Nucor at a Crossroads
Nucor at a Crossroads
On December 7, 1986, F. Kenneth Iverson, chairman and chief executive officer (CEO) of Nucor Corporation, awaited a delegation from SMS . Iverson had to decide whether to commit Nucor to a new steel mill that would commercialize thin-slab casting technology developed by SMS. Preliminary estimates indicated that the mill would cost $280, and that start-up expenses and working capital of $30 million each would push the total cost to $340 million.
Successful commercialization of thin-slab casting would let Nucor enter the flat sheet segment that accounted for half the U.S. market for steel.
The U.S. Market for Steel
In 1986, U.S. producers shipped 70 million tons of steel mill products. Subtracting exports of one million tons and adding imports of 21 million tons implied 90 million tons of domestic consumption of steel that year. Relative to the most recent peak year, 1979, domestic shipments had decreased by 30% and domestic demand by 22% (see Exhibit I). The decline in demand derived from the stagnation of many steel-intensive industries, particularly automobile manufacture, efforts to use steel more efficiently and the emergence or substitute materials such as aluminum, plastics and advanced composites.
Shipments could also be classified by customer group. The four most important ones, ranked by volume, were service centers and distributors, the automotive sector, construction, and the appliance and equipment industries. Service centers and distributors were intermediaries
Price, quality and dependability were the three most important buyer purchasing criteria. Uncompetitive pricing was probably the major reason U.S. steelmakers had lost ground to imports.
U.S. Steelmakers
There were three groups of steelmakers in the United States in 1986: integrated firms with the capacity to produce 107 million tons of steel by reducing iron ore, minimills with 21 million tons of capacity to produce steel by melting scrap, and specialty
On December 7, 1986, F. Kenneth Iverson, chairman and chief executive officer (CEO) of Nucor Corporation, awaited a delegation from SMS . Iverson had to decide whether to commit Nucor to a new steel mill that would commercialize thin-slab casting technology developed by SMS. Preliminary estimates indicated that the mill would cost $280, and that start-up expenses and working capital of $30 million each would push the total cost to $340 million.
Successful commercialization of thin-slab casting would let Nucor enter the flat sheet segment that accounted for half the U.S. market for steel.
The U.S. Market for Steel
In 1986, U.S. producers shipped 70 million tons of steel mill products. Subtracting exports of one million tons and adding imports of 21 million tons implied 90 million tons of domestic consumption of steel that year. Relative to the most recent peak year, 1979, domestic shipments had decreased by 30% and domestic demand by 22% (see Exhibit I). The decline in demand derived from the stagnation of many steel-intensive industries, particularly automobile manufacture, efforts to use steel more efficiently and the emergence or substitute materials such as aluminum, plastics and advanced composites.
Shipments could also be classified by customer group. The four most important ones, ranked by volume, were service centers and distributors, the automotive sector, construction, and the appliance and equipment industries. Service centers and distributors were intermediaries
Price, quality and dependability were the three most important buyer purchasing criteria. Uncompetitive pricing was probably the major reason U.S. steelmakers had lost ground to imports.
U.S. Steelmakers
There were three groups of steelmakers in the United States in 1986: integrated firms with the capacity to produce 107 million tons of steel by reducing iron ore, minimills with 21 million tons of capacity to produce steel by melting scrap, and specialty