September/October 1993
IMCO Recycling Inc. has become a leader in the specialized businesses of recycling aluminum, magnesium, and zinc scrap and drosses, providing technology-based, value-added services to its customers.
BY KENT KISER
Kent Kiser is associate editor of Scrap Processing and Recycling.
Just six years ago, IMCO Recycling Inc. (Irving, Texas) was a newly created metal recycling company—the product of a leveraged buyout of International Metal Co.—carrying long-term debt that accounted for 71 percent of its total capital. Its operations were modest, encompassing an aluminum plant in Rockwood, Tenn., and a magnesium and aluminum recycling operation in Sapulpa, Okla.—yielding a combined processing capacity of 295 million pounds per year.
It's a different story today. By building greenfield aluminum recycling facilities in Morgantown, Ky., and Uhrichsville, Ohio, and acquiring a zinc recycling company in Adrian, Mich., IMCO has expanded into a five-plant, multi-commodity company with a total annual processing capacity of 850 million pounds. Furthermore, IMCO is now reportedly the largest and only publicly traded aluminum recycler in the world, and also claims to be one of the largest recyclers of magnesium scrap and the largest recycler of continuous-galvanizing zinc dross in the United States. Not bad for an upstart.
On the financial front, IMCO 's ascent has been equally impressive. Since its beginnings in 1988, the company has reduced its debt from 71 percent to less than 18 percent. At the same time, it has enjoyed a 25-percent annual growth rate in earnings, which reached $7.5 million in 1992. IMCO has been so successful financially, in fact, that it was named one of the 200 best small U.S. companies by Forbes in 1992.
For IMCO 's executives, this growth has been according to plan, and the company isn't about to slow its momentum now.
Filling a Niche
IMCO isn't your ordinary recycling company, the firm's executives point out. For one thing, most of its business—95 percent—involves tolling customer-owned scrap and dross for a processing fee. Being a toller has its advantages, notes Ralph Cheek, IMCO 's chairman, president, and chief executive officer. Since the company rarely purchases scrap, it doesn't compete against its customers for material, and it has minimal working capital tied up in scrap inventory, which enables it to largely avoid exposure to fluctuating metal prices. Another benefit is that IMCO 's tolling fees tend to be fairly constant, giving the firm added financial stability.
IMCO has also distinguished itself as an expert at recycling aluminum, magnesium, and zinc drosses. Because of the specialized nature of dross processing, many of IMCO 's customers have largely discontinued recycling this material themselves, preferring instead to pay IMCO to recover the metal content.
IMCO processes aluminum scrap and dross at four of its five plants, which have a combined aluminum recycling capacity of 800 million pounds. At this capacity, Cheek asserts, "we're far larger than any of our competitors."
Magnesium, which accounts for less than 1 percent of IMCO 's processing volume, is handled exclusively at the Sapulpa plant, where up to 10 million pounds per year of magnesium drosses as well as old scrap such as lawnmower bodies, Volkswagen engine blocks, Chevrolet Vega transmission housings, and U.S. Army tent poles are transformed into secondary magnesium ingots and sacrificial magnesium anodes that provide corrosion protection for underground steel structures, bridges, and offshore drilling platforms.
Meanwhile, zinc, which represents roughly 5 percent of IMCO 's processing volume, is recycled at the Michigan facility, known as Interamerican Zinc Inc. Acquired by IMCO in 1992, the plant employs a patented system to process zinc drosses from 15 major continuous hot-dip steel galvanizers, recovering 99.6-percent-pure zinc slab, which is returned to the galvanizers, and oxides—zinc, aluminum, and iron—which are sold as fertilizer or animal feed supplement.
Offering Unique Services
Capacity alone, of course, doesn't build a recycling business. IMCO 's top managers certainly recognize this and point out that the key to the firm's current success is the unique services it offers, most notably its proprietary rotary-furnace technology, which can reportedly recover 3 to 4 percentage points more metal from scrap and dross than other systems. "The service that drives everything in this business is recovery," says C. Lee Newton, senior vice president of operations. "Decimals of a percent on recovery means big dollars to customers."
In addition to yielding maximum recovery, IMCO 's furnaces have the added advantage of flexibility: The firm can "switch instantly from dross to cans to scrap siding and back with no problem," Cheek explains. As you might suspect, IMCO guards its technology as if it were a golden goose, operating each of its 25 furnaces inside a concrete block enclosure with moveable doors to allow charging—a veritable black box system.
