Whitefish, MT / April 29th, 2014 / Metal corrosion is a large and growing problem estimated to cost the global economy $2.2 trillion each year or roughly 3% of gross domestic product, according to World Corrosion Organization. While anti-corrosion technologies have been in development since the early 1900’s, companies must generally decide between spending a lot of money up front to buy better anti-corrosion products, or dealing with subpar products that will require expensive and time-consuming replacement.
Abakan Inc. (ABKI) aims to revolutionize the market by providing the strongest protection against corrosion at a competitive price. Through its 72% interest in Ohio-based MesoCoat, the company provides the PComP™ family of thermally-sprayed nano-composite cermet coatings and the CermaClad™ clad steel products, targeting a wide variety of end markets, ranging from oil and gas to infrastructure customers. Abakan’s current focus is to serve the oil and gas industry, and it comes as no surprise; since more than 70% of the remaining oil and gas reserves are extremely corrosive , making it almost mandatory for oil and gas companies to use high-quality corrosion-resistant products to produce oil and gas from these corrosive reserves.
In this article, we’ll take a look at why investors may want to examine Abakan Inc.’s growing presence in a little known but very large and rapidly growing industry.
Corrosion Resistant Coatings
PComP™ is a family of nano-composite cermet coatings that are used to impart wear and corrosion resistance, as well as restore the dimensions of metal components in an environmentally acceptable manner. PComP™ can also be applied and machined much faster than products based on traditional carbide or other ceramic coatings, resulting in higher productivity and reduced costs in metal finishing operations. The unique structure of the PComP materials enables coatings that are both hard and tough, which means that these coatings can withstand both impact and stress, a feat that none of the other coatings can achieve.
By using proprietary nano-composite materials, the technology provides better wear, corrosion, and mechanical properties at a lower life cycle cost than traditional alternatives in the $32 billion inorganic metal finishing markets, like hard chrome plating and tungsten carbide thermal spray coatings. The EPA also increasingly frowns upon the use of hexavalent chrome and tungsten carbide cobalt.
In a sign of the efficacy of their product line, Abakan already has the several oilfield equipment manufacturers as customers. While PComP™ is already commercially available in numerous end markets; MesoCoat plans to expand geographically and set thermal spray coating facilities to better serve the higher margin, regional customers that don’t have the capacity to coat their own products.
Innovative Cladding Process
CermaClad™ combines the lower cost of carbon steel clad with better properties of a corrosion resistant alloy in order to offer a lower cost and higher performance alternative for critical oil and gas assets. Using a high-intensity arc lamp, the proprietary process rapidly fuses protective, proprietary anti-corrosion and anti-wear cladding materials onto the internal surface of steel pipes and tubes, covering a large surface area; coating at production rates up to 20 times faster compared to conventional weld overlay and laser cladding technologies.
CermaClad™ clad products costs less than a third of solid anti-corrosion alloy alternatives since it deposits only a thin layer of the anti-corrosion alloy on top of the inexpensive but strong carbon steel substrate, and the strong bond formed between the carbon steel and alloy in the process makes it a more durable alternative than other cladding processes. In fact, the technology boasts an average lifespan of 30 to 100 years without maintenance, which helps customers lower costs and avoid expensive accidents.
On March 13, 2014, MesoCoat received the highly prestigious National Association of Corrosion Engineers (“NACE”) and Materials Performance (“MP”) Corrosion Innovation of the Year Award in the Coatings and Linings Category for its CermaClad™ high-speed, large-area, metal cladding technology. The Pipeline Industries Guild also conferred CermaClad with the ‘Subsea Pipeline Technology of the Year’ award that validate CermaClad’s potential to improve the performance and life of offshore pipelines and risers that are subject to an extreme assault of corrosion as they transport unrefined caustic fluids.
About a few years ago, the average requirement for clad pipes was for 3 to 5 kilometers whereas the largest requirement was 20 to 30 kilometers for each project. Today, the average requirement for clad pipes is in the tens of kilometers and the higher end in hundreds of kilometers for single projects; where cladding the inside diameter of a kilometer long 20” pipe would roughly translate to $6 million in revenues. The clad pipe market is growing at a rapid pace and the current solutions have several limitations in terms of inspectability, installation, quality, and productivity. CermaClad™ technology enables metallurgically bonded cladding over large areas at high production rates, and without the size, thickness, and reeling/installation limitations of other methods.
Robust Business Model
Abakan Inc.’s technologies are uniquely positioned in several multi-billion dollar markets. PComP™ targets the broad and fragmented market for corrosion resistance, while CermaClad™ targets a more consolidated market for large-scale metal cladding. Independent studies, awards, and industry have confirmed the effectiveness of both technologies.
PComP™’s are being commercially sold since 2011 and have witnessed progressively increasing demand; and once CermaClad™ development is finished, the company will be in a unique position to service large oil and gas companies. CermaClad™ plants can be established at a fraction of the cost of traditional steel mills, like those operated by U.S. Steel Corp. (NYSE:X) or ArcelorMittal SA (MT), which means that its up-front costs and utilization requirements are much lower.
Abakan is currently scaling-up its PComP powder production from 3 tons/year to 18 tons/year to meet the growing demand, especially since the current capacity is sold out for the next 6 months, and has recently received a low-interest $1.5 million loan from State of Ohio that allows Abakan to scale-up its PComP powder production to 180 tons/year which given the current market price for similar thermal spray coating powder, translates to about $22 million in annual revenues. Further growth and expansion plans over the next 3 years call for the acquisition of up to 10 US based thermal spray production businesses that will have a total of 30 to 40 spray booths, which serve the growing oil and gas sector; where each coating cell can generate up to $5 million in revenues.
The company has announced setting-up a large clad pipe manufacturing plant in Indonesia, and has announced plans to set-up plants in Brazil and Canada to supply the highest quality metallurgical clad pipes for projects across the globe, as they see an increasing number of projects getting delayed due to lack of supply and lower quality of clad pipes. The very high productivity of the CermaClad™ technology enables the company to set-up clad pipe manufacturing facilities at a tenth of the cost of competing technologies; which allows the company to set-up multiple facilities across the globe to serve the regional market and fulfill the growing and critical local content requirement in South America, Indonesia, Africa, Middle East, and other regions - a trend that is expected to continue and grow over the foreseeable future. The company intends to have capability of producing up to 200 kms of 10” clad pipes in 2016, and then expects to add new clad pipe manufacturing facilities in Middle East, Mexico, Alberta, and Europe to produce more than 500 kms of 10” clad pipes to serve the rapidly growing clad pipe market across the globe.
Investors may want to take a closer look at the company given the large scale expansion of PComP™, the massive potential for CermaClad™, and recent traction and funding that the company has received which is briefly mentioned in the press releases below.
For more information, see the following resources:
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