The conventional wisdom is that the era of smokestack America has passed. Services are the new foundation of the U.S. economy, not manufacturing. American steel companies just can’t compete against producers from abroad, who have a much better handle on efficient, cost-effective steel production.
But try telling this to Keith Busse, Mark Millett or Dick Teets, the partners behind Steel Dynamics, Inc., of Fort Wayne, Ind.
“We thought differently,” says Busse, president and chief executive officer. “We knew that talented engineers, using new production techniques, could build mills that – when operated by motivated, focused employees – could compete effectively with anyone in the world, anywhere in the world, as it might regard cost and quality. We also believed that it was clearly in our national interest to maintain a strong, vibrant American steel industry.”
It turns out that he was correct. Under the combined leadership of Busse; Teets, vice president and general manager; Millett, vice president and general manager of the flat-rolled steel division; Tracy Shellabarger, vice president of finance and chief financial officer; and John Nolan, vice president of sales and marketing, Steel Dynamics has become a major player in the minimill arena of the American steel market.
Out of the Gate
The Steel Dynamics minimill was constructed in Butler, Ind., in a record 14 months, and broke records in productivity and profit in the 12 months following start-up. Steel Dynamics became a public company (trading as STLD on the NASDAQ) in Month 11 of production. In its first four years of operation, mill shipments and sales grew at a compound annual rate exceeding 35 percent. The minimill now produces more than 2 million tons annually. Its products include hot-band or hot-rolled pickled and oiled sheet, hot-rolled base/galvanized sheet and cold-rolled sheet or cold-rolled base/galvanized sheet.
The Steel Dynamics facility rolls hot bands from thin, 50-millimeter pieces or from approximately 2-inch thick slabs that are cast to meet the specific order requirements of a customer. The company fine-tunes the metallurgy for each “heat” of steel melted from 160 gross tons of scrap and pig iron. Steel Dynamics’ seven-stand rolling mill compresses each red-hot slab into a long, continuous strip of steel, and subsequently coils it into large rolls. The company’s melting, casting and rolling operations are contiguous, requiring less than two and one-half hours to produce a string of bands from a charge bucket of scrap.
Because of the expertise Steel Dynamics has in-house, it can produce hot-rolled bands and hot-rolled pickled and oiled sheet in a range of thicknesses down to 1 millimeter, and with a surface quality that permits their substitution for competitors’ cold-rolled products in certain applications, thus adding value for the company’s customers.
On a Roll
Cold-rolled steel makes up the bulk of Steel Dynamics’ production. After the removal of surface scale by continuous pickling, the coils are cold-rolled using a unique, two-stand, cold-reversing mill. It is an extremely efficient process, and the machinery can produce more than 1 million tons of products each year to a minimum thickness of 0.014 inch. The surface quality of the silvery, lustrous, cold-rolled sheet is consistent, making it suitable for numerous demanding applications.
Steel Dynamics, Inc., is expanding. In 2000, the company began operations for its appropriately named subsidiary, New Millennium Building Systems, also located in Butler. This unit offers a wide array of steel products for commercial and industrial building construction, such as joists, trusses, girders, steel floors and roof decking. The company also plans to build a structural steel mill in northeastern Indiana’s Whitley County to supply the market with a wide variety of structural shapes and lengths.
A substantial amount of Steel Dynamics’ finished products find their way to the automotive industry; 24 percent of the company’s output winds up in safety restraints, suspension members and automobile frames. Other uses include metal buildings, safety gratings and pilings for the construction industry; equipment racks, shelving and office furniture in commercial applications; heating and air-conditioning equipment; structural and mechanical tubing and conduit; farm equipment, such as feeders and bins; lawn and garden equipment; and myriad other applications, too numerous to mention.
Steel Dynamics’ mission statement sets a strong agenda for the abilities and success of the corporation: “To meet or exceed customer service expectations with regard to quality, service and price; to be a world-class supplier by continually improving our processes, equipment and systems; to provide a safe working environment for all employees; and to continue to enhance the skills of our employees through ongoing training and education.”
The company acts on its mission statement in many ways. First, it maintains a can-do corporate culture that rewards hard work and teamwork. Its employees are offered the opportunity to develop skills that allow them to work in various facets of the production environment, a versatility that promotes job satisfaction and corporate efficiency. Production workers who meet quantitative and qualitative goals are paid bonuses that often exceed 100 percent of base pay. Each employee receives stock options. In 1999, the average profit-sharing contribution was $5,500.
State-of-the-art production technology also contributes to the company’s success. Steel Dynamics has advanced many aspects of the continuous, thin-slab casting processes now used by minimills throughout the world. The company prides itself on having completed multiple-mill projects on time and on budget. Integral to its culture is the practice of involving its production employees in the design and modification of plant layout and equipment.
The expansion of Steel Dynamics’ original mill led to the doubling of the casting capacity, while the completion of the cold-rolled operation substantially increased the company’s market penetration. Its Iron Dynamics subsidiary is pioneering new technology for the direct reduction of iron ore into molten pig iron. The structural steel mill currently on the drawing board will bring the company even greater market presence.
Management’s philosophy regarding change and growth is another major factor leading to the remarkable progress of the young company. Steel Dynamics believes that its strengths include: the ability to select and execute leading-edge business strategies; the ability to attract and hire capable individuals that, once empowered, aggressively and successfully implement the business plans of the company; and its philosophy to reward employees for their successes in achieving some of the most aggressive productivity and cost objectives in the world steel industry today.