Evaluate the generic competitive strategies pursued by Nucor and key industry competitors. Provide recommendations for Nucor

Use this format for case analyses in strategic management.

Problem/opportunity statement and situation analysis. Specific to this case, focus heavily on generic strategies and competitor analysis. Solution statement - Alternatives, their evaluation, and justification for selected solution. How should Nucor proceed from this point? Financial analysis - the final sentence should include an assessment of the organization's financial health and the apparent trajectory of its financial situation. Consider in this section if selection of a generic strategy influences firm profitability.

Nucor and key industry competitors case #28

CASE 27

Nucor Corporation in 2016: Contending with the Challenges of Low-Cost Foreign Imports and Weak Demand for Steel Products

Arthur A. Thompson

The University of Alabama

In 2016, Nucor Corp., with a production capacity of 29 million tons, was the largest manufacturer of steel and steel products in North America and ranked as the 13th largest steel company in the world based on tons shipped in 2014. It was regarded as a low-cost producer, and it had a sterling reputation for being a global first-mover in implementing cost-effective steel-making production methods and practices throughout its operations.

Heading into 2016, Nucor had 24 steel mills with the capability to produce a diverse assortment of steel shapes (steel bars, sheet steel, steel plate, and structural steel) and additional finished steel manufacturing facilities that made steel joists, steel decking, cold finish bars, steel buildings, steel mesh, steel grating, steel fasteners, and fabricated steel reinforcing products. The company's lineup of product offerings was the broadest of any steel producer serving steel users in North America. Nucor had 2015 revenues of $16.4 billion and net profits of $357.7 million, far below its 2008 pre-recession peak of $23.7 billion in revenues and $1.8 billion in net profits and also substantially worse than its 2014 revenues of $21.1 billion and net profits of $714 million. Nucor's sharp declines in sales and net profits in 2015 resulted from eroding market prices for many steel products and a sharp falloff in customer orders in several major product categories, both largely due to a surge in ultra-cheap imported steel products coming from a variety of foreign sources (but mainly China). The outlook for 2016 was not encouraging.

COMPANY BACKGROUND

Nucor began its journey from obscurity to a steel industry leader in the 1960s. Operating under the name of Nuclear Corporation of America in the 1950s and early 1960s, the company was a maker of nuclear instruments and electronics products. After suffering through several money-losing years and facing bankruptcy in 1964, Nuclear Corporation of America's board of directors opted for new leadership and appointed F. Kenneth Iverson as president and CEO. Shortly thereafter, Iverson concluded that the best way to put the company on sound footing was to exit the nuclear instrument and electronics business and rebuild the company around its profitable South Carolina-based Vulcraft subsidiary that was in the steel joist businessIverson had been the head of Vulcraft prior to being named president. Iverson moved the company's headquarters from Phoenix, Arizona, to Charlotte, North Carolina, in 1966, and proceeded to expand the joist business with new operations in Texas and Alabama. Then, in 1968, top management decided to integrate backward into steelmaking, partly because of the benefits of supplying its own steel requirements for producing steel joists and partly because Iverson saw opportunities to capitalize on newly emerging technologies to produce steel more cheaply. In 1972 the company page C-360adopted the name Nucor Corporation, and Iverson initiated a long-term strategy to grow Nucor into a major player in the U.S. steel industry.

By 1985 Nucor had become the seventh largest steel company in North America, with revenues of $758 million, six joist plants, and four state-of-the-art steel mills that used electric arc furnaces to produce new steel products from recycled scrap steel. Moreover, Nucor had gained a reputation as an excellently managed company, an accomplished low-cost producer, and one of the most competitively successful manufacturing companies in the country. A series of articles in The New Yorker related how Nucor, a relatively small American steel company, had built an enterprise that led the whole world into a new era of making steel with recycled scrap steel. Network broadcaster NBC did a business documentary that used Nucor to make the point that American manufacturers could be successful in competing against low-cost foreign manufacturers.

Under Iverson's leadership, Nucor came to be known for its aggressive pursuit of innovation and technical excellence in producing steel, rigorous quality systems, strong emphasis on workforce productivity and job security for employees, cost-conscious corporate culture, and skills in achieving low costs per ton produced. The company had a very streamlined organizational structure, incentive-based compensation systems, and steel mills that were among the most modern and efficient in the United States. Iverson proved himself as a master in crafting and executing a low-cost provider strategy, and he made a point of practicing what he preached when it came to holding down costs throughout the company. The offices of executives and division general managers were simply furnished. There were no company planes and no company cars, and executives were not provided with company-paid country club memberships, reserved parking spaces, executive dining facilities, or other perks. To save money on his own business expenses and set an example for other Nucor managers, Iverson flew coach class and took the subway when he was in New York City.

