Mapes & Sprowl barges into new territory with its acquisition of a Tennessee toll processor.

By Corinna C. Petry,
Managing Editor

• Quick Facts
  

Mapes & Sprowl Steel Ltd., one of the oldest Chicago-area steel service centers, found itself occasionally turning business away for lack of space and resources. That all changed last November when the company purchased JIT Terminal Inc., Chattanooga, Tenn.

The acquisition represented a departure for Mapes & Sprowl on several levels: the company now services enameling and electrical steel buyers from a location in the Southeast, has entered the toll processing business, and has become a much more flexible provider of value-added services.

This location, with its barge capability on the Tennessee River, also increases Mapes & Sprowl’s freight options, offering a cost advantage over truck and even rail. “We can buy in bulk from mills that can ship by barge,” says Gary Hamity, company president.

Hamity, who also serves as chairman of the renamed JIT Steel Service, says the Tennessee acquisition started up well, making money in its first two months under new ownership.

“We are landlocked in Elk Grove Village. We have no rail spur here, and no ability to put more steel storage or processing equipment here. If we didn’t expand elsewhere, it would have confined our opportunity to grow,” he explains.

Mapes & Sprowl continues its tight focus on sales of enameling and electrical steels, which made expansion into southeast Tennessee a logical move due to its concentration of appliance manufacturers. “We’re really familiar with a number of the big [oven range] players. It seemed like a natural location for us, but to do brick and mortar wasn’t in the cards,” Hamity adds.

Mapes & Sprowl had developed a relationship with JIT Terminal over the past few years. A year ago, the service center relocated a 72-inch-wide cut-to-length line from Elk Grove to JIT Terminal. “They had space and were looking for some new ways to raise revenue,” Hamity explains. “So we installed the line and set up a lease arrangement. They operated it and could use it for their purposes as well as for ours.”

When JIT’s owners, seeking to retire, expressed interest in selling the facility, Mapes & Sprowl recognized the opportunity. “We figured out it was a doable project—financially, strategically. We’re really glad we did it,” Hamity says.
Mapes & Sprowl has no intention of minimizing JIT’s toll processing business, which remains its primary function. “There is enough capacity to continue that and expand Mapes & Sprowl’s business there,” Hamity says.

Due to its expansion, Mapes & Sprowl is on pace to post annual revenues in excess of $50 million, and “when we look down the road, we think we can grow at 10 to 15 percent per year, which may even be conservative. We could not have said that a couple years ago, but this JIT acquisition really gives us that ability.”

The purchase was financed with cash and bank borrowings. When Mapes & Sprowl estimated its return on investment for the bank, “we thought we would go into the black within 18 months,” recalls Chris Widuch, executive vice president. “We actually started out of the box in the black, in both November and December. We are ahead of schedule.”

Enameling, Electrical Steels
Though much of appliance manufacturing uses prepainted or stainless steels, nothing has replaced porcelain enamel on steel in high-heat applications, according to Widuch.

“We don’t put the porcelain on. We process steels made by the mills as enameling steel. It’s a cold-rolled product specially processed at the mill to form a permanent bond between the steel and the porcelain when it’s applied by the end user. They form or draw it and then they coat it,” he explains.

Mapes & Sprowl purchases between 30,000 and 35,000 tons of enameling steel a year, primarily from AK Steel Inc., Mittal Steel (Inland Steel Co.) and U.S. Steel Corp. Its primary customer base includes such major appliance makers as Whirlpool, GE, Electrolux, Viking Range and Wolf Appliance Co., to name a few. “Beyond that you get into some of the small, but important, sectors like the barbecue and gas grill business, cookware and signage,” Widuch says.

Within the electrical steel family, Mapes & Sprowl sells fully processed and semi-processed, oriented grain and non-oriented products. “Our profile is to cover the full gamut of electrical steel needs,” says Hamity.

Electrical steels are used for motors, transformers and generators, among other applications. Mapes & Sprowl purchases about 20,000 tons of electrical and cold-rolled motor lamination steel per year.

