluminum extrusion for automotive impacted the aluminum billet industry?
Certainly, the added extrusion demand via automotive applications is going to drive billet demand. There have been several announcements over the past three years where extrusion companies are expanding specifically to cater to automotive OEMs. New extrusion capacity is creating greater billet demand.
How will the company’s aluminum billet business thrive in years to come?
Ultimately, billet demand is driven by extrusion demand. As extrusion end markets (like automotive) grow, that will favorably impact billet demand. For SCM, most of its billet demand comes from our own internal extrusion operations. We have seen favorable trends in our extrusion business, which were catalysts for expansion. We also decided to expand our billet casting operations beyond our internal needs, since we saw an opportunity to provide other strategic accounts with high quality sourcing options beyond imported billet.
Andrea Svendsen has been with Light Metal Age for over ten years. In her role as managing editor of , she addresses all areas of the magazine’s editorial focus. She works with authors, participates in industrial plant tours, performs interviews with industry managers, and writes feature articles to ensure relevant information is featured. Her editorial experience, along with her attention to detail, is critical in the production of the magazine.