York manufacturer CEO to House panel: Low-cost energy is ‘critical’

dworthington@heraldonline.comJune 20, 2013 

A stable supply of low-cost energy is crucial to Ajax Rolled Ring and Machine, the York manufacturer’s chief executive officer told Congress on Thursday.

Simon Ormerod was one of four speakers to testify before a subcommittee of the House Committee on Small Business in a hearing titled “The New Domestic Energy Paradigm: Its Potential for Small Businesses and the Economy.”

He represented Ajax, as well as the Forging Industry Association, which he serves as president. The trade group represents 200 forging operations nationwide.

Responding to a question from U.S. Rep. Mick Mulvaney, R-Indian Land, Ormerod agreed that the cost of energy is among the top concerns for small businesses.

“It’s critical for us,” Ormerod said. “It’s our cost driver.” When the price of natural gas increases dramatically, he said, “it creates difficulty for us.”

Ajax makes custom seamless rolled rings used in industrial components such as gears, flanges and valve seat rings. The components are sold to the oil and gas industry, power generation plants, mining and construction equipment.

The company employs about 100 people at its York plant on Wallace Way between U.S. 321 and S.C. 5.

The company uses natural gas and electricity to turn steel into its rings, which are finished to very tight tolerances.

In 2008, the price of natural gas ranged from $5.80 for each million British Thermal Units used to $12.70 MBTU. The price increase caused Ajax to cut its workforce by about half.

Since 2011, natural gas prices have ranged between $1.20 MBTU and $4.50 MBTU. The price of natural gas on the New York Mercantile Exchange Thursday was $3.88 per MBTU.

John Larson, a vice president with IHS Economics and Country Risk Group of Washington, D.C., testified that current U.S. natural gas prices are a third of the Asian price and half of the European price.

U.S. Rep. Scott Tipton, R-Colo., chairman of the subcommittee, asked if domestic energy costs were the “secret weapon” to creating jobs.

“It certainly helps a lot,” Ormerod said. “Cheap steel, cheap energy makes a big difference for us.”

Continued oil and gas exploration through the controversial practice of fracking and extension of the Keystone pipeline – which is designed to bring Canadian oil to Gulf Coast refineries – have dual benefits for forging companies, he said.

In addition to keeping the price of natural gas low, he said, more exploration and the pipeline would create more demand for products the mills make.

Demand for the forged rings Ajax makes for the oil and gas pipelines has increased 20 to 30 percent in the past two years, Ormerod said. Because of the demand, Ajax has hired “at least” 10 people, he said.

Ormerod urged Congress to be cautious about enacting regulatory barriers on the domestic supply of oil and natural gas.

Policies that artificially increase natural gas prices or restrict supply, he said, would affect a supply chain that serves “everything from airplanes to hand tools to hip joints.”

Don Worthington •  803-329-4066

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