Iron and Steel Overview: Minimill Business Structure

definition_minimill_business_struct

Minimills are steel companies that produce steel by melting recycled ferrous scrap in electric arc furnaces (EAFs) to make a limited quantity of commodity steel products such as carbon steel bars, wire rods, and light to medium structurals that are sold primarily to the construction industry. Some larger minimills have entered the flat rolled products market.

Minimills also make merchant products such as angles, flats, and merchant bar, which are sold to fabricators. Minimills vary in size from single plant operations with an annual capacity of 150,000 tons to multi-plant companies with capacities of up to 2 million tons/year. Minimills are typically located close to their customers and sources of scrap. As shown in the figure, there are over 100 operating minimills in the U.S. Minimills now account for about 38% of total U.S. steel industry shipments. Some of the larger minimills have expanded their production capabilities to make large structurals, and have subsequently driven some integrated producers out of this market.

Minimills have both a labor and capital cost advantage compared to integrated steelmakers. Minimills are very sensitive to scrap prices, however, and lose their cost advantage compared to integrated mills when scrap prices rise above $90/ton (1994 breakeven).

Electric Arc Furnace Minimills (Number of Plants per State)

Alabama – 4
Arkansas – 4
California – 1
Colorado – 1
Delaware – 1
Florida – 1
Georgia – 1
Illinois – 7
Indiana – 6
Iowa – 2
Kansas – 1
Kentucky – 4
Louisiana – 1
Michigan – 4
Minnesota – 1
Mississippi – 2
Missouri – 1
Nebraska – 1
New Jersey -3
New York – 4
North Carolin1a – 1
Ohio – 12
Oklahoma – 1
Oregon – 3
Pennsylvania – 23
South Carolina – 4
Tennessee – 4
Texas – 12
Utah – 1
Virginia – 1
Washington – 2
West Virginia – 1
Wisconsin – 2

 

“Steel and Heavy Machinery”, Industry Surveys, Standard & Poor, February 16, 1995

“Electric Arc Furnace Roundup”, Iron and Steelmaking, May 1995.