SCS UPDATE - February 2006

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With brutal competition in the steel industry these days, you can't blame a steel executive for 'looking over his shoulder' every so often. Not Rich Merlo of JDM Steel Service, Inc. His focus is firmly on what's ahead..

Last April, Merlo became the sole owner of JDM Steel Service - formerly Northern Industries - the 37 year old service center he joined in 1986. The company's new name comes from the initials of his three children, but Merlo also kept 'Northern' as part of the name while he and his team transitioned operations to a

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new location in Chicago Heights. Next, they had Red Bud Industries do a major efficiency upgrade of their key cut-to-length line. Last December, after careful strategic review and technical assessment, JDM ordered an SCS Coil Line. When delivered in November, it'll be the third such line in the United States.

"We're a smaller service center - about 75,000 tons a year," Merlo explained during a recent tour of the JDM Steel plant, "but there's a lot we do for our customers to earn their loyalty. They come to us for hot rolled carbon products that are pickled, leveled, temper passed, slit, blanked, sheared, even laser burned parts. If we don't do it ourselves we can get it done by virtue of our membership in the North American Steel Alliance."

"But one thing we couldn't get through the Alliance or other service centers in

The JDM Steel Executive Team: (standing, l to r): Tom Zager - Sales, Gene Puk - Operations, Jim Barnthouse - Finance, George Cimbala - Purchasing, (seated) Rich Merlo - President, Paul Cravens - Materials.	our region was SCS," added Paul Cravens, Vice President of Materials for JDM. "We use TMW's processing when the freight allows and could
	have waited for a nearby source of

SCS to emerge. Instead, we decided to become the regional SCS source and an SCS toll processor as well."

Tom Zager, JDM Sales VP, already presents SCS to key customers: "We sell to tractor trailer, rail car and ag equipment manufacturers. They will benefit tremendously from SCS. Still, what's key to their buy-in is carefully walking them through their SCS trials, to make sure it performs to their expectations in every step of their process. We point out what costs SCS might eliminate for them and how it can help them do things faster.

For example, we have a customer who makes saw blades from high-tensile, temper passed P&O and we just assisted at their first SCS trial. They were delighted with how clean SCS is. We pointed out that means the destackers they're buying for ghost shift won't shut down because blanks stick together. It means their welders will no longer have to wipe down sheets with acetone to clean off the oil before welding. They were also delighted with how well the SCS lasered - clean and no springback. But we showed them the SCS Laser Cutting Gudelines and figured that they may be able to increase their laser speed by 50%! He got starry-eyed and he's gonna follow the guidelines and try to get there in the next week."

"Yep, lasering," chuckled Gene Puk, JDM Operations VP. "We were curious about SCS laser claims ourselves, so we put it to the test. We lasered some 0.250" hot rolled black, with normal scale, at 73" a minute, then switched to SCS and cut at 109" a minute without re-tuning the laser. And the SCS parts were gorgeous." (The lasered SCS parts are the disk-shaped parts shown in the photo above).

George Cimbala, JDM VP of Purchasing sees in-house benefits of SCS processing: "Minimizing rust and shape problems - that's it! We run a lot of hot rolled and I've had issues with the mills regarding shape and, at times, rust. To think we can solve both problems with the same line is almost too good to be true."

Those savings were part of our justification of the SCS Coil Line," added Finance VP Jim Barnthouse, "but there's more than solving quality issues. With SCS we'll bring in house processes we currently outsource, like tension leveling and certainly pickling. Turning outsourced costs into profit centers is a rare feat for a company our size."

For the most part, Rich Merlo sees JDM Steel's size as an advantage: "We're small enough to turn on a dime when a customer has an urgent need, but we're large enough to take advantage of competitive buys. The bottom line is we're realists. With all the consolidation going on it's tough for smaller players to survive. Being SCS producers and toll processors puts us more in control of our own destiny. It'll give us new dimensions for serving existing customers, plus the ability to attract new customers. That combination puts us in a better position for growth."

Recent salt spray corrosion testing of SCS panels produced an important result -- you can achieve extended corrosion resistance using just a single stage water rinse paint prep. That's BIG potential savings to manufacturers who paint their parts.

Salt spray fog chambers are used to test corrosion resistance of pre-treatment and paint formulas. Treated, painted samples are scribed through to the bare metal, then exposed to a 5% salt fog atmosphere, simulating accelerated exposure to the elements. Rust forms in the scribed stripe, causing paint to 'creep' away from the scribe. The rate of creep indicates the paint system's ability to retard further rusting of unexposed steel.

With no pre-treatment, even clean hot rolled with high quality powder coat paint will show significant creep by 200 hours exposure (see graphic at right). And you'd never think of painting P&O without a pre-treatment (paint doesn't adhere very well to an oil film). So to improve a paint's effectiveness, steel parts undergo pre-treatment consisting of both chemical and rinse stages. The most common chemical stage is an iron phosphate and water solution. The iron phosphate improves a paint's adhesion and uniformity, which inhibits the spread of corrosion beyond damaged areas.

However, the recent SCS tests exposed four SCS panels that received no phosphate at all - only a water rinse prior to a single powder coat with a

common, good quality polyester paint. At each inspection interval up through 288 hours, the SCS panels showed no noticeable paint creep. The next inspection interval at 384 hours finally showed significant creep, but the SCS panels had already demonstrated 300 hours corrosion resistance using just a water rinse pre-treatment (see test results here). You simply cannot get performance like that from P&O or hot rolled.

A leading paint system consultant who reviewed the SCS results agrees. He states that the SCS performance is 'truly impressive' and suggests leaning down an existing phosphate pre-treatment to a two-stage rinse: "The first stage should use a low-foaming surfacant at 0.1% concentration (by volume) in water as a recirculating stage. Use a clean, overflowing water rinse as the second stage. For very clean SCS (light handling dirt), it may be feasible to use only the first stage and reduce the surfacant concentration to 0.01% - enough to give the SCS low surface tension so paint 'wets out' evenly while curing."

Manufacturers who send parts out for painting because they lack pre-treatment systems may now consider painting SCS parts in-house. Those with pre-treatment systems may 'lean out' their paint prep as noted above. Stan Vallis, operations manager of Custom Cabinets & Racks (see Issue #10) has already begun. After switching from P&O to SCS nearly a year ago, Vallis found he needed to change out his iron phosphate solution much less often because SCS is so clean. He also lowered his iron phosphate concentration from the 3% he used with P&O to just 1% with SCS, and his paint performance has never been better. With SCS, Vallis is proving in practice what the laboratory proved in principle: SCS can help you save big on paint prep without compromising on paint performance.