Tamco is a healthy survivor in an industry being slaughtered. How does this steel minimill manage this feat in today’s uncertain economy? Join April Terreri as we tour the mills.
Once upon a time, back in the 1970s, California had 13 steel melting facilities. Today, only one of those facilities remains –Tamco in Rancho Cucamonga, about 35 miles south of Los Angeles. “We are a survivor company,” says Jack Stutz, president.
How did this brave company stand up to all of those pressures that knocked out 12 of its competitors? “Those other mills were victims of California’s tough environmental laws, as well as the higher costs associated with operating in this state,” Stutz says. Tamco not only rose to those challenges, but it actually garnered accolades and awards from the environmental protection community. “We are very much a part of the state’s recycling system,” continues Stutz.
Do you remember all of those old metal oil filters you discarded over the years? Well, if you live in California, those oil filters were never dumped in any landfill because Tamco retrieves them and safely melts them so that the metal can be recycled and re-used. The company also melts down firearms confiscated by local law enforcement agencies in southern California. In addition, companies reclaiming rubber from old tires send the wire tire cords to Tamco to be recycled.
“We’ve been covered extensively in the media for our participation with law enforcement agencies in southern California to melt down the confiscated weapons, and for our excellent reputation for environmental compliance,” says Stutz. In fact, Tamco’s environmental manager, Leonard Robinson, sits on the advisory council for the federal Environmental Protection Agency. Tamco is the proud recipient of numerous local and national awards for its environmental protection efforts, as well as for its work with law enforcement agencies. The company was also awarded the Steel Manufacturing Association’s first Recycler of the Year award in 1999.
The company has an excellent record of safety as well, reducing the number of lost-time accidents in the last five years from 154 injuries in 1995 to 42 in 2000. “And our goal is to reduce that number to 30 in 2001,” says Stutz. Tamco employs 250 unionized workers and 80 salaried employees in its facilities on a 91-acre campus. The company credits the relationship and trust that it has developed with the United Steel Workers union for its success in safety.
All of Tamco’s raw material is scrap, from which it produces steel billets in its melt shop. Its rolling mill then converts the billets into reinforcing bar, which Tamco sells to the construction industry for concrete reinforcement in all major infrastructure work in California, Nevada and Arizona — the company’s major market areas. The steel also goes into lift-slab construction and into the construction of freeways, stadiums, airport runways, water transmission systems, bridges, commercial buildings and even world-renowned Las Vegas casinos like the Bellagio, Luxor, Paris, Venetian and Rio. “We are currently supplying rebar to construction companies involved with all of the modifications and rebuilds of the major bridges in the San Francisco area, like the Bay Bridge, the San Mateo Bridge and the San Raphael Bridge,” says Stutz.
The largest local project Tamco is currently involved with in southern California is the Alameda corridor. “This is a rapid transit system connecting the ports of Los Angeles and Long Beach with downtown Los Angeles. Essentially it’s a large in-ground trench where they are running rail to move cargo from the ports to downtown LA,” explains Stutz. The project is scheduled to be operational within the coming year, and will be used exclusively to move cargo along the 22-mile corridor.
The Fittest Survivor
Although Tamco does have its share of competition, it is generally the market-share leader in its regional market of California, Arizona and Nevada. Its ability to survive where others could not is attributed to both the quality of Tamco’s employees and to the location of the company. “We are a rebar producer situated in the largest rebar market in the country,” notes Stutz.
Tamco’s business practices and strategies are focused on maintaining sufficient inventories of rebar to provide reliable customer service. “We have what is probably the best reputation for customer service because we are able to offer same-day shipments, and our customers rely on us for just-in-time delivery,” says Stutz.
This kind of customer commitment paid off a few years ago, when the North Ridge earthquake damaged bridges, ramps and overpasses. “We rose up to that challenge and supplied all the necessary special-grade rebar manufactured to seismic building standards, so that this part of the country could get back into operation as quickly as possible,” Stutz says.
In order to be able to provide this kind of nimbleness, “you have to stay focused every day,” continues Stutz. “Since our primary raw material is scrap, whose prices are very volatile, we have to pay very close attention to the metal spread — which is the difference between the sales price and the scrap price. So our people are focused on all of these issues that keep us working profitably.” Tamco‘s mission is to offer predictable prices to its fabricating customers for the products they need for the duration of a project.
One of the harsh realities of running a steel mill is that, historically, the steel industry does not have a good track record for getting good returns on investments. “We used our capital very judiciously by targeting smaller equipment investments in the areas where we can get the greatest and fastest return on our investment,” says Stutz. “We stay away from the large investments that are difficult to pay back in this industry. We pick and choose from among the technologies available – so we were able to take an older plant with older equipment and upgrade that with some of the latest technology to where it is considered a modern facility.”
Thinking smart is one of Tamco’s assets. “Everyone is fighting to maintain their market share in an industry that is splintered with many owners,” explains Stutz. “They are fighting for market share with pricing and, therefore, prices are driven down within the steel industry. Additional downward pricing pressure exists due to the high levels of cheap imports flooding U.S. markets.”
Another of Tamco’s strengths is its melting capacity. “We have melting capabilities in excess of that required for a facility of our size,” says Stutz. “That is a strategic issue because that allows us to pick the hours of the day and the day of the week and months of the year we want to maximize our production – and that decision is generally made based on electric rates. The success of our business is tied to operating at the lowest possible cost and by having the ability to pick and choose when we will operate.”
Tamco is the largest single facility on Southern California Edison’s network of electric users. “So we optimize our production at night and on the weekends. That was part of the overall planning strategy we developed over two years ago,” Stutz continues. “Why compete for electricity during the day when we can operate at night when there’s a lot of energy available in the state?”
Another plant upgrade is Tamco’s continuous casting machine, which has all of the latest technology and computerization. “We also installed some fancy computer regulation and controls on our continuous-caster electric arc furnace, and we did the same thing in our rolling mill,” says Stutz.
As to what the future holds for the company and for the industry in general, Stutz is cautious. “We’ve just seen the 13th bankruptcy in our industry. The steel industry is being slaughtered right now,” he says. “But we have an edge here in California and we have a reputation of being a strong company that is environmentally sensitive and in compliance with all of the strict laws of this state. We want to continue to focus on supplying the construction industry with rebar to support and rebuild the infrastructure in this rapidly growing area.”