Steel in the new Millennium - 9a - Sectoral Activities

Mini-mills represent a robust segment of the American steel industry, with a reputation as savvy competitors who are quick to adapt to new markets and technology. Successful mini-mills have achieved competitive advantages through innovative production, human resource, and marketing practices, some of which have achieved significant publicity. The publicity, which typically focuses on limited aspects of a small sample of mini-mills, obscures reality. In particular, the publicity overlooks the breadth of practices that support and enhance one another at successful mini-mills, and the variety of approaches that have led to mini-mills' success as steelmakers.

This case study will examine Nucor Steel's Darlington mill and Georgetown Steel, with particular attention to the relationships between technology, management and history. The two mills have taken very different paths to success. By examining these paths, lessons can be learned about how to develop a sound fit between different practices, and possibilities for changing environments.

Introduction

Nucor, Darlington

Nucor Steel's Darlington steel mill, the first of Nucor's mini-mills, was built in 1969. Initially built primarily to supply steel products for the Vulcraft steel fabrication division of Nucor, the mill now produces bar products ranging from concrete reinforcing bar (rebar) to special bar quality (sbq) shapes. The mill currently supplies Vulcraft, Nucor Cold Finish (both sited locally), and outside customers. The melt shop has a 100 tonne DC electric arc furnace using the Consteel continuous scrap charging process installed in 1993, a ladle refining furnace and a four-strand continuous billet caster. The melt shop produces 4.5" x 4.5" billets in grades from rebar to sbq. The rolling mill is composed of two lines: Rolling Mill 1, built in 1969, is an 18-stand mill with a 90 tonne per hour reheat furnace, and currently produces smaller structural products. Rolling Mill 2, built in 1977, is a 14-stand mill with an 80 tonne per hour reheat furnace and is used to produce larger structural shapes. Current melt-shop capacity is 725,000 tonnes per year, and current rolling mill capacity is 565,000 tonnes per year. The mill produces No. 4 - No. 8 rebar, merchant rounds in sizes from 0.625" to 2.1825". and merchant shapes (flats, angles, squares and channels) in small and medium sizes. Table 1 shows the mill's production in 1990-96.

Table 1. Nucor, Darlington: Production, 1990-96

	1990	1991	1992	1993	1994	1995	1996
Billets (`000t)	447.4	377.8	474.9	454.7	456.6	585.6	569.8
Melt-shop rate (t/hr)	68.8	69.9	74.4	64.9	64.0	86.5	90.7
Rolling mill (`000t)	393.5	339.5	438.9	431.2	513.7	551.3	524.3
Rolling mill rate (t/hr)	59.2	59.0	69.0	65.4	80.2	87.5	87.2
Rolling mill yield (%)	88.6	88.3	90.4	90.0	91.9	93.0	92.4
Total shipments (`000t)	381.9	336.0	423.1	451.2	513.2	556.1	543.3
Inside shipments (`000t)	159.9	133.9	159.1	151.7	206.1	218.5	191.4
Outside shipments (%)	58	60	62	66	60	61	65

Located in a small town in South Carolina, the mill's workforce is a cross-section of the local area. The average employee is 40 years old and has been employed by Nucor for 15 years. A significant number of the operators do not possess high school degrees and the average education level of the operators is less than 12 years of formal schooling. Recently hired employees tend to have more education. Although some employees transfer from other mills, most production workers have no experience in the steel industry apart from their work at Nucor. Management and craftsmen, however, often have gained experience in other steel companies. Total employment at the Darlington mill is 359. Table 2 shows employment by department since 1990.

Table 2. Nucor, Darlington: Employment, 1990-96

	1990	1991	1992	1993	1994	1995	1996
Melt & cast	163	157	151	140	76	74	71
Rolling	138	134	136	129	124	127	128
Maintenance	81	70	67	58	61	62	64
Shipping	54	48	47	47	49	44	44
Administration	63	62	58	50	47	54	52
Total	499	471	459	424	357	361	359

The mill's administrative structure is very flat, comprising a general manager, department heads for melting, rolling, maintenance and accounting, and front-line supervisors. The maintenance department is centralized, with both day shift personnel and rotating shift personnel assigned to both the rolling and melting departments.

Darlington, like all Nucor mills, is non-union. Management personnel, many of whom have experience in integrated steel mills, have a strong conviction that the work rules, grievance procedures and the overall environment resulting from the union-management structure are detrimental to the operation of the mill. They believe that treating employees with respect and integrity and providing them with recourse when they disagree with a management action makes unions unnecessary. The employees have adopted the same attitude as the management; a recent exchange of letters to the editor in New Steel represents a common attitude at Nucor mills.²

The mill is productive and profitable. Financial results for the mill itself are not available, but results for the company are in table 3. The mill has set profit records for the last three consecutive years.

Table 3. Nucor: Financial performance, 1990-96

	1990	1991	1992	1993	1994	1995	1996
Sales ($bn)	1.48	1.5	1.6	2.25	2.98	3.46	3.65
Net earnings ($m)	75.1	64.7	79.2	123.5	226.6	272.0	248.0
Capital expenditure ($m)	58.7	218.0	379.0	364.1	185.3	263.0	...
Employment	5 500	5 600	5 800	5 900	5 900	6 200	...
Employment cost (% of sales)¹	15	15	15	12	10	10	...
Cost/t of capacity²	<175	<175	<175	<175	<175	<175	...
Steel production (`000t)³	3 125	3 507	3 924	5 215	6 357	7 135	...
% sales to outside customers⁴	70	67	75	85	85	85	...

Notes

¹ 1991 figure is for the four bar mills only; 1992-95 figures are for all steel mills (not Nucor Cold Finish, Vulcraft, Nucor Grinding Balls, Nucor Fastener, Nucor Bearing Products, and Nucor Building Systems).

² Figures for bar mills only.

³ Figures for all steel mills (new facilities completed in 1992 and 1993).

⁴ 1990-91 figures for bar mills only; 1992-95 figures include two sheet mills.

The company feels that the business is too dynamic to make long-term planning worthwhile, so the mill does not prepare five year or extended business plans. Consequently, there are no formal objectives to 2005. However, capital improvements to the rolling mill to enable higher quality production are being made. The company's long-standing goal is to be the low-cost provider of its products. This is achieved by maintaining a competitive advantage in technology and having a motivated and dedicated workforce. This approach will remain the core of the business strategy.

Notes:

¹ Carnegie Mellon University. Unless otherwise noted, the information in this paper was gathered by the author during visits and follow-up phone conversations with the two mills. This research was conducted as part of the study Competitiveness in the Global Steel Industry, funded by the Alfred P. Sloan Foundation.

² See Iron Age New Steel, Jun., Jul., Aug., Oct. 1996.

Updated by BR. Approved by OdVR. Last update: 28 September 2000.

9 Steel in the United States Two mini-mills compared

Part a

Abstract

Introduction

Nucor, Darlington

9 Steel in the United States
Two mini-mills compared