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Tuesday | 01 August, 2006 | 3:37 am

Adding value in all the right places

By Lauren Duensing

Value-added processing isn't the first idea that comes to mind when talking about steel mills, but Macsteel, headquartered in Jackson, Mich., is not a run-of-the-mill operation. It has developed a strategy that makes it a hybrid between a traditional steel mill and a value-added producer. This outlook allows the company to focus on global thinking, and as it continues to make capital expenditures to stay competitive, its customers' opinions are extremely important.

The company started out in 1974 as a mill that provided bar to its former parent company, Michigan Seamless Tube, now called Quanex Corp., says Rick Szink, vice president and general manager, sales and marketing. A few years later top management discovered that the company's unique rotary continuous casting process was well-suited for supplying markets like automotive, agriculture and off-highway.

Today, the rotary continuous casting with direct rolling is still unique in North America. The company also has incorporated a traditional steelmaking process with the former North Star Steel facility, which is now Macsteel Monroe. "It's a mill that was moving up the quality ladder, and it has given us more opportunities to sell our product. We now go down to 5/8 of an inch, and we also can serve different markets, like the service centers, because we can ship truckload quantities," Szink says.

About 65 percent of the company's product ends up in a car or light truck. "The other key, double-digit percentage markets are off road, agriculture and heavy truck, and service centers," Szink notes. The company also supplies the seamless tubing, defense and energy markets.

Focus on growth
Macsteel has grown substantially since 1974 and is currently on its ninth phase of an extensive expansion. "It's been a strategic, focused approach to growth," says Szink. "All of this growth has come with the sole purpose to improve our quality and be able to do more for our customers. If you go back to 1974, the company was making hot-rolled only."

In order to become the operation it is today, Macsteel has conducted a series of capital projects. "Phase one was our ultra-clean steel program," says Szink. "Phase two was the rolling and finishing expansion, and we started our Macplus process. Phase three was to maximize our melting and casting. Phase four was to continue to grow our value-added capabilities. Phase five was to maximize our shipping capabilities. Phases six and seven added some more Macplus and heat-treat capability and brought us what we call our mult-cutting facility in Jackson, Mich. That resulted from listening to our customers saying 'why can't you turn, thermal treat, cut and robotically put these mults in our dunnage and ship them to us?'

"Phases eight and nine are our most recent," he continues. "Phase eight is a $20 million capital project at our Fort Smith plant. To continuously improve our quality we're adding a new twin-tank vacuum degasser, extending the metallurgical height of the caster and two rolling stands. We are able to produce and ship 40,000 tons more.

"Phase nine is at our Monroe, Mich., operation. This $38 million capital project includes a turning line, two straighteners, two testing lines and three heat-treat furnaces," Szink says. Both phases eight and nine will be complete by the end of the year.

The company is looking forward to the future, though. "As one thing is just getting started, we're looking at the next two or three phases," says Chuck Short, marketing manager. The next phase will involve a $6.2 million capital project in Huntington, Ind., that will include "our fourth quench and temper line to meet the growing demand from our bar and tube customers," he notes.

Digging deeper into value-added
The company is committed to further developing value-added processing, which the company believes is an opportunity to control the product, since it's done in-house. Therefore, Macsteel can ensure that it meets stringent customer requirements. Currently, value-added makes up 70 percent of the operation.

"We're a hybrid, and we're a forward-thinking company," says Szink. "By no means do we want to say that hot-rolled is not important. It is still our bread and butter, and frankly, our value-added starts with a great hot-rolled product."

Adding value through capital projects helps Macsteel meet the requirements of its automotive customers. "As you get deeper into value-added, you get closer to the customer's process and you almost become a Tier Two supplier," says Short. The company had to adjust its schedule to accommodate these customers. We've learned that we have to manage the value-added business a little bit differently than our traditional steel side. We're very close to their operation. In many cases, it is going right from our facility as a cut blank and into a car two or three days later."

An additional part of Macsteel's value-added portfolio comes from several trademarked products, such as Macplus and Macprime. "Macplus is a turned and polished bar. We have turning and polishing facilities at all three mills," says Short. "Over time, we've grown this product line significantly, and it's a big portion of our overall product mix." Macplus has a defect-free, decarburization-free and scale-free surface that offers improved machinability, tighter size tolerances and concentricity.

"Macprime is a newer product that we're promoting," he continues. "It is a precision, first-operation blank that is cut to whatever dimensions the customer requires, from 1/2 inch long to 4 feet long, depending on the application." This gives customers the advantage of not having to do the bar cutting and resulting material handling in-house. After the bars are cut, "we put it in whatever kind of package they want, they put it right in front of their machine, and it's ready to go," Short adds. "We've really seen great growth here in the last four years."

Facing challenges head on
The key to both the expansion and the ongoing addition of new processing capabilities is the flexibility of Macsteel's employees and the feedback from its customers. "Our people are willing to try new things in all roles throughout the company," says Szink. "They truly understand that they are a key part of customer satisfaction. They want to do their best, and their efforts demonstrate that commitment."

The key to any of the expansion periods is to keep operating, notes Short. "That's the biggest challenge that any of our people take on. We give them challenges such as expanding the metallurgical height of a caster while still producing as much as planned. We're not going to shut down for two months." He says that a shutdown is impossible, especially when supplying the automotive industry, and the employees from the ground up have risen to the task. "We have not missed a beat on the productivity and production rates that we need to keep our customers in steel," he says.

Macsteel also keeps tabs on the pulse of its customers. "The value-added product lines were driven by customers," Szink says. "Our customers say 'we want you to handle this; we don't want to do this operation.' They want to put a press where a cutting line is because that's not really core to their business."

The company surveys customers annually to get feedback on their needs. "We're constantly asking our customers questions to make sure we're meeting their needs and putting processes in place to improve performance in these areas," says Short.

"If it helps them grow and improve their business and they'd like to push it down the value chain, we think Macsteel is their steel mill of choice because we're willing to at least sit down and talk about it. If it makes sense for both companies, there is a good likelihood that we'll do it," says Szink.

The company's success comes back to its simple and effective mission statement. "First and foremost, it's dedicated, professional people. Second, a customer-centric view. Third, the unique capability of our facilities. Fourth, a long-term vision and operating philosophy, and finally, the ability to execute every day, every heat, every bundle, every bar. This is what provides value to customers well beyond the transaction price of steel," says Mark Marcucci, president.

And that long-term vision will continue to serve the company well into the future. "In the next five-plus years, we will stay up with the latest technology and continue to invest in our people and our equipment so they can provide our customers a world-class product," says Szink. "We will continue to invest money in our five facilities so we can provide more volume, and Macsteel will diligently search for complementary operations again aimed at servicing our customers." MM

By Lauren Duensing, from the August 2006 issue of Modern Metals.

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