Another special IMCO service is delivering molten aluminum to many of its customers. This just-in-time supply practice enables IMCO 's customers to pour metal directly into their furnaces, thus saving the time and expense—estimated at 2 to 3 cents a pound—required to melt cold ingots. "These are big, big savings," Cheek asserts. Using molten metal also reduces metal loss, a common problem when melting ingots, and frees consumers from scrap handling and inventory responsibilities.
IMCO 's Morgantown plant supplies molten metal to three rolling mills in its region—Logan Aluminum Inc. (Russellville, Ky.), Commonwealth Aluminum Corp. (Lewisport, Ky.), and Aluminum Co. of America's (Alcoa) Warrick Operations (Newburg, Ind.)—while the Rockwood facility principally serves the Alcoa mill in Alcoa, Tenn. The new $18-million Uhrichsville plant, dedicated in June, serves as the sole supplier of recycled molten aluminum to an adjacent rolling mill owned by Barmet Aluminum Corp. (Akron, Ohio). The plant, known as IMCO Recycling of Ohio Inc., delivers hot metal to Barmet every 15 minutes, 24 hours a day, seven days a week.
Environmental capabilities represent yet another service IMCO offers its customers, particularly when it comes to salt cake, a nonhazardous byproduct of the aluminum recycling process. Because, as a tolling-based business, IMCO typically doesn't own the materials it recycles, it also doesn't own the byproducts created, but the company believes in controlling the handling and disposal of this material as the best way to protect itself and its customers from potential downstream liability. "What we rely on is the fact that we don't expose ourselves to damage," Cheek says. IMCO has done this by disposing of its customers' salt cake either in on-site monofills (landfills that contain only one type of waste) at its Morgantown and Sapulpa plants, or in a section of the county landfill dedicated exclusively for the use of IMCO 's Rockwood facility. "Our environmental philosophy is you do it right," says Thomas W. Rogers, senior vice president. "You do it at least as much as the law requires, and if you're able to do it even better, you do." As proof of this philosophy, IMCO went above and beyond all regulatory requirements by building its Morgantown monofill to hazardous waste standards. "We're conscientious and dedicated to going beyond just the minimum requirements," says Paul V. Dufour, senior vice president and chief financial officer.
Cheek also points out that IMCO 's healthy financial status gives its customers an added degree of environmental security. How? As he explains, "As a public company, we have a strong balance sheet, and our customers know that they've got this financial strength between them and any problems that would possibly occur." To prevent such future problems, however, IMCO is using its financial strength today to ensure its environmental security, as can be seen in its plans to spend $4.2 million this year on environmental-related projects, including expanding its Morgantown monofill, siting a monofill near the Rockwood plant, and installing a new air pollution control system at the Sapulpamagnesium facility.
One of IMCO 's long-term environmental aspirations is to recycle salt cake, thus fully achieving closed-loop recycling, and the company has already engineered a recovery plant that would process salt cake into flux and a variety of oxides. The process is still not economical, however, based on today's disposal costs, but this situation will change, Cheek says, "because disposal costs have only one direction to go—up." Looking ahead, he states, "We're prepared to do it as soon as our customers are."
Ensuring Quality
Beyond the technological, economic, and environmental aspects of its services, IMCO is adamant about providing services and products that meet its customers' quality needs. On the processing side, the firm has met these needs by installing equipment that upgrades aluminum scrap before it is melted—equipment such as shredders, magnets, air knife systems that extract nonferrous metals such as stainless steel and zinc, and delacquering furnaces. "I don't know of any other company that does this type of upgrading of scrap through processing to the degree we do it," says Richard L. Kerr, executive vice president and chief operating officer.
As another quality service, IMCO maintains a lab at each facility, complete with quantometers that analyze samples from each heat for 19 elements, including silicon, iron, manganese, magnesium, and copper. The company takes two readings of each sample, then averages the readings to get the most accurate analysis. "We strive to keep total lot integrity and are able to give the customer exact results," Rogers says. IMCO 's quality efforts have paid off in many ways, including public recognition such as the Outstanding Processor Award that the Morgantown plant received from Commonwealth Aluminum in 1991.
