Propane tank refurbishing market expanding

November 1, 2008 By and    

As the cost of steel continues to rise along with the pricing for new tanks, propane marketers are increasingly opting to set refurbished vessels on customers’ properties.

Those in the tank-refurbishing business, who boast of the quality and affordability of their work, say you can achieve significant savings by removing tanks from closed accounts and shifting them to new ones. They also contend that reconditioning unused tanks rather than leaving them to rot in a storage yard better serves a marketer’s bottom line.

There’s also the safety aspect to consider once a tank has become pitted or otherwise compromised.

“The propane industry’s been lax about maintenance for many years – they set ’em and forget ’em,” says Maurice Ryman, owner of LP Cylinder Service, based in Shohola, Pa.

“You want a tank that’s up-to-date,” he points out, noting how regulatory requirements have tightened along with the surging cost of new tanks, making used vessels an attractive option.

 (PHOTOS COURTESY OF MAURICE RYMAN AND JOEY CRIST)
(PHOTOS COURTESY OF MAURICE RYMAN AND JOEY CRIST)

“We’ve seen an increase in our customer base, and our existing customers are doing more refurbishing. Instead of a customer doing four loads a year, they’re doing eight loads a year.”

The higher cost of propane plus the related routing and delivery economics also drive the refurbishing market, according to Ryman.

“They’re pulling bigger tanks out and putting smaller tanks in,” he notes.

“Everybody is refurbishing and everybody is buying used steel tanks – if they’re not, they’re not making as much money as they should,” asserts Joey Crist, co-owner with his father Roger of Crist Propane Services in Irvington, Ky. “We almost double our business every other year.”

Market movement

Orders are also up at Cortland, N.Y.-based Modern Tank Services, according to Manager Peter Morenus. Suburban Propane purchased the operation as part of the $206 million acquisition of Agway Energy in 2003.

The refurbishing segment is seeing significant market movement among multi-state propane providers, says Morenus, when comparing the customer traffic traditionally gleaned through independent marketers. “The business from them has always been steady; our increase is coming from Suburban.”

Is this trend toward refurbishing expected to continue?

“That’s a good question,” Morenus ponders. “We know American Welding and Tank [AWT] thinks it will grow.”

Morenus is referring to AWT’s August acquisition of Crossville, Tenn.-based Certified Cylinder; in 2006 it bought Ferrellgas’ tank reconditioning division.

“Certified Cylinder has certainly distinguished itself as the premier player in the DOT vessel refurbishing business in the U.S. The addition of the Certified Cylinder operations to our existing ASME refurbishing service will result in the largest and most comprehensive propane vessel requalification service in North America,” says AWT President Mike Larsen.

“All propane marketers are aware of the importance of managing their tank and cylinder assets,” explains Ted Reilly, vice president of sales and marketing for AWT.

“The addition of Certified Cylinder to our organization provides unparalleled depth to our total tank asset management services. This acquisition uniquely defines American Welding & Tank as the only ASME propane tank manufacturer and refurbisher of both ASME and DOT cylinders worldwide.”

Family service

While Crist considers the AWT conglomerate to be tough competition, he believes his company’s quality and industry experience – plus a pickup-to-delivery timeframe of less than three weeks – is a force to be reckoned with.

“No one can touch that,” he insists, “because we’ve been doing it since 1997. You can only refurbish a tank so well, then you have to start selling your service.”

 1. The process of refurbishing tanks is on the rise.
1. The process of refurbishing tanks is on the rise.

The family owned business specializes in refurbishing ASME-compliant tanks. This type of reconditioning “is more of an individual process” than the automated methods frequently applied to DOT-certified tanks, according to Crist.

2. A refurbished tank looks like new.
2. A refurbished tank looks like new.

“With the ASME tanks, there’s so many different styles and configurations” that require a hands-on approach from the firm’s 15 employees.

3. Tanks of varying sizes can be refurbished.
3. Tanks of varying sizes can be refurbished.

Liquid, rather than powdered, paint is the coating that assures a long-lived product. “It’s more of a finish that’s on offshore rigging, water towers and bridges – anything you don’t want to mess with for 15 years,” he says.

4. Companies have ability to manage tank logistics.
4. Companies have ability to manage tank logistics.

Crist’s clientele includes many independents along with several majors, including Heritage Propane, United Propane Gas, Thompson Gas and Suburban.

Pricing is another selling point. Crist describes how a 500-gallon new tank currently being sold for $1,100 from the manufacturer can be had as a refurbished version for just $625 when delivered in Kentucky.

“We’re also selling ‘raw’ used tanks that are good enough to place in a customer’s yard without refurbishing,” he says, noting that a 500-gallon vessel shipped within Kentucky can be purchased for $450.

“That’s a big part of our business now,” he says. “It’s been going on forever [within the industry], but in the past three years it’s really caught on.”

Keeping the refurbishing segment afloat requires a flow of scrap vessels coming into the pipeline. Crist encourages marketers to turn any unused tanks in for cash or a credit toward their order: “We’ll take all we can get.”

With a fleet of three transports and shipments via common carriers, Crist has a nationwide product reach, including a tank redeployment service.

“We pick up tanks in the East, refurbish them and then ship them to the West Coast, and you still save 30 percent over the cost of new,” he notes.

Busy times

The marketing region for Modern Tank Services stretches from Virginia to Maine. DOT vessels sized 100 to 420 are expertly refurbished with a “wet on wet” paint process that assures high quality, according to Morenus. Tanks can be collected at a marketer’s site over a period of time.

“We have trailers spotted at some locations, and at some locations we send a trailer to pick them up.”

Pennsylvania-based LP Cylinder Service also provides pickup throughout its 21-state coverage region. Each of the four trucks is equipped with a crane, and there are 35 trailers available for on-site collection.

“We’re pretty self-contained,” says owner Maurice Ryman. Independent propane marketers account for 70 percent of the business, which encompasses both ASME and DOT vessels.

“As the codes have changed, requiring [DOT] cylinders to be inspected, propane companies have had to obtain a RIN number [retesters identification number] and register their facility with DOT to do their own visual inspections, which are good for only five years. With the lack of qualified personnel, many companies have elected to outsource their refurbishing needs,” he says.

Previously, the 100-pound cylinder “was the big number” at Ryman’s operation. A good week saw 50 to 60 cylinders being serviced – now they average 1,000 a week.

“We’re busy now and we’ve always been busy. It’s mostly word-of-mouth, and people keep coming back because we do good work,” he says.

Ryman takes issue with unnamed Johnny-come-latelies that have entered the refurbishing arena in conjunction with the sting the industry is feeling with new-tank pricing.

“I don’t want to start a bees nest here,” he remarks, adding how “these new guys are cutting quality and trying to force me to lower my prices. Steel is like gold now; I’ve seen seven or eight guys get in this business, then a couple of years later they’re out of it. They come and go.”

Of the existing mainstream players, “there’s enough work out there for everybody” as the reconditioning segment continues to heat up.

Ryman says some of his customers have strayed, only to return after dealing with a competitor who cut corners.

“For the next load, guess who they call? Then they’re back home with us.”

Experience counts, he declares. “I’ve been at this 26 years; I ain’t just started! Everyone thinks this is a bed of roses, but it’s a lot more difficult than you would think.”

Attention to detail is a must among the 26 employees who work within a sophisticated process that includes computerized systems. Training is extensive, and Ryman occasionally recruits painters from the automotive collision repair industry.

“When we hire someone they have no clue what we do. We’re like a body shop that does tanks.”

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