Pipe fabricator takes on new role, becomes pipe producer

Every entrepreneur knows that launching a new company takes substantial preparation and no small amount of faith. Even when the planning is solid, every i is dotted, and every t is crossed, quite a few things can go wrong. About 20% of small businesses fail within the first year, and approximately 70% fail within the first decade, so founding a business isn’t for the faint of heart.

The family that owns Fayette Pipe, Lemont Furnace, Pa., is blessed with no small amount of entrepreneurial zeal, strong organizational skills, and nerves of steel. Fayette is one of four endeavors the family has undertaken in the last few decades.

Finding a Microniche

Some companies sprawl, while others start in a niche and stick with it. Quite a few tube fabricators started narrow and broadened their capabilities, adding processes and diversifying into as many markets as possible. Many were founded in the late 1980s or early 1990s and rode the long wave of economic expansion for a decade, buying additional equipment and diversifying their skill sets to make themselves as viable as possible. Those that expanded were rewarded as many OEMs trimmed their supplier lists, focusing on the smallest number of the most capable suppliers they could find.

In contrast, companies that find a niche, or even a microniche, focus on just a few processes, refining them and sticking with a “go with what you know” business perspective. The Gearing family took this path from the outset, carving out some space in the electrical conduit marketplace and sticking to it. The original company, Perma-Cote Industries, was founded by Joe Gearing and focused solely on applying a PVC coating to electrical conduit. Most conduit is galvanized, providing a moderate amount of corrosion protection; Gearing’s company found a niche in the conduit market, a specialty product for use in environments that need more substantial corrosion resistance.

In 1999 the family sold the company to a competitor, Robroy Industries, and gained financial security. That move could have been the end of the line for the Gearing family in the pipe, tube, and conduit business, but it wasn’t. It merely marked a new phase of proprietorship in this family’s history.

Hitting a Disappearing Target

Selling a successful business and enjoying the ensuing payday would lead many to “git while the gittin’ is good” and rest on their laurels. But entrepreneurs never rest and rarely even slow down, other than to take some time to refine a plan or to start work on the next one. So it was in 2000 when Joe’s son Dan Gearing and David Kerr founded Specialty Conduit & Manufacturing Co., which they created to thread 10-ft. sticks of hardware pipe.

In an industry dominated by 21-ft. lengths, their business plan rested on converting rejected lengths (bundling table rejects) for Sawhill Tubular. Specialty Conduit & Manufacturing would take delivery of the rejects, cut them down to 10-ft. lengths to eliminate the defects, thread them to make a finished product, and ship them back to Sawhill Tubular. This wasn’t just a good manufacturing plan, but a green one, in that it salvaged material that otherwise would have been scrapped and helped Sawhill enter the 10-ft. hardware market.

This was a viable plan and a successful business model until a merger disrupted it.

“Eventually Sawhill was bought by Wheatland,” said Dan Gearing, Specialty Conduit’s president.

As luck would have it, Sharon Tube was looking to get into the 10-ft. hardware pipe market, so Sharon became a Specialty customer. Specialty Conduit also began threading 10-ft. hardware pipe for a few of the master pipe wholesalers. The company would buy 20- and 21-ft. lengths of plain-end material from various suppliers and convert it to 10-ft. threaded lengths.

Specialty did this work for Sharon for nearly seven years when the course of business interfered. Again, a merger. Again, Wheatland.

“Then we found a manufacturer in California, Western Tube & Conduit, that was expanding their market area to the East Coast,” Gearing said. “They would ship conduit shells to our facility, and we would convert them to rigid conduit and assist in distributing the conduit all over the East Coast,” he said. This was an excellent opportunity for both companies.

Wheatland entered the picture again, but it didn’t purchase Specialty Conduit’s supplier this time; Wheatland became a Specialty Conduit customer. In the eyes of Gearing, this arrangement wasn’t just a prize; it was the prize. Wheatland initiated a far-reaching business plan, its Phoenix Project, which was a major overhaul of its facility in Wheatland, Pa.

“Our agreement with Wheatland represented a significant amount of threading work for both electrical conduit and 10-ft. hardware pipe,” Gearing said. Life was good. Life was very good.

