By Aaron Stone and Vicky Villena-Denton
When a company is bought and sold, often the nature of the business changes as the purchaser moves to leave an indelible mark on the organisation. In some cases, a company becomes almost unrecognisable as new owners eye up growth opportunities or endeavour to turn around flagging performance. It is perhaps surprising then that FedChem, a company that has changed hands four times over the past two decades, has continued to operate with consistent technology in the competitive lubricating grease industry. FedChem, a division of Federal Process Corp. based in Cleveland, Ohio, U.S.A., is the global leader in the production of aluminum organic chemicals.
Fedchem’s core product, a reactive aluminum organic sold under the Kolate™ brand is used by their customers to manufacture aluminium complex grease. The resulting grease is part of a truly niche market accounting for just 3.5% of worldwide grease revenues in 2015, an estimated volume of 90 million pounds. Christopher Horvath, technical service & market development manager, believes the company has “found a role in the world that not everyone tries to fill.” Aluminum complex grease is designed to withstand the most extreme operating conditions while remaining versatile enough for almost any application. “Traditionally complex soaps are used in tougher applications,” says Horvath, “simple soaps have a much lower dropping point – so effectively you can’t use them in higher temperature applications.”
Aluminum complex grease is one of a range of products in the marketplace suitable for use in difficult operating conditions. Competitive products include lithium complex, calcium sulphonate complex, polyurea, as well as some non-soap thickeners such as bentonite clay and PTFE.
Fedchem’s Kolate product is used by their customer base to formulate the final grease product and can impart a wide variety of characteristics. The resulting grease boasts outstanding water resistance, good pumpability, excellent surface adhesion, as well as the ability to restructure after excursions above melting point. These properties make it well suited when the grease is exposed to the elements such as in marine, mining, oil field, agriculture and power generation applications.
The first patents for aluminum technology were held back in the 1950’s — encouraging the preliminary development of what eventually would become Kolate. Over the next two decades the product type gained traction as the reactive aluminium became thinner, pourable and more stable to use and handle. Horvath says the original driver of growth for aluminium complex grease was in steel mills. Equipment required frequent re-lubrication due to the vigorous demands of the steelmaking process. To cope with the hundreds of re-lubrication points centralised lubrication systems became prevalent. Aluminum complex as soap has inherent water resistance and relatively low thickener content — making it very pumpable and allowing easier passage through centralised systems. Furthermore, its high temperature performance and ability to restructure made it especially suited to the extreme temperatures of steel mills.
In recent times Fedchem’s customers have diversified their products into other industries. Aluminum complex grease is “probably one of the biggest thickeners for H1 incidental food contact,” he says. The food industry now accounts for approximately 40% of the business. Not every thickener type is approved for use in a food environment, for example, lithium complex is not permitted.
The list of former owners of FedChem is long and includes Joseph Ayers, Manchem, Rhone Poulenc, Rhodia and OMG. Federal Process Corporation purchased the company in November 2002 and has hung on to it for the last decade and a half – providing surety in operations and ownership. Federal Process is a family-owned company with a track record of acquiring and growing niche industrial businesses.
Originally a manufacturer of pipe thread sealants, the organisation now endeavours to cultivate niche businesses into market leaders and has established several highly differentiated products under trusted brands. Federal Process “buys great little niche companies, hires good people and lets them run it,” says Horvath. “The industries are not necessarily related to one another, “we were the first chemical company,” he attests.
FedChem attributes much of their consistency in technology to the quality of the product they deliver. “The products themselves are still good and [there is] still a role for them,” he says, while confirming the ease of manufacture once customers are familiar with the product.
Instability around lithium supply and rising costs have left customers looking for alternative complex grease products. The soap supplier believes aluminum complex grease will continue to provide growth opportunities owing to stable pricing and the fact that there are no supply limitations. Increasingly customers are focusing on higher quality greases, to improve operating performance and minimise equipment breakdowns. Demonstrating the superior performance of their products and the impact on overall operating costs is paramount to the product’s longevity.
Clearly, FedChem has a range of advantageous products on the market. But it is not simply the quality of materials that has driven the success of this niche business and made it very attractive to new purchasers over the years. Horvath believes they are known as much for their technical service as the quality of the product. In a “very small” grease community, service is vitally important, he says.
A proliferation of long term customer relationships, many of which stem back to when the company started, supports this assertion. Schaeffer Lubricants out of St. Louis, Mo., U.S.A. and Bel-Ray out of Farmingdale, N.J., U.S.A. are two examples of early accounts that have stood the test of time and remained exceptionally loyal.
A key component of FedChem’s service proposition is working collaboratively with customers to “help them create the best product they can make.” This includes laboratory testing, analysis and optimizing formulations, and is a “service we don’t charge them for.” Horvath suggests other reactive aluminum manufacturers do not provide the same level of customer support.
The United States is the number one manufacturer of complex grease in the world and accounts for the majority of FedChem’s Kolate product sales. Europe is second, though the company admits it is a highly competitive market littered with local suppliers. FedChem supplies a range of unique grease applications in parts of Asia, although the company admits gaining ground in the tough Asian market has been challenging. The organisation has achieved greater success in Southeast Asia.
Horvath says the company has had problems with aluminum complex in China because suppliers use cheap technology in a price sensitive market. He says the U.S. and Europe have moved away from cheaper raw material due to concerns around flammability, reactivity and environmental issues. The continued use of cheaper raw materials continues to be an obstacle to growth in Asia. “We really have to sell the value proposition – that there is a distinct advantage to paying more for the highest quality products.” Convincing locals of this truth takes considerable time and effort.