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Kristin DeSouza
Travis Jernigan
Nicholas Morrison
Sujan Patel
Oksana Seeley
Largest Steel Producer in the US
Largest Steel Producer in the US
Fortune 500 Rating
Largest Steel Producer in the US
Fortune 500 Rating
Unconventional
Largest Steel Producer in the US
Fortune 500 Rating
Unconventional Use of electric arc furnaces and mini mills
Largest Steel Producer in the US
Fortune 500 Rating
Unconventional Use of electric arc furnaces and mini mills
Minimal management layers
Largest Steel Producer in the US
Fortune 500 Rating
Unconventional Use of electric arc furnaces and mini mills
Minimal management layers 200 operating facilities
Largest Steel Producer in the US
Fortune 500 Rating
Unconventional Use of electric arc furnaces and mini mills
Minimal management layers 200 operating facilities
100 people at corporate headquarters
Origins traced to 1905
Origins traced to 1905
Evolved through successive companies Reo Motor Company
Nuclear Corporation of America
Vulcraft-- the first whole steel company
Nucor Steel in 1971
Low threat of new entrants
MATURE INDUSTRY
WELL ESTABLISHED COMPANIES
CONSOLIDATION OF FIRMS IN US
EXIT OF MAJOR FIRMS
Low threat of substitute products
INCREASING DEMAND FOR STEEL AND STEEL PRODUCTS
WELL ESTABLISHED MAJOR CUSTOMERS
LARGE MARKET SIZE
DOMESTIC AND INTERNATIONAL CUSTOMERS
High bargaining
power of consumers
OPPORTUNITY TO CAPITALAZE ON THE COST LEADERSHIP
OPPORTUNITY TO CAPITALIZE ON QUALITY CONSISTENCY AND VARIETY OF PRODUCTS
High bargaining
power of suppliers
ALLOWS FOR HIGH LEVEL OF SUPPLIER-SELLER COLLABORATION
COMPETITION DRIVES DOWN THE PRICE
LOWERS SHIPPING COSTS
Low threat of new entrants
Low threat of substitute products
High bargaining
power of consumers
High bargaining
power of suppliers
Intense IndustryRivalry
Economical
Economic
Political
Economic
Political
Environmental
Economic
Political
Environmental
Technological
Economic
Political
Environmental
Technological
Social
Economic Downsides of Steel Industry:
• Increasing cost of steel scrap In year 2000 – 6.54% In year 2011 – 3.89% In year 2014 – 3.29%
• Tight profit margins In year 2000 – 6.54% In year 2011 – 3.89% In year 2014 – 3.29%
• Intense competition in US and Globally
• Labor and energy intensive industry
Political Pressures on Steel Manufacturers:
Increasing demands to be environmentally conscious
Taxes and fines imposed by the government since the steel industry has unfavorable environmental impact
Pressure to develop new technologies in order to move towards “green” production
Environmental Pressures on Steel Manufacturers:
Increasing number of environmental groups fighting against air pollution
Increasing pressure to have “clean” production
Increasing costs to comply with environmental laws
Technological Opportunities in Steel Industry:
Pressure to advance existing technology in order to cut costs/maintain market share
Increasing variety of products offered
Continuous pressure to maintain uniform consistency and quality throughout the different products offered
Social Pressures on Steel Manufacturers:
Continuous pressure for “clean” production
Growing number of “green” movement
Pressure from environmental groups
Mature industry
Highly cyclical, depending on ups and downs of the economy
Opportunity for increasing market share by purchasing existing companies
Labor intensive industry
Need for advanced technology
Low Cost Provider• Commodity Nature for Pricing
Low Cost ProducerMarket Price – Low Cost
Low Cost ProducerMarket Price – Low Cost
Advanced Technology
Low Cost ProducerMarket Price – Low Cost
Advanced Technology
Plant Efficiency
Low Cost ProducerMarket Price – Low Cost
Advanced Technology
