A New Die is Cast: Digging Into the Rare Metals Supply Chain
IBC Advanced Alloys puts a pedal to the metals to manage the logistics of complex manufacturing.
When you get into complex manufacturing, the idea of a supply chain is misleading. Networks are anything but linear. The depth and breadth of the supply base alone more closely resembles a chain link fence.
As you dig deeper into the origins of certain products, such as metals and alloys that bring "things" to life, lead times inevitably grow. End-user demand changes trigger swings in inventory upstream, which creates bullwhip flux that is difficult to modulate. Then factor in the challenges of sourcing from geographically constrained supply sources; shipping high-value, bulk materials; and dealing with regulatory bureaucracy.
Welcome to the world of rare earth metals such as beryllium—a difficult to find, yet increasingly relevant material in the aerospace, defense, oil and gas, and consumer electronics industries.
IBC Advanced Alloys, a Vancouver, British Columbia-based beryllium and copper alloy manufacturer and distributor, occupies a unique niche in this emerging space. The company operates four production facilities across the United States: a copper processing and forging plant in Franklin, Ind.; two casting facilities in Rohrsburg, Pa., and New Madrid, Mo., respectively; and an engineered materials division that performs investment casting for specific alloys based in Wilmington, Mass.
"When we started the company, it was common for processors to turn rare metals into powder," explains Christopher Huskamp, executive vice president of business and technical development for IBC Advanced Alloys. "For example, they would take aluminum and beryllium powder, mix them together, and squeeze it through hot isostatic pressing to form a block. Then they'd put that block into a machine and whittle out a component.
"But that's poor utilization of high-value material; essentially you're turning it into a bunch of chips," Huskamp adds. "What IBC has done, and what we bring to market, is technology based on investment casting and the ability to create net shapes."
Net shape manufacturing is a process that creates components closer to the finished size and shape, thereby reducing post-production machining. That's a huge advantage when making specialized beryllium alloy components for the aerospace industry.
"Sometimes the buy-to-fly ratio is as great as 30 to 1," Huskamp says. "In other words, a 10-pound part may require a 300-pound material buy. With our manufacturing approach, we can create components with 98-percent material utilization. And we can recycle material from the casting process 100 percent."
Beyond that, IBC's Engineered Materials division is creating new alloys that deliver more compelling characteristics to manufacturers. For example, its Beralcast product—65 percent beryllium and 35 percent aluminum—is three times stiffer than aluminum with 22 percent less weight.
Beryllium is a unique metal in terms of its chemical makeup, as well as the means necessary to bring it to market. The competitive landscape is pitted with limited sources, long lead times, big blocks of material, and poor utilization. A business model and process that literally melds supply to demand, and empowers customers to buy what they need, moves the needle in a big way.
Inbound Logistics recently met with Huskamp to talk about IBC's business model and the unique challenges of the rare metals supply chain.
What is beryllium?
Beryllium is the second lightest metal after lithium. The difference is lithium explodes when exposed to air. It's also as stiff as steel. So a beryllium aluminum alloy is both light and stiff.
Beryllium has excellent thermal conductivity properties, which makes it a great transmitter of heat. It has a very low coefficient of thermal expansion. So, when beryllium is used in a manufacturing application, for example, there is less expansion of the parts and fewer temperature stresses.
How did IBC Advanced Alloys get started?
We originally began with the idea of being a vertically integrated company primarily working on the exploration side—bringing beryllium from the mine to finished goods.
When we first looked at the business, we thought we had to control the source, but we discovered that we needed to control the consumption/buyer piece first, then work back up the chain incrementally and forge strategic partnerships. That avoided large infrastructure costs.
The exploration properties didn't pan out, so we focused on manufacturing, which brings us to where we are today.
What vertical industries does IBC Advanced Alloys serve?
The immediate, short-term business primarily serves the U.S. Department of Defense (DoD), optics, and aerospace industries. The commercial side of the business provides offshore applications within the semiconductor world. We produce wire ball bondings that connect chips to substrates for phones and nearly every other product on the planet. They all require high-precision, stiff materials, especially for vibration dampening.
