Nucor Corporation: Competing Against

Low Cost Steel Imports

Assignment

Submitted By:

Garvit Garg
 Nucor Corporation: Competing Against Low Cost Steel Imports
Nucor is the world’s 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 50’s and early 60’s. Over the next five
years, 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 reorganized
numerous 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 & wider
range of steel products, enabling it in 2006 to offer steel users one of the broadest product
lineups in the industry. Nucor’s 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 Nucor’s 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 1990’s.

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
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 employee’s 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 producer’s
technology. Plus Nucor should invest in R & D simply to try to stay ahead of the competition.