Along the way, the company realized it could branch out and use its threading capability to enter the plumbing market. At first blush, conduit and pipe might not seem to have much in common, but in some sizes and wall thicknesses, they are identical products. When gas lamps were the primary source of illumination, pipe was used to move the gas from the source to the lamp; in the transition to electric lamps, the light fixture and the power source changed, but the pipe remained the same. Schedule 40 pipe eventually became the blueprint for conduit, so the Gearing family is right at home in both markets.

In addition to threading pipe, the company also furnishes nipples, the short fittings threaded at both ends used for joining a pipe to another pipe or a fitting. With a staff of 70, the company is equipped with 10 pipe cutting machines; 40 threaders; two double-ended nipple machines; two high-speed, double-end threaders for 10-ft. lengths; and several packaging lines.

Like pipe and conduit, the nipple business can be tough. It’s a commodity product, and foreign suppliers have a substantial portion of the U.S. market. Still, Specialty Conduit had a viable plan and worked in this market successfully until yet another acquisition disrupted it. This time, Wheatland acquired Western Tube & Conduit and, at the same time, invested in a significant threading capacity, putting an end to its arrangement with Specialty Conduit.

Specialty Conduit wasn’t just trying to hit a moving target; every company does that. It was shooting at targets that would simply disappear.

Producing Pipe on the Premises

Surviving in a commodity market can be tough when times are good, and anyone who deals in raw steel can attest that it’s especially daunting when times are tough. Competition tends to be intense, the price pressure tends to be relentless, and the steel price can double or halve in a matter of months. Throw in a few more uncertainties, such as those related to the vagaries of the import market, and it’s a wonder that any company in this market can survive at all, much less thrive. In Specialty Conduit’s case, the headaches were especially taxing as its customers were picked off, one by one. With few good options, the owners had to consider a new path to the future, one that would provide a secure, stable source of pipe for its threading operations.

After several lengthy conversations about strategy, Gearing and a member of the third generation, his son Chris, made a monumental decision: Specialty Conduit would become its own supplier to secure the future of the company. It would buy a mill and produce its own pipe products for threading.

To most tube or pipe mill operators, foremen, or owners who have vivid memories of their first few weeks (or months) on the job, any talk of entering the tube or pipe business probably sounds like pure foolishness. The capital investment is substantial, the learning curve is daunting, the mill needs continuous preventive maintenance, the tooling needs regular reconditioning, and depending on the product, the margins are razor thin. Domestic raw material can vary quite a bit in quality and especially price, and when procuring raw material from foreign sources, a pipe producer has to be extremely careful. On the sales side, market conditions likewise aren’t known for stability and predictability; a lucrative market can turn on a dime. A longtime, loyal customer might turn out to be something other than loyal.

Long story short, the combination of time, effort, and investment on the input side doesn’t have a corresponding financial renumeration on the output side. The old saying about planning, “It looks good on paper,” rarely applies to entering this market. Unless the circumstances are extraordinary, buying a mill and carving out a piece of the pipe market doesn’t look good on paper.

Despite all that, the Gearing family made plans to enter the pipe market. They did some shopping around and eventually entered negotiations with a domestic mill manufacturer.

“We weren’t knowledgeable,” Gearing said. “When inquiring about mills and their capabilities, we didn’t really know what to ask.” One of their contacts in the industry provided the name of a retired tube maker—one who had worked at Wheatland, of course—and with that, Specialty Conduit acquired all of the expertise it needed. The Gearings are endlessly grateful to Mike Baranowski, who worked tirelessly to be sure they specified all of the features and functions they needed.

“He held our hand all the way through the process, and he double-checked everything,” Gearing said. “He provided a lot of help, and even introduced us to Jim,” he said, referring to Jim Anderson, the plant manager.

They were days away from signing a purchase order for the mill, and searching for a hydrotester, when they contacted the folks at FD Machinery, Highland Heights, Ohio. The conversation that followed changed everything. Although the Gearings are greatly in favor of buying American, FD Machinery (part of Dalian Machine Tool Group, Dalian, China) made a case supplying a hydrotester and a mill to go with it in about half the time as the domestic suppliers could at that time.

