TITAN TERMINAL & TRANSPORT is more than a transfer station for railcars of bulk liquid and dry packaged materials. The South Gate, California, company also offers shippers a comprehensive array of auxiliary services through its affiliation with Los Angeles Chemical Company, an 83-year-old chemical distribution firm.
LA Chemical and Titan reported revenues of $28.5 million for the past year, with Titan contributing $2 million. With logistical and management support from LA Chemical, the terminal company already achieved 50% growth in its first two years of operation.
Chronic service delays resulting from Union Pacific railroad's merger last year with Southern Pacific railroad have generated additional business for the three-year-old terminal company, says Dana Fontaine, Titan terminal manager. Daily shipments at Titan have increased to 1.25 million pounds from half a million pounds in less than a year.
"Three years from now, we should be averaging about 7.5 million pounds a day," Fontaine says. "Chemical companies that depend on movement of product from railcar to tank truck are losing major dollars because of the rail congestion. Customers with inventory in our storage tanks reduce their dependency on rail."
In addition to shipments via UP/SP, Titan now receives rail traffic from the Burlington Northern/Santa Fe (BNSF) because of conditions set forth in the Surface Transportation Board's approval of the UP/SP merger.
"This allows added flexibility in transportation decisions and supplies competitive rail freight rates for shippers," Fontaine says. "The option of shipping cars by BNSF may result in reduced transportation costs for our customers and provide them with a more competitive position within the southern California marketplace."
Market Opportunity Titan is the brainchild of David Miller, president of LA Chemical. Miller saw an opportunity when chemical manufacturers began abandoning their terminaling facilities in the southern California market during the early 1990s. Chemical companies cited the high cost of doing business and a steady decline in oil and agricultural industries as reasons for the pullout.
Miller presented the idea of a bulk terminal in the Los Angeles market to suppliers of LA Chemical, including FMC Corporation, which left its facility in Newark, California, in 1995.
"The advantage of a terminal in Los Angeles is obvious to a manufacturer such as FMC," he says. "Instead of customers having to buy chemicals from FMC's production facility in Kansas, Titan offers the option of a terminal with blending and storage services that provides FMC with a solid West Coast presence."
Using two rail spurs and 25 rail loading spots on LA Chemical's property, Miller began offering terminal, transloading, blending, storage, and other services to manufacturers that had no terminals in California and were trying to serve the market from facilities in the East and Midwest.
"The fixed cost of handling chemicals rises about 10% each year," Miller says. "You can't compete in this market without economies of scale. Titan would have a difficult time justifying its financial existence without LA Chemical.
"The infrastructure, environmental and chemical engineers, hazardous materials permits, chemist, and on-site laboratory already were established by LA Chemical. Titan is the only southern California terminal that can provide customers with a turnkey service, including chemical analysis of blends and dilutions."
Titan was established in 1994 as a separate corporation to highlight its services as distinct from LA Chemical's distribution business. There were also legal and tax reasons to form a separate company.
Major customers include Solvay Minerals, Solvay Interox, Witco Corporation, Pioneer Chlor Alkali, Hercules, and Goodyear Tire & Rubber. Titan specializes in blending and transloading acids, caustics, and hydrogen peroxide, and can handle other inorganic chemicals based on approval and receipt of a product's material safety data sheet.
Both companies have profited greatly from the chemical industry's exodus from southern California. Miller says that much of LA Chemical's history reflects the decline of chemical manufacturing in the region.
The company began as a manufacturer of oilfield chemicals and fertilizers in 1914. By the late 1950s, the company had stopped manufacturing and focused entirely on distribution. Today, LA Chemical operates the largest chemical distribution facility in California, according to Miller. Much of the company's future growth will come from acquisitions of other distribution companies.
Physical Expansion In 1996, Titan's terminal capacity increased to four spurs with 55 railcar spots on 25 acres after the purchase of an eight-acre facility from Rhone-Poulenc located across the street from LA Chemical. Titan already has plans for three new rail spurs at a cost of about $250,000.
The most important aspect of the new property is the available space to build more storage and blending tanks, Miller says. Currently, Titan has about 120,000 gallons of storage capacity, which will increase tenfold within the next year.
"Interest from the chemical industry suggests that Titan can sustain a 50% growth rate for the next seven years," he says. "Shippers using our terminal benefit from greater market penetration and enhanced profitability.
"For example, Solvay Interox sends us 70% hydrogen peroxide by rail. Using deionized water, we dilute the product to a 50% concentration. That results in about six and one half tank truckloads of chemical from one railcar."
Recently, after completing a contract with Witco, the company began groundbreaking on the first phase of the tank farm that will include 15,000- to 70,000-gallon tanks for an additional 1,000,000 gallons of blending and storage capacity. This will free up rail spots currently used to store chemicals. Titan expects completion of the first storage tanks by early 1998.
Companies in the terminaling business range in size from small operations that can provide only rail transloading service to mega corporations that have the storage capacity to transfer millions of gallons into barges and ships every day. Miller says his custom tank storage program will enable Titan to service customers in the middle market.
"Titan is the first of a new generation of terminaling facilities," he says. "To my knowledge, we are the only company that provides customized bulk storage, blending, and dilution of product for medium-sized chemical shipments. We can provide storage tanks with cooling, heating, nitrogen blanketing, or whatever environment is required for the product.
"Titan is to chemical manufacturers what leasing companies are to tank truck carriers," he says. "We reduce or eliminate certain fixed operating costs.
"Getting into the terminaling business can be a logical progression for other chemical distributors that have the necessary land and infrastructure. It probably will happen eventually in other major cities."
Product Transfer Terminaling operations at Titan include transfers of liquid and dry products directly from railcars to tank trucks. The company also fills a variety of containers, such as tank containers, intermediate bulk containers, drums, carboys, and five-gallon pails.
To facilitate the loading of trucks, Titan maintains a certified scale on site. Currently, transfers from railcar to tank trailer make up the majority of terminaling operations. Most tank truck shipments for shorthaul delivery are handled by DTI, which specializes in hazardous materials hauling.
Based in Compton, California, DTI operates a fleet of 60 tank trailers. Most trips usually average no more than 125 miles. "We appreciate the time and money that DTI has invested in late-model equipment and professional drivers," Miller says. "DTI always delivers on price, quality, and service."
Warehouse space for control and storage of inventory totals 125,000 square feet. Products such as sodium tripolyphosphate and soda ash can be repackaged into 50-, 100-, and 2,000-lb bags. LA Chemical's private truck fleet delivers packaged and drummed products to customers in southern California.
ISO tank containers are playing a greater role in Titan operations. Terminaling of tank containers currently represents about 15% of revenue. Miller says that number probably will increase another 10% in the next five to seven years.
Most of the container traffic runs to and from Asia because of Titan's proximity to the Los Angeles and Long Beach harbors. "Companies ship us concentrated chemicals that we blend to a commercial level," he says. "We also fill outbound tank containers from railcars.
"Increased demand for terminaling services will continue to fuel Titan's growth. At the same time, LA Chemical will look for additional acquisitions, especially any distributorships that have or can develop terminaling operations."