Gene Newman reports on how Marion Steel started during hard times in an outdated mill but has managed to thrive in a competitive market.
The strategy of the three businessmen who founded Marion Steel in November 1981 was to acquire an undervalued steel mill and build it into an efficient, competitive low-cost producer.
The unemployment rate was 21 percent at the time, and so was the interest rate. On the plus side, the Marion, Ohio area, where they planned to operate, had a large skilled labor force with many idled by the economic slowdown. The location was also advantageous in that 60 percent of the steel consumed in the United States was used in manufacturing plants within 300 miles of Marion.
The group bought the assets of a shuttered Armco Steel facility on 37.5 acres within the Marion city limits, about 45 miles north of Columbus. Included were two 35-ton electric furnaces, a 12-stand bar mill fed by a 35 tons-per-hour reheat furnace, outdated sign post fabrication equipment and support areas including warehouses, maintenance shops and a quality control lab.
An aggressive management team, comprising of former key Armco employees and experienced mini-mill managers, began the ground work. This included reviewing the 7,000 job applicants who vied for 200 openings. The team managed to hire and train the new work force and get the equipment back on line in short order. The first bar was rolled by the new Marion Steel Company in January 1982, and the first heat of steel was poured the following month .
Investments In Growth And Quality
Continuous improvements were achieved as the work force rose to over 400 and with the company’s reinvestment of most of its earnings in new equipment and in employees’ interests.
Forty million dollars in major capital projects bought new mill stands, a new substation transformer and electrical controller, a reheat furnace, cold shear equipment, sign-post presses and painting equipment, new electric furnaces and automotive bundling equipment. The casting machine and air pollution control systems were also upgraded. Chairman and President James Conway, who purchased the shares of his two original partners, attributes the rejection of the United Steelworkers organizational attempts to a healthy employee-management relationship, a generous benefits package, the family atmosphere at Marion Steel and an open door policy that has given employees a say in policy and procedures implementation. Employees have been rewarded with incentive plans, benefit packages and workplace improvements.
The company’s annual steel production has grown from 100,000 tons to 380,000 tons, with annual sales exceeding $120 million despite economic downturns, equipment difficulties and three unionization attempts that failed to win employee approval.
Starting From Scrap
Marion Steel’s operation is that of a mini-mill, which melts scrap to make commodity products such as sign posts, reinforcing bar and merchant bar including angles, rounds, flats and channels used in a wide variety of products. Mini-mills are subject to the same processing requirements as integrated mills that smelt iron from ore in blast furnaces, but the two operations have great differences in management style and product markets.
Marion recycles 380,000 tons of scrap metal each year, amounting to high-stakes poker in an industry where availability and price are the wild cards of success. Steelmakers have two choices: They can seek more sophisticated methods of using scrap to minimize cost, or they can find a way to put downward pressure on its price. Marion Steel does both.
Conway negotiates all scrap contracts and hedges prices by varying mix. In addition, a company-owned processing yard in Marion collects unprepared scrap and supplies about 5,000 tons a month to the mill. The company plans to add small satellite yards in a radius of 75 miles to Marion to capture more raw material.
Recycling is not a new buzz-word for mini-mills such as Marion Steel. With scrap as raw material, Marion has perfected the recycling technique, which starts with loaded charge buckets being transported by overhead crane to Marion’s new electric arc furnace, where the scrap is melted at a power cost in excess of $700,000 a month.
An oxygen plant injects 44,000 standard cubic feet per hour of the gaseous element to reduce power consumption, lower tap-to-tap time and increase production. Once a heat is melted and chemical properties are determined to meet specifications, a 60-ton refractory-lined ladle transports the molten metal to the continuous, caster where it is poured to flow through water-cooled molds and formed into billets, semi-finished forms suitable for long products such as bars or channels.
In a typical operation, the 5.5-inch-square billet strands are cut by oxygen and gas-fired automatic torches to 26-foot lengths weighing about 2,500 pounds and placed in inventory. The quality control department performs tests during production to ensure that the specified steel grades are being made regulates billet yard movements to deliver the specified grades of stock to the rolling mill, where they enter the reheat furnace before being reduced and shaped into finished products.
The Furnace Project
Marion Steel tries to partner whenever possible with customers and suppliers such as during the recently completed electric-furnace project. With cost reduction being the key to success in the mini-mill industry, Marion Steel had determined that the most effective way to reduce melting expense was to replace the two outdated 35-ton furnaces with one state-of-the-art, 65-ton high- reactance furnace.
The model chosen, an EMCI 153, was designed and built by EMC International Inc. The furnace is powered by a Ferranti Packard 35 MVA transformer which, when combined with a Tamini reactor, a More Lance manipulator and three Process Technology Inc. oxy/fuel burners, can melt steel at about 50 tons per hour, or about 400,000 tons annually.
The $6 million project would provide enough savings to pay for itself in fewer than two years. Marion Steel was able to partner with its power supplier, First Energy, to help with the design, engineering and procurement of the furnace. With this new project under way, Marion Steel looks ahead to increase production well into the 21st century.