Plant Efficiency
Employee Satisfaction
Low Cost ProducerMarket Price – Low Cost
Advanced Technology
Plant Efficiency
Employee Satisfaction
Cut Costs –Even Higher Management
Low Cost –Increased
Market Share
Low Cost –High Profit
Margin
Low Cost –Increased
Market Share
Better Technology
Low Cost –High Profit
Margin
Low Cost –Increased
Market Share
Better Technology
Low Cost –High Profit
Margin
Low Cost –Increased
Market Share
Acquisitions –Gain Market
Share
Better Technology
Low Cost –High Profit
Margin
Low Cost –Increased
Market Share
Acquisitions –Gain Market
Share
Value-Added Products
Better Technology
Low Cost –High Profit
Margin
Low Cost –Increased
Market Share
Acquisitions –Gain Market
Share
Value-Added Products
Leader in Environmental Performance
Better Technology
Low Cost –High Profit
Margin
Low Cost –Increased
Market Share
Acquisitions –Gain Market
Share
Value-Added Products
Leader in Environmental Performance
American Made
Innovation 1968 Darling Mill was one of the first plants of major
size in U.S to use electric arc furnace
Late 1980’s Crawfordsville plant was the first to employ a revolutionary thin slab casting process
Innovation 1968 Darling Mill was one of the first plants of major
size in U.S to use electric arc furnace
Late 1980’s Crawfordsville plant was the first to employ a revolutionary thin slab casting process
Low cost Low cost leadership strategy
Low cost per ton produced(allowed them to compete with foreign manufacturers (NBC business documentary)
Innovation 1968 Darling Mill was one of the first plants of major size in
U.S to use electric arc furnace Late 1980’s Crawfordsville plant was the first to employ a
revolutionary thin slab casting process
Low cost Low cost leadership strategy Low cost per ton produced(allowed them to compete with
foreign manufacturers (NBC business documentary)
Sound management Posted a dividend for 156 straight quarters Ken Iversen was a “Model Company President” Streamlined organizational structure
Leadership
Execution strategy
Leading Market Position in North America
Leading Market Position in North America
Diversified and balanced product mix
Leading Market Position in North America
Diversified and balanced product mix
Robust Production network
Dependence on outside vendors for raw materials
Dependence on outside vendors for raw materials
Competition with International Imports
Strategic acquisitions and expansions
Strategic acquisitions and expansions
Robust growth perspectives in the US steel market
Intense competition
Intense competition
Greenhouse gas regulation
Intense competition
Greenhouse gas regulation
Overcapacity in the global steel industry
Proven track record via acquisitions and Joint Ventures 1988 Yamato-Kogyo
Early 2000’s Harris Steel
2006-2011 Acquired several other facilities, mostly troubled at discount prices
Steel shapes and steel products are considered commodities
The Steel market is highly cyclical
Year Nucor US Steel Baosteel
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Year Nucor US Steel Baosteel
2000 310.9 (29)
2001 113.0 (2.45)
2002 162.1 .62
2003 62.8 (4.64)
2004
2005
2006
2007
2008
2009
2010
2011
Year Nucor US Steel Baosteel
2000 310.9 (29)
2001 113.0 (2.45)
2002 162.1 .62
2003 62.8 (4.64)
2004 1121.5 1135
2005 1310.3 910
2006 1757.7 1374
2007 1471.9 879
2008 1831.0 2212
2009
2010
2011
Year Nucor US Steel Baosteel
2000 310.9 (29)
2001 113.0 (2.45)
2002 162.1 .62
2003 62.8 (4.64)
2004 1121.5 1135
2005 1310.3 910
2006 1757.7 1374
2007 1471.9 879
2008 1831.0 2212
2009 (293.6) (1401)
2010 134.1 (482)
2011 778.2 (53)
Year Nucor US Steel Baosteel
2000 310.9 (29) 488.6
2001 113.0 (2.45) 418.2
2002 162.1 .62 697.6
2003 62.8 (4.64) 1139.2
2004 1121.5 1135 1527.2
