The Demand For Steel Mill Products

802 WordsOct 2, 20144 Pages
Macro-Environment Nucor Corporation is the largest manufacturer of steel and steel products in North America. The worldwide industry in which Nucor competes had record years of crude steel production in 2010 and 2011. Steel making capacity worldwide was approximately 2,090 million tons in 2011, resulting in a 2011 capacity utilization rate of 80 percent versus just 75 percent in 2010. The demand for steel mill products had grown 5.5 percent annually since 2000, but between 2000 and 2011 there have been periods of both strong and weak demand. Weak demand caused over supplied conditions in the steel industry worldwide and allowed Nucor to expand via acquisition. Steel product segments include the production of steel deck, steel joists…show more content…
Open hearth processing has become obsolete and continuous casting and the electric arc furnace has been adopted. Information on the world steel industry including growth rates and production is listed in Exhibit 1. Competitive Forces Rivalry in the steel industry is intense and price is the main factor for differentiation among competitors. Steel products are considered commodities and quality can be inconsistent on occasion, for the most part, steel plants turn out products of comparable metallurgical quality. The threat of new entry into the market is moderate. There are several entry barriers to overcome, product differentiation being one of them; however, costs would be the main barrier. The cost of raw materials can be very high since they are usually purchased in large quantities. Minimizing fixed costs can also be very challenging. Competition from substitutes is considered low. There are few substitutes for steel at this time. Steel is used for its strength and durability in auto manufacturing and in construction. As technology advances there are possibilities for alternative materials in the future. Supplier bargaining power is a high to moderate threat. Raw materials can be one of the largest costs for a company so suppliers often have the upper hand. Having a cost effective strategy for the supply of raw materials can have a huge effect on a company’s bottom line. Many firms choose to establish a joint venture with
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