For IMCO , quality also applies to customer service, and the company has a track record of accommodating its customers and paying attention to even the smallest details. "If a customer wants something special, we'll do it," says Newton. For one customer, he notes, IMCO weighs each ingot separately and stencils the weight and the customer's control number on it. In another example, the firm accommodates a customer that drops its trailers off at night so its trucks can be free to do other runs during the day. The company is also willing and able to blend different types of scrap and dross to upgrade the material into specification metal for individual customers, Kerr says.
IMCO 's brand of quality processing and service is not inexpensive, however. "We make no bones about the fact that we are not—and we don't intend to be—the low-cost processor," Newton says, "because we feel we offer something that makes our services worth more." He is quick to point out, however, that "although we may charge more for our services, our better recovery gives the customer more pounds back than our competitors can provide." In the end, then, IMCO delivers recycled metal for the lowest cost per pound, Newton remarks.
Living for the Company
While much of IMCO 's success is based on its proprietary technology and unique services, it hasn't achieved its prominence on these foundations alone. At root, IMCO is a company made up of committed individuals. On the executive level, this is obvious in that IMCO 's five officers left large companies—principally major primary aluminum producers such as Kaiser Aluminum & Chemical Corp. and Alcoa—to join the new firm. "Most of us left big companies with good pensions hanging out there and a lot of service under our belts," Rogers says. "We left a comfort zone to do this."
Why? Because they were enticed by the opportunity to start a new company and wanted the change of pace of working for a smaller firm that would give them more freedom and responsibility. "While IMCO has only one president," Rogers notes, "there are a lot of `mini-president' jobs throughout the company." It's part of the informal team-management work environment the company strives to instill in its 520 or so employees, who are rewarded with numerous benefits that go beyond a competitive wage, including profit sharing, a fully paid health plan, life insurance, short-term disability, and comprehensive safety programs. "We believe in treating people well," Cheek says.
The payoff? "Many of our employees eat, drink, and sleep IMCO," Rogers says. "They love this company. It's their life." As a result, company officials say, IMCO has low turnover, productive employees, and excellent labor relations with its unionized workforces at the Rockwood and Uhrichsville plants. As Dufour says, "There's a lot of pride inIMCO, and it's reflected in the way we do business and the way we're perceived."
Full Speed Ahead
For a company growing as fast as IMCO , there's only one direction to look, and that's ahead. From the outset, the firm has been working toward the goal of having 1 billion pounds of recycling capacity by the end of 1995, and as far as Cheek is concerned, "there's no question that we're going to hit that mark on time." Much of the added capacity will come from expansions at existing facilities, but Cheek doesn't rule out the possibility of building additional plants, acquiring competitors, and even exploring international ventures. In fact, on the international front, IMCO 's executives have already made trips to Western Europe , Russia , and Central America to explore potential business opportunities. As Newton states, "Pounds of capacity are pounds of capacity. It doesn't make any difference if the material is in South America, Mexico, Canada, or wherever."
Its status as a public company (stock is traded on the New York Stock Exchange) should help the firm continue to help it grow, according to Cheek. As a publicly held company, he notes, IMCO can "raise money on the public market and grow as large as it wants without being owned by the local banker." Thus far, IMCO hasn't paid dividends, opting instead to reinvest its earnings in expanding its operations. Being public does have its drawbacks, however, in that IMCO must be more open with its financial data and corporate plans than its competitors, and it is under more pressure to expand. "When you're public, you usually have to grow—or else," Rogers says. "You don't have that kind of pressure in a private company."
As IMCO grows, it's possible the firm will diversify beyond its core businesses of recycling aluminum, magnesium, and zinc scrap and drosses. "We'll look at anything that makes good financial sense," says Kerr, though he adds that the firm "will not grow in areas that are risky." Dufour attaches another caveat: "The important thing is for us to continue to grow as fast as possible, but only as long as we can continue to be the best." And even though IMCO has already reached the top of its recycling niche, it plans to climb even higher. "When you have a proprietary process, you need to keep moving and stay ahead of everybody," Cheek says. "You need to continue to improve your operations. We're not going to sit still and wait for somebody to catch up with us." •
IMCO Recycling Inc. has become a leader in the specialized businesses of recycling aluminum, magnesium, and zinc scrap and drosses, providing technology-based, value-added services to its customers.