How does the DoD business compare with your commercial applications?
The businesses are complementary. The copper side of the business is an organic model. It's clicking along at 15 percent growth year over year. The lottery, or big bang opportunity, comes out of our Beralcast product—IBC's innovative beryllium-aluminum alloy.
We have more explosive growth potential on the Beralcast side in terms of capitalizing on markets with a material monopoly. There's a huge opportunity to reduce the end user's costs. Then, because you can reduce the cost structure, you can also compete on a wider scale and against other materials.
Copper is a more established market. There are many ways to slice that apple.
What about IBC's penetration in the oil and gas industry?
Copper is our primary area for oil and gas. It's used in making downhole-drilling tools and components that require high wear resistance, thermal conductivity, and non-sparking characteristics. Berylcast alloys aren't purposed for oil and gas.
Beryllium is IBC's bread and butter. Where does it come from?
Rare metals often aren't rare, They are ubiquitous. It's a matter of whether you can find them in an economic quantity. But the supply source isn't the issue. Processing is what matters. Whoever controls the processing controls the market.
Today, there are only two beryllium processors in the world: Materion in North America and Ulba in Kazakhstan. Materion takes raw materials out of the ground in Utah and processes it at a plant in Ohio; Ulba is working off materials coming out of Cold War stockpiles. Technically there's a third source in China, but it is not even a consideration for DoD product.
IBC's agreement is with Ulba, while Materion is essentially a competitor so we prefer not to buy from them. If we do, terms are less than favorable. We've also gone through the process to become an approved buyer of the DoD stockpiles. The DoD doesn't always sell its stockpiles, but when it does, we are permitted to buy. That's a major coup for a small company such as IBC.
The electronics industry is rife with concerns regarding conflict minerals. Are there similar transparency and regulatory issues in transporting beryllium?
Despite the fact that Kazakhstan is a former Soviet republic, the source is already fully documented and North American suppliers have been using it for many years. It's a transparent chain.
Beryllium is not a conflict mineral because it's not being pulled out of Africa or any area with large conflicts and exploitation issues. But it is an International Traffic in Arms Regulations (ITAR) restricted material. ITAR is a U.S. governmental policy that restricts transfer of technical information, goods, and services that would allow or enable countries on watch lists to control the flow of materials used for arms. That creates some logistics challenges.
With our commercial products, we have to go to the State Department and ask for a license to be able to ship to certain areas around the world. Paperwork goes along with that. Being able to track our product in use is important as well.
How do you move beryllium from Kazakhstan to the United States?
When the Soviet Cold War machine was pumping out uranium for weapons, they left big stockpiles of refuse. Beryllium coexists with uranium, and it comes from these stockpile tailings.
We procure beryllium as lump metal, and it comes to us from Kazakhstan in metallic chunks. It's bagged within a barrel within a container, and for safety and health reasons it has to be watertight.
We deal with typical container transit times; there's no such thing as expedited. Shipments have to be held at Customs and inspected. These are high-value containers so we need control and visibility.
We have to be in control of transportation using freight forwarders. We manage the transportation directly instead of through a third party. Those are important aspects of having control.
Containers are delivered to our Rohrsburg facility. Product is individually barreled in lot quantities of 50 pounds. We receive singular, batched shipments several times every year. The problem, from a logistics perspective, is that we have a surplus, then wind that down—over and over.
Just-in-time isn't an option. We want to have a stockpile, and there's money tied up in that. That could change in the future if we have the opportunity to work with a domestic source—where we don't need State Department clearance to procure material.
That's interesting, because most industries and manufacturers that use beryllium alloys are just-in-time driven.
In effect, we become their buffer. At any given time, we look at how much beryllium we have on hand because it's a cash investment. That's significant. We can't talk about the exact cost because of our agreement with Ulba. But I can tell you, it's more than $100 per pound. So it's expensive, especially if you have to carry a lot of inventory.