The Mill. The Gearings needed a process for making pipe to comply with ASTM-A53, so the supplier quoted a turnkey system with all of the equipment needed to fulfill the specific attributes and requirements from start to finish. It incorporates ancillary equipment from Stanza Machinery (vacuum painting), EFD Induction Group (induction curing), Domino Amjet Inc. (marking), and Pruftechnik Inc. (nondestructive testing). With capabilities to run pipe from 3/8 to 2 in. dia., the mill is also equipped with a cold saw, end facing system, and a six-head hydrotester.

Currently Fayette is producing Schedule 40 pipe, ASTM-A53 Grade A, Type E, which is UL listed and FM approved. It also intends to pursue the same certifications and approval for Schedules 10 and 80 pipe, and it is considering a packaging and strapping machine to eliminate this labor-intensive material handling step.

The Staff. After taking delivery of its mill, the company was ready to start the long, arduous training process that eventually would result in producing a good product, threaded and ready to go. Of course it’s extremely difficult to find experienced mill operators in Lemont Furnace, Pa., population 827. Then again, it isn’t easy to find inexperienced mill operators either, or anyone who wants to work in any sort of a manufacturing environment, for that matter. Local employers simply don’t have many people lining up to apply for spend-all-day-on-your-feet, get-your-hands-dirty sorts of jobs, a downside to setting up shop in a small community. An upside is that offering solid employment at a fair wage keeps turnover low, benefiting employee and employer alike.

“The Gearing family provides solid, good-paying jobs for people in the local area,” Anderson said.

Like many small, out-of-the-way communities, Lemont Furnace as a whole tends to struggle. It doesn’t have large amounts of anything, such as big employers, high-paying jobs, or revenue streams that contribute to the tax base.

“We understand the struggle because we deal with our own struggles every day,” Gearing said. Like the community, the company is a small player in a big market. “We don’t need a big piece of the pie. We just need a small piece and we’ll be fine,” he said.

For all that, the company didn’t go into the pipe business blindly. Notable staff members include the aforementioned plant manager, Jim Anderson, a tube and conduit veteran with 30 years of experience with well-known companies such Bull Moose and, of course, Wheatland. Another on staff is Eric Mampel, who has 20 years of experience in mill supervision and mill sales. Veterans on the staff and the can-do spirit embodied by the Gearings have gone a long way in guiding the mill operators through the lengthy training process.

The Outcome. “We got into this at the worst possible time,” Chris Gearing said. “The Section 232 steel tariffs came into effect when we were just learning about buying steel, and then the global COVID-19 pandemic broke, throwing all of the supply lines into disarray.” In comparing May 2020 to May 2019, durable goods shipments in the U.S. fell by 40%, one of the steepest drops in many decades.

Regarding the prices of its products, the company is in the middle of the market. On one hand, because it’s not a big company, it doesn’t have as much overhead as many of the big firms in the industry, so it can compete against the big domestic players; on the other hand, many imported products are available at prices lower than Fayette can offer.

Despite the pricing challenges, the diversity of materials it produces and distributes is a help in maintaining its piece of the pie. The products offered include from 21-ft. plain end, 21-ft. threaded and coupled, 21-ft. threaded at both ends, 10-ft. threaded at both ends, 10-ft. threaded and coupled, and a complete line of plumbing nipples.

Round 4

The Gearing family made a big investment only to see it underutilized because of the COVID-19 outbreak. Rather than retreat, they chose to advance, engaging the pandemic head-on. When face masks were unavailable in the early days of the epidemic, the executives and management staff went into overdrive, learning everything they needed to know about the various sorts of masks that are available, how they work, the materials they are made from, and how they are made.

To that end, the Gearings considered remodeling some existing office space and buying the equipment they would need to go into the mask-making business.

“We looked at the need, we looked at the materials, we looked at the process, we looked at the equipment, and we thought, ‘Well, this doesn’t look too difficult’ and it escalated from there,” Chris Gearing said, describing a project that quickly took a few interesting turns (see Sidebar).

Are the Gearings finished? Maybe, maybe not. A family with a low aversion to risk and high degree of entrepreneurial spirit, they just might have their best years ahead of them. Perhaps they’ll launch another new company when an opportunity presents itself, or continue expanding their current businesses.

It remains to be seen if their next undertaking comes about as the result of losing a series of suppliers or rising to a challenge associated with a global pandemic, but regardless of the motivation, the Gearings don’t seem to be finished yet.

Source: The fabricator: https://www.thefabricator.com/