“We primarily slit coil, and the end-user stamps out a lamination. That lamination becomes part of the core of a motor, generator or transformer,” he says.

Mapes & Sprowl’s domestic suppliers of electrical steel are AK Steel and Mittal Steel. The service center also buys from sources in Poland, Ukraine, Russia, Czech Republic, France, Germany and South America.

Cold-rolled motor lamination “bridges the gap between standard cold-rolled steel and electrical steel, which is a silicon-based steel. Motor lam has been processed at the mill to be suitable for lamination stamping and motor applications. That’s a large volume product for us,” Hamity says.

Selling technical expertise
Mapes & Sprowl prides itself on stocking a wide and deep range of enameling and electrical steels and having the technical expertise to counsel customers.
With electrical steels, Widuch says, customers often have questions about which products are best to use for specific operations. “Just because you’re using this grade or width today, is that the most cost-effective product in the long run? Customers will use our technical services to look ahead and engineer.”

For example, a gas grill manufacturer may seek Mapes & Sprowl’s recommendation on which enameling steel to use based on how well it bends or draws. A motor manufacturer may design a lamination after consulting with the service center about the steel’s magnetic properties.

“We try to offer economical solutions as well as the right quality product,” Hamity says.

The company’s four metallurgists were all long-time employees at companies that produce enameling and electrical steels. Hamity and Widuch both worked at Inland Steel Co., where Widuch managed accounts for appliance manufacturers.

“Often, we know more about the product and its use than the end user or the mill,” Hamity says. “Our metallurgists help both the customer and the supplier. It’s important because we have to ensure quality for the specific end use and the fabrication process it goes through.”

Widuch notes that most service centers don’t sell enameled and electrical steels—and mills don’t want to sell them to service centers—because the “downstream consequential cost of making a mistake can be astronomical.”

Mapes & Sprowl’s products go into parts for the space shuttle, M-1 tanks, Patriot missiles and Smart bombs—parts that must not fail. “If you make a mistake in the way you apply the steel or in the way you process the steel, if the end customer has a defect, you as the supplier are accountable for it. These can become six-figure claims on a 10,000-pound order that cost all of $5,000.”

Porcelain enameling is very expensive, easily three times the cost of the substrate steel, Hamity notes. “Steel’s job is to hold it. If you’ve done something wrong, the porcelain pops off. Customers turn to us to make sure that doesn’t happen.”

Secure relationships
Mapes & Sprowl attributes some of its success to long-time ties with certain producers. “We treat our suppliers like customers, which has served us well over the years,” Hamity says.

AK Steel’s predecessor, Armco Inc., was Mapes & Sprowl’s supplier of electrical steels dating back to 1927. The impetus for growth in electrical steels at that time was the radio, which was just beginning to catch on with consumers.

“Armco wasn’t sure this market would kick in,” Hamity says. “Mr. Mapes and Mr. Sprowl, then located back East, said they’d build a facility in Chicago if Armco would work with them on developing electrical steels for radio receivers. When the crash hit in 1929, luckily Mapes & Sprowl had that arrangement. Armco stood behind them and they were able to survive.”

Mapes & Sprowl has purchased from Mittal (Inland) for at least 25 years and from U.S. Steel for more than 20 years. The distributor also buys steel from Nucor, International Steel Group and Arcelor.

“The core suppliers remain with us in good markets and bad,” Hamity remarks. “We never hounded our mills to give us the lowest price. Sometimes we paid a premium. But when things got tight, like in 2004, we were not let down by our mills. There were some delays, but we were never cut off.”

On the customer side, Mapes & Sprowl has featured prominently in the success of some manufacturers. “We have been the supplier of record since the beginning for a large number of our customers, who 15 years ago didn’t exist, such as high-end range manufacturers,” Widuch says.

As they started up, “they wanted a supplier who could instruct them about the best type of enameling steel to use, what type of systems they should install, how they should prototype their designs, how to run trials, what type of lubricants they should use. We’ve dealt with half a dozen customers like that, taking them from an idea and a business plan to running a factory.”