Can beryllium be processed or shipped differently?
You can pull up a few different minerals, one of which is bertrandite. That can be refined into beryllium hydroxide—a white, flaky powder. But it's susceptible to water, and breaks down when it gets wet. Transporting that versus lump metal? We've opted for the latter. Cleanup becomes a health and safety issue.
With the way supply is dictated today, we think this approach works best. As we grow demand, we may have a different answer.
What happens when beryllium shipments enter the U.S. supply chain?
When product comes into the country, it's verified and tested. We reanalyze the chemical makeup. We're looking for high purity material; we don't want any contamination because it degrades our product quality down the line. If we're not careful, it can quickly turn into a negative spiral.
After product is graded and validated at our Rohrsburg location, it is distributed to our other facilities based on the quality.
We have two processing ranges—aerospace grade and commercial grade. We have a tolerance with commercial grade and have tested to validate this. We can actually use a lower grade of beryllium than we've ever received from Ulba for commercial purposes.
We can get various levels and qualities of materials that can be purposed differently. For example, a copper-beryllium alloy has virtually no beryllium, but what it does have makes all the difference in the world. It makes the copper extremely hard.
What lead times do you work with on the manufacturing side?
Lead times on cast product can be as short as four weeks from delivery of CAD model to shipping. Unless you happen to have that stock on hand in the specific size you want, there can be a long dwell, sometimes more than 12 months.
We can handle lead times associated with casting in one or two ways. If it's a simple part, we can use a wax injection mold. We can also use a prototype, which shortens our supply chain time by about four weeks.
Using additive and prototyping technologies changes the paradigm. The problem is, we get so fast that the machine shop becomes the long lead on. So post-processing work—whether it's machining to fine detail specification, powder coating, or painting—are the downstream processes that ironically become the long poles in the tent.
Do you have to deal with supply chain bullwhip fluctuations?
The risk there is you don't have enough stockpile and you have to go back. It's not a quick turn process. So we need a good picture of business development activities. We have to be cognizant of these pop-up demands.
The nice thing is, we have a developing technology. It takes time to get to market. If there's a pop-up demand, the response is typically low volume. So we can respond to it from our stockpile and the overages that we maintain.
IBC's innovative alloys are a hot commodity in DoD and aerospace applications. What other opportunities do you see on the commercial side?
Interconnected devices—the Internet of Things—is on the move. The challenge is getting enough chips to support all these integrated processors.
We don't know what chip will drive everything. The Internet of Things will be important because you have to make these products smart. That means they will need chips in order to process. It's not just an on-off switch. Consumers want functionality.
Your lamp will talk to your air conditioner. That change in demand is a step function, and then some. The semiconductor industry is already ramping up its sources. We're seeing evidence of that in a variety of places.
When consumer electronics ramp up, they kill every other industry. They're thinking now of what they will be doing in the next two to five years to meet those demands.
How is this "step function change" impacting what you do?
Change is forcing us to consider other alloys. It's a difficult process to obtain a commercial license for export. We know the boundaries, and we've tailored alloys that come in under those requirements. We can still streamline downstream processes and meet performance standards.
Our engineered materials division in Wilmington capitalizes on our unique expertise in vacuum casting and producing net shape components in a high-purity environment. We know how these materials work together with other materials from a metallurgy perspective.
For example, we provide a standard copper product to one customer in Asia. But its application is an erosive environment, so we developed a new material, a technical solution to accommodate these working parameters. That type of agility and innovation gives us a leg up on our competitors. They are either too big, or they are distributors without the capability to make the material.
It's not that we're cutting distributors out. There is good reason to have them, especially on the copper side of the business. Someone has to hopper the material and have it on hand.
But in some particular cases, we can come in and solve a technical challenge. We'll ride that wave for a while until it becomes more of a commodity type product. Then we'll step back and let the distributor come in.
That type of responsiveness is key to addressing a variety of markets, and ultimately gives IBC Advanced Alloys a useful competitive edge.