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Nucor Corporation: Competing Against Low Cost Steel Imports
Nucor is the worlds largest recycler, recycling over 10 million
tons of scrap steel annually.
Nucor descended from auto manufacturer Ransom E. Olds, who
founded Oldsmobile. The
company evolved into the Nuclear Corporation of America, which
was involved in the
nuclear instrument and electronics business in the 50s and early
60s. Over the next fiveyears, Valley Sheet Metal, Vulcraft
Corporation and U.S. Semi-conductor Products joined the
Nuclear Corporation. After suffering several money-losing years,
in 1964 F. Kenneth Iverson
was installed as president. Management then decided to integrate
backwards into steel
making, and in 1972 they adopted the name Nucor. Since then
Nucor has established itself as
a leader in the steel industry through efficiency and
innovation.
Nucor Corporation is made up of 17,300 teammates whose goal is
to "Take Care of Our
Customers." Company is accomplishing this by being the safest,
highest quality, lowest cost,
most productive and most profitable steel and steel products
company in the world.
Before 1966 Nucor was rarely profitable; it declared bankruptcy
and was reorganizednumerous times. Since then however, Nucor has
been at the forefront of the steel industry.
Continually striving to use the most an up-to-date and efficient
process, Nucor has been able
to remain as a low-cost producer in a hyper-competitive industry
for nearly half of a century.
Nucor works in two main lines of business: steel joists and
steel mills. Competition for both
of these businesses is based on price and delivery performance.
Nucor has aggressively
sought to be the lowest-cost producer in the industry by using
mini mill technology and by
keeping employee and officer wages relatively low. Nucor also
maintained its own fleet of
trucks in order to ensure timely delivery.
Over the years, Nucor had expanded progressively into the
manufacture of a wider & widerrange of steel products, enabling
it in 2006 to offer steel users one of the broadest product
lineups in the industry. Nucors line of steel products include
steel joists & joist girders, cold
finished steel products, metal building system, light gauge
steel framing, steel fasteners, steel
sheets, flange steel beams, heavy structural steel products
& steel plates
Nucor embarked on four part growth strategy that involved new
acquisitions, new plant
construction, continued plant upgrades & cost reduction
efforts & joint ventures
Acquisitions strengthened Nucors customer base, geographic
coverage, & lineup of product
offerings. Through acquisitions and organic growth Nucor had
become the second-largest
steel company in the United States by the end of the 1990s.
Nucor continued to be a technology leader & to be aggressive
in constructing new plant
capacity, particularly when such construction offered the
opportunity to be first-to-the market
with new steel making technologies..Nucor management made
conscious effort to focus on
the introduction of disruptive technologies & leapfrog
technologies.
Nucor continue making capital investment to improve plant
efficiency & keep production
cost low. Nucor had built state-of-art facilities in the most
economical fashion possible and
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then made it standard company practice to invest aggressively in
plant modernization and
efficiency improvements as technology advanced and new cost
saving opportunities emerged.
Although Nucor strived to keep wages low, research shows that it
has the most satisfied
employees in the industry. Nucor provides job security to all
employees, having never needed
to initiate mass lay-offs. Nucor also offers excellent fringe
benefits, including group health
insurance and education reimbursement for its employees
children. All employees are also
given incentive pay for working hard and meeting production
goals.
Nucor was in a great position for future success because the
industry was fragmented and
there were many small competitors. Unfortunately for Nucor
though, the U.S. government
continually gave subsidies to these smaller mills, which allowed
them to simply limp along
and weaken the industry.
In the early twenty-first century, the U.S. steel industry,
overall, was in trouble. According to
The Economist, Nucor was the only U.S. steel company that was
indisputably healthy.
Because of an increasing amount of cheap imports, rising energy
prices, and decreasing
demand, over a dozen U.S. producers were now operating under
Chapter 11 bankruptcy-law
(this protection allowed bankrupt companies to sell steel
cheaper than non-Chapter 11
companies).
In order to help protect domestic producers from cheap imports,
President Bush imposed
antidumping tariffs in March 2002. By the end of the year,
domestic steel prices had risen
40 percent, but international hostility was increasing. In
November 2003 the WTO ruled
against the tariffs and Bush was forced to withdraw. For these
and other reasons Nucor
struggled in 2002 and 2003, but did remain profitable in all
quarters.
During this time period, international steel producers were also
becoming increasingly
consolidated. Much of the domestic scrap steel was now being
exported to these international
conglomerates making it difficult for Nucor to find affordable
raw materials. By 2004 Nucor
was facing an increasingly uncertain environment. There was much
new technology being
developed that would decrease the need for scrap steel and other
raw materials, but it was not
yet well enough developed that Nucor could starting using
it.
In order to remain competitive Nucor must continue to acquire
new steel mills in order to
keep up with foreign conglomerates. Nucor needs also to
strengthen its relationships with
producers / miners of raw materials by becoming key stakeholders
or setting up strategic
alliances with these companies. Finally, Nucor should begin
investing more in research and
development rather than just copying the technology of other
producers. As the industry becomes more consolidated it is going to
become more difficult to copy other producers
technology. Plus Nucor should invest in R & D simply to try
to stay ahead of the competition.
