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Out on an Island

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MCN Editor Dan Markham From its days as a window maker, ALMETCO has steadily grown into Puerto Rico's largest service center.

The service center sector has been dealing with a major problem with trucking over the last few years, with fuel prices, driver shortages, federal mandates and other concerns bogging down the ability to bring material into a facility by truck or ship one out the same way. 

That’s not the biggest concern for ALMETCO. 

Aluminum and Metal Services Co., ALMETCO, is headquartered in San Juan, Puerto Rico, with additional facilities in Isabela in the northwest corner of the island and another in Ponce to the southwest. Surrounded on all sides by water, the distribution business is faced with an entirely different set of challenges than the stateside service center. 

The company was founded as an aluminum window manufacturing company in the middle of the last century. For years, it served as the only Alcoa representative outside the continental United States, giving it rare access to high-quality material. The business flourished when times on the island were good, but those heady days came crashing down in the 1970s and ‘80s, as the first oil crisis, rising interest rates and other issues slowed business activity. 

Facing a sluggish environment for window manufacturing, the company opted to transition to the distribution business, taking advantage of its existing relationship with the aluminum giant. But the business transitioned into bore little resemblance to its service center peers in the States. 
Initially, the business began as almost exclusively a retail operation, working in small-volume, high-margin orders from walk-in customers. Though ALMETCO is now more of a traditional service center operation, the retail side remains an integral part of the operation.

Orlando Ferran, president of ALMETCO, estimates 30 percent of the company’s business is done via retail sales.  “Someone walks in and he wants half an angle. They’re doing an odd job around the house. They come in and walk out with a $25 purchase. But that $25 purchase is $20 margin.”

The other 70 percent is more traditional service center work, or at least more traditional in areas without a lot of OEMs or other large fabricators. Still, even its more conventional industrial customers tend to be smaller than average. Ferran notes the average service center order in the States is more than 2,000 pounds. ALMETCO’s average order tops out at 400 pounds. “That’s just the nature of our market,” he notes.  

Window manufacturers, solar water heaters, highway signs all use the company’s 5052 aluminum products. Commercial sign manufacturers and golf cart makers are also among the end markets for ALMETCO. Most of the company’s sales are of aluminum sheet products, but it also offers some stainless as well. 

When ALMETCO began to expand its operation to handle larger volume orders the way other service centers do, it toured some facilities in the U.S. Midwest, exploring all the major equipment makers to see which products made the most sense. They were given an honest appraisal. “For the size of your business, new equipment is very expensive. I recommend you look at used equipment,” Orlando Ferran was told by his service center hosts. 

That’s the approach the company took, adding used equipment to facilitate slitting and shearing, among its other services. 

Its customer base has also expanded beyond the island. The company has clients in other parts of the Caribbean and Central America, including El Salvador, Guatemala and the Dominican Republic, among others. It also maintains some clients in the States. 

The company sources material from all over, bringing metal into the nearby port. Until Section 232 changed the dynamic, it almost exclusively dealt in foreign material. After the tariffs were put in place, it did do some U.S. sourcing, but often found the U.S. mills were booked solid. As with many in the aluminum distribution space, he’s not a supporter of the tariffs, nor the reasoning behind them. 

“The purpose of Section 232 is to try to have common alloy sheet in the U.S. again. That’s not going to happen,” Ferran says. “Very few aluminum producer capacity is going to be used for common alloy sheet, which is bottom of the barrel. They’re using it for cars, planes, those things that go for $7-8-9 a pound. I can’t see those companies investing a huge amount of money, taking years to build, to make low-value-added alloys.” 

In the past, bringing in material was little different than a metal distributor in the States having it hauled in via truck or rail, working with a broker to facilitate the transaction. But that easy access changed with the port issues of the past 12 months. Though not as dramatic as the world saw outside Long Beach, the long wait times and other scarcities made logistics a nightmare for ALMETCO. “It’s been a pain in the butt. Sometimes the transit time is longer than the manufacturing time,” he notes. 

One issue that has been somewhat unique to the island over the past few years is the spate of natural disasters. In 2017, Hurricane Maria devastated the island. “Two days after [the hurricane], Puerto Rico looked like a scrapyard,” Ferran recalls. “I was without power for two months, and we were the lucky ones.”

Three years later, the southwestern portion of Puerto Rico took the brunt of an earthquake, further hammering an  already battered island. 

For companies such as ALMETCO, these disasters are devastating for workers and their families, but also lead to a ramp up in business conditions as reconstruction takes place. Those rebuilding efforts would be far more lucrative if they were a little more dependable, however. 

The island’s unique status, where it is part of the United States but with little representation in Washington, leaves it waiting on Congress to part with monies that are promised, but not necessarily released. “Some of the money has trickled in, but the vast majority has not. Most of the money has been authorized by Congress, but it has not been dispersed.”

Of course, he notes, the island bears a large brunt of the responsibility for the lack of prioritization of the repair work, which includes a complete reconstruction of Puerto Rico’s electrical grid. Corruption and mismanagement led to the island declaring bankruptcy, prompting lawmakers to conclude, “Until you get your house in order, we’re not going to send it to you,” he says. 

The whole process is a reminder, he says, of the need for Puerto Rico to drive internal growth through the private sector, rather than waiting on federal funding that is subject to the whims of Congress and the politics of the day. “Puerto Rico has to once again start to have its own locally generated economic growth,” he says. And when it does, ALMETCO will be there to support it.
ALMETCO began as an aluminum window manufacturer before shifting into distribution. (Photos by Dan Markham)