Home | Business News | Browse by Publication | M | Metal Center News

Split-personality processor: half service center, half toll processor, Feralloy strives to achieve the best of both worlds.

Article Excerpt
Unlike most middle-market metals companies that either buy and sell steel or offer toll-processing services, Feralloy Corp. manages to do both with equal success.

Feralloy is part of the PNA Group (formerly Preussag North America), which includes Delta Steel in Houston and Infra-Metals in Wallingford, Conn. Founded as a steel distributor in 1954, Feralloy observes its 50th anniversary this year.

Today, Feralloy operates 15 plants in the United States and Mexico, employing a workforce of 600. With steel sales totaling 800,000 tons, and a processing volume of 1.2 million tons, Feralloy expects to move about 2 million tons of steel through its facilities this year. It forecasts gross income ranging from $450 million to $500 million for 2004, including steel distribution and its share of the revenues from its joint ventures.

Feralloy is the operating partner in five toll processing joint ventures: Feralloy Processing Co. in Portage, Ind., with venture partner U.S. Steel; Indiana Pickling & Processing Co. in Portage, with International Steel Group and Signode Corp.; Feralloy-Wheeling Specialty Processing Co., with Wheeling Pittsburgh Steel in Wheeling, W.Va.; and Oregon Feralloy Partners with Oregon Steel Mills in Portland, Ore. Feralloy is also 44 percent owner of Acero Prime, a Mexican steel processing and logistics operation (see "Acero Prime: Foothold to the South," page 44).

On the steel sales side of its business, Feralloy operates six service center divisions: the Midwest Division in Chicago; Southern Div. in Decatur, Ala.; St. Louis Div. in Granite City, Ill.; Cleveland Div. in Ohio; Western Div. in Stockton, Calif.; and Charleston Div. in Huger, S.C.

As full-service, flat-roll service centers, Feralloy's divisions are well equipped to handle most processing tasks. The sharing of processing capacity between its service center and joint venture tolling facilities gives the company a competitive edge and helps to leverage its capital equipment investment. Using the same equipment to process service-center and toll processing orders "is a good way of bringing a broader base to the same equipment," explains Chuck D'Alessio, Midwest vice president.

Most companies either have a service center or a toll processing mentality. To do both requires the segregation of responsibilities--and occasionally, some difficult business decisions about whose order is next in line, D'Alessio admits.

"Once you make a capital investment as a steel distributor, it is rare you will use that equipment around the clock. So you call service other [toll] customers on the same equipment. We've done that at all our locations, to balance the [erratic] economy and protect ourselves," he says.

On a tonnage basis, Feralloy's business is roughly split between the volume that is toll processed vs. the steel that's processed and sold. Since steel sells at about $440 per ton, but is processed for about $30 per ton,...