2005 1310.3 910 2068.4
2006 1757.7 1374 2124.6
2007 1471.9 879 2076.9
2008 1831.0 2212 1054.8
2009 (293.6) (1401) 949.8
2010 134.1 (482) 2101.6
2011 778.2 (53) 1202.3
2007 2008 2009 2010 2011
Nucor EPS
USS EPS
Nucor ROE
USS ROE
Nucor Current
USS Current
Nucor D/E
USS D/E
2007 2008 2009 2010 2011
Nucor EPS $4.96 $5.99 $(0.94) $0.42 $2.45
USS EPS $7.44 $18.04 $(10.42) $(3.36) $(0.37)
Nucor ROE
USS ROE
Nucor Current
USS Current
Nucor D/E
USS D/E
2007 2008 2009 2010 2011
Nucor EPS $4.96 $5.99 $(0.94) $0.42 $2.45
USS EPS $7.44 $18.04 $(10.42) $(3.36) $(0.37)
Nucor ROE 29.4% 28.1% -3.8% 1.8% 10.7%
USS ROE 15.9% 43.1% 30.0% -12.5% -1.5%
Nucor Current
USS Current
Nucor D/E
USS D/E
2007 2008 2009 2010 2011
Nucor EPS $4.96 $5.99 $(0.94) $0.42 $2.45
USS EPS $7.44 $18.04 $(10.42) $(3.36) $(0.37)
Nucor ROE 29.4% 28.1% -3.8% 1.8% 10.7%
USS ROE 15.9% 43.1% 30.0% -12.5% -1.5%
Nucor Current
3.2 3.5 4.2 3.9 2.8
USS Current 4.8 5.12 4.58 4.1 3.8
Nucor D/E
USS D/E
2007 2008 2009 2010 2011
Nucor EPS $4.96 $5.99 $(0.94) $0.42 $2.45
USS EPS $7.44 $18.04 $(10.42) $(3.36) $(0.37)
Nucor ROE 29.4% 28.1% -3.8% 1.8% 10.7%
USS ROE 15.9% 43.1% 30.0% -12.5% -1.5%
Nucor Current
3.2 3.5 4.2 3.9 2.8
USS Current 4.8 5.12 4.58 4.1 3.8
Nucor D/E 29.4% 28.3% 28.9% 36.9% 35.7%
USS D/E 58.9% 64.2% 71.9% 96.9% 120.8%
Rising Scrap Steel Costs
Rising Scrap Steel Costs Costs have been rising since 2001
Rising Scrap Steel Costs Costs have been rising since 2001
Costs fluctuate frequently
Rising Scrap Steel Costs Costs have been rising since 2001
Costs fluctuate frequently
Year Cost of Scrap per Ton
2007 $278
2008 $438
2009 $303
2010 $351
2011 $439
Domestic Market Share United States Steel
Domestic Market Share United States Steel
Foreign imports
Domestic Market Share United States Steel
Foreign imports
Country Crude Steel Percentage
China 752 45.9%
Japan 118 7.2%
United States 95 5.8%
India 79 4.8%
Russia 76 4.6%
South Korea 75 4.6%
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign cost advantage
Russia, India, S. Korea
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Helps to offset cyclical nature of certain product sales
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Help to offset cyclical nature of certain product sales
Combat substitute threats
Mergers and Acquisitions To mitigate foreign competition cost advantage
Russia, India, S. Korea expansions
Lower labor costs and regulations
Thwart Supplier Power Acquisition of raw material suppliers
Vertical integration
Invest in Product Mix Diversification Help to offset cyclical nature of certain product sales
Combat substitute threats
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Vehicle Uses. (n.d.). Retrieved November 22, 2014, from http://www.drivealuminum.org/vehicle-uses
Robert C. Allen, "International Competition in Iron and Steel, 1850-1913, Journal of Economic History, (1979) 39#4 pp 911-37
David Jardini, "From Iron to Steel: The Recasting of the Jones and Laughlins Workforce between 1885 and 1896," Technology & Culture (1995) 36#2 pp 271-301
Etsuo Abé, "The Technological Strategy of a Leading Iron and Steel Firm, Bolckow Vaughan & Co. Ltd: Late Victorian Industrialists Did Fail," Business History (1996) 38#1 pp 45-76
Preston, Richard (1992). American Steel. Quill
Hoerr, John P. And the Wolf Finally Came: The Decline of the American Steel Industry (1988)
Hogan, William T. Minimills and Integrated Mills: A Comparison of Steelmaking in the United States (1987)
United States Steel Corporation. (n.d.).Retrieved November 20, 2014, from https://www.ussteel.com/uss/portal/home/investors/annualreports
Baoshan Iron & Steel Co., Ltd. (n.d.). Retrieved November 20, 2014, from http://www.baosteel.com/group_en/contents/2942/40191.html
