In October of 2011, The Timken Co., Canton, Ohio, posted its third quarter results. The steelmaker reported a 25 percent increase in sales compared with the same period a year ago, with sales reaching $1.3 billion. For the first nine months of 2011, sales were up 31 percent for the company at an impressive $3.9 million. Following that same momentum, the company earned more in the first nine months of 2011 than it did in the entire year prior.
"This accelerated performance shows our strategy is working, positioning Timken to serve attractive industrial markets that today are growing faster than the economy in general," Timken President and CEO James Griffith said at the time. "We are leveraging that growth to higher profitability."
It takes a lot of scrap to fill billions of dollars worth of sales orders for finished products and to power Timken's two electric arc furnaces (EAF). In fact, the company, which makes highly engineered bearings, alloy steels and related components and assemblies, relies heavily on steel scrap generated from its own facilities or sourced from scrap yards.
It is a huge responsibility sourcing all of that material and one that falls under the leadership of Bill Bryan, vice president, supply chain and supply chain economics for Timken's Steel Group.
"We certainly over the last several years have very specifically developed an iron unit supply strategy," Bryan says. "It is not a growth strategy, but a strategy that assures we have a reliable source of steel scrap for our operations in a cost-competitive way."
The Source of the Matter
As part of that strategy to ensure a cost-competitive supply of steel scrap, Timken has a wholly owned subsidiary, TSB Metal Recycling LLC, which handles scrap sourcing.
"It was essentially developed because there is a whole bunch of places where scrap comes from, so it is a vehicle where we can bring scrap back from our customers and our suppliers and other external entities," Bryan explains. Scrap obtained from Timken's bearing operations and its customers who have cuttings, shavings or turnings from Timken parts also are managed through TSB. Bryan adds, Timken scrap is scrap the company loves to accept back into its steelmaking process because the company knows exactly what is in it.
In total, Timken recycles between 1.5 and 2 million tons of scrap every year—the equivalent of more than 1 million scrap automobiles, the company estimates. Scrap automobiles, appliances, structural steel and industrial scrap all find its way into Timken steel processes.
A year ago, TSB acquired a scrap yard in Akron, Ohio, City Scrap and Salvage. Bryan says City Scrap and Salvage is an important part of TSB. The auto shredding operation at City Scrap and Salvage already had provided most of its ferrous output to Timken. TSB recently announced that it would invest $450,000 for a connector road to the facility as well as a $7 million investment in a 14,000-square-foot warehouse and a 4,000-square-foot office building there.
The acquisition, Bryan reiterates, was not a growth strategy for Timken but a "supply, reliability and cost strategy."
Bryan says because scrap makes up about half of the company's raw material and is the way it charges its EAFs, "having a reliable source of scrap is important; therefore, we created an iron unit strategy, a wholly owned subsidiary of Timken that helps us facilitate and manage the reliable, cost-effective supply and enact that strategy." That strategy could involve making acquisitions such as that of City Scrap and Salvage, but the focus of TSB primarily is to serve a supply chain plan.
Not all steel companies carry large raw material inventories, but Timken says it tends to keep a supply of material on hand, so it buys less frequently and is less affected by market fluctuations. "One piece of our strategy is that we run with a predetermined amount of an inventory of the various things that are critical to us," Bryan says.
"We have a whole bunch of very key scrap suppliers in addition to our own recycling efforts," Bryan continues. "Those suppliers are very important to us. A few of them have been with us for a very long time," he says.
Making the Grade
Timken also works with its suppliers to reduce copper content and to help ensure the quality and consistency of the ferrous scrap it receives. Bryan says Timken does not want copper in its scrap and by working with its suppliers to reduce the copper content in the scrap Timken receives, suppliers can sell the copper to other customers as a valuable nonferrous scrap.
Scrap is sorted by grade, form and supplier at Timken. Bryan says traceability to the supplier is important. With its computerized system, Timken is a "master" at optimizing the scrap it receives, he adds. Timken can specialize the grades it makes for its individual customers. The company makes more than 400 grades of steel to serve more than 9,000 customer specifications.
Timken's recycling efforts go beyond the recycling of scrap metal.
"Waste reduction in all forms is important and it's one of our primary environmental goals," says Alan Oberster, Timken vice president, environmental, health and safety. But Timken hasn't been able to eliminate all of its scrap. "Just by the nature of some of our operations, for example, cutting tubes or melting steel or grinding bearings or bearing components, you do generate some scrap."
That is why the company strives to find uses for the scrap it does generate, either in house or through other companies that can recycle it. Grinding bearing components generates what Oberster describes as a muddy sludge containing a large amount of metallic content, called swarf. "One of our focus areas of waste reduction in our bearing operations is to find ways to put that swarf into a reusable form that our steel melt jobs can use to recover those iron units. We have concentrated efforts in that area." The company recycles approximately 350,000 tons of swarf yearly at its steel plants in Canton.
Another waste product Timken generates is EAF dust through its melting process, "We have found a partner to recycle that and put it to another use," Oberster says. In 2010, the company estimates 20,000 tons of this material were kept out of landfills as a result.
Timken recycles an estimated 30 million gallons of waste water each day at its Canton-based steel facilities through a closed-loop process. Oberster says Timken had been recycling its water even before it was regulated.
Oberster says Timken has an advantage in its ability to recycle because of its two business units—bearings and power transmissions and steel operations—"whereby we have an in-house partner that can help us to find opportunities to use metal scrap we generate."
Since 2006, Timken has invested more than $250 million in its Stark County (Ohio) steel operations. In February 2010, the company announced it was making a $35 million investment in a high-volume in-line forge press at its Faircrest, Ohio, rolling mill. The company plans to invest an additional $225 million to increase capacity and product selection at the Faircrest steel plant. Timken also has invested $50 million in its steel plants in the cities of Harrison and Gambrinus, also in Stark County, in 2010.
Timken says it also is working toward a new union contract to ensure workforce stability throughout the duration of the project, which is targeted to go into production in 2014. The expansion is designed to extend Timken's leadership position in special bar quality steel (SBQ).
"In the first nine months of 2011, we've had our best financial year in our company's 110-plus-year history. Clearly 2011 is a record-setting year," Oberster says. He attributes the company's success to the execution of its strategy. "We have a growth and optimized strategy that Jim Griffith, our CEO, and the leadership team have set out over the past four or five years, and the bottom line is, we have stayed true to executing that strategy. Since the economic downturn in 2009, each year, we've continued to execute better and perform well with the market opportunities we've been given."
The author is associate editor of Recycling Today and can be reached at firstname.lastname@example.org.