When Iverson left the company in 1998 following disagreements with the board of directors, he was succeeded briefly by John Correnti and then Dave Aycock, both of whom had worked in various roles under Iverson for a number of years. In 2000, Daniel R. DiMicco, who had joined Nucor in 1982 and risen up through the ranks to executive vice president, was named president and CEO. DiMicco was Nucor's chair and CEO through 2012. Like his predecessors, DiMicco continued to pursue Nucor's longstanding strategy to aggressively grow the company's production capacity and product offerings via both acquisition and new plant construction; tons sold rose from 11.2 million in 2000 to 25.2 million in 2008. Then the unexpected financial crisis in the fourth quarter of 2008 and the subsequent economic fallout caused tons sold in 2009 to plunge to 17.6 million tons and revenues to nosedive from $23.7 billion in 2008 to $11.2 billion in 2009.

Even though the steel industry remained in the doldrums until he retired in 2012, DiMicco was undeterred by the depressed market demand for steel and proceeded to expand Nucor's production capabilities and range of product offerings. It was his strong belief that Nucor should be opportunistic in initiating actions to strengthen its competitive position despite slack market demand for steel because doing so put the company in even better position to significantly boost its financial performance when market demand for steel products grew stronger. DiMicco expressed his thinking thusly:²

Nucor uses each economic downturn as an opportunity to grow stronger. We use the good times to prepare for the bad, and we use the bad times to prepare for the good. Emerging from downturns stronger than we enter them is how we build long-term value for our stockholders. We get stronger because our team is focused on continual improvement and because our financial strength allows us to invest in attractive growth opportunities throughout the economic cycle.

During DiMicco's 12-year tenure, Nucor completed more than 50 acquisitions, expanding Nucor's operations from 18 locations to more than 200, boosting revenues from $4.8 billion in 2000 to $19.4 billion at the end of 2012, and transforming Nucor into the undisputed leader in providing steel products to North American buyers. When DiMicco retired at the end of 2012, he was succeeded by John J. Ferriola, who had served as Nucor's president and COO since 2011. Ferriola immediately embraced Nucor's strategy of investing in down markets to better position Nucor for success when the economy strengthened and market demand for steel products became more robust.

Going into 2016, Nucor was the biggest, most cost-efficient, and most diversified steel producer in North America. It had the capacity to produce 29 million tons of steel annually at its 24 steel mills. All of its steel mills were among the most modern and efficient page C-361mills in the United States. The breadth of Nucor's product line in steel mill products and finished steel products was unmatched; it competed in 11 distinct product categories. No other producer of steel products in North America competed in more than 5 of the 11 product categories in which Nucor competed.³ Moreover, Nucor was the North American market leader in 9 of the 11 product categories in which it had a market presencesteel bars, structural steel, steel reinforcing bars, steel joists, steel deck, cold-finished bar steel, metal buildings, steel pilings distribution, and rebar fabrication, distribution, and place.⁴ In the other two categories in North America where Nucor competed, it ranked number two in sales of plate steel and number three in sales of sheet steel.

With the exception of 3 quarters in 2009, 1 quarter in 2010, and the 4th quarter of 2015, Nucor earned a profit in every quarter of every year since 1966a truly remarkable accomplishment in a mature and cyclical business where it was common for industry members to post losses when demand for steel sagged. As of February 2016, Nucor had paid a dividend for 171 consecutive quarters and had raised the base dividend it paid to stockholders for 43 consecutive years (every year since 1973 when the company first began paying cash dividends). In years when earnings and cash flows permitted, Nucor had paid a supplemental year-end dividend in addition to the base quarterly dividend.Exhibit 1 provides highlights of Nucor's growth and performance since 1970.Exhibit 2 shows Nucor's sales by product category for 1990-2015.Exhibit 3 contains a summary of Nucor's financial and operating performance during 2011-2015.

EXHIBIT 1Nucor's Growing Presence in the Market for Steel, 1970-2015

Year	Total Tons Sold to Outside Customers	Average Price per Ton	Net Sales (in millions)	Earnings before Taxes (in millions)	Pretax Earnings per Ton	Net Earnings (in millions)
1970	207,000	$245	$50.8	$2.2	$ 10	$1.1
1975	387,000	314	121.5	11.7	30	7.6
1980	1,159,000	416	482.4	76.1	66	45.1
1985	1,902,000	399	758.5	106.2	56	58.5
1990	3,648,000	406	1,481.6	111.2	35	75.1
1995	7,943,000	436	3,462.0	432.3	62	274.5
2000	11,189,000	425	4,756.5	478.3	48	310.9
2001	12,237,000	354	4,333.7	179.4	16	113.0
2002	13,442,000	357	4,801.7	227.0	19	162.1
2003	17,473,000	359	6,265.8	70.0	4	62.8
2004	19,109,000	595	11,376.8	1,725.9	96	1,121.5
2005	20,465,000	621	12,701.0	2,027.1	104	1,310.3
2006	22,118,000	667	14,751.3	2,692.4	129	1,757.7
2007	22,940,000	723	16,593.0	2,253.3	104	1,471.9
2008	25,187,000	940	23,663.3	2,790.5	116	1,831.0
2009	17,576,000	637	11,190.3	(470.4)	(28)	(293.6)
2010	22,019,000	720	15,844.6	194.9	9	134.1
2011	23,044,000	869	20,023.6	1,169.9	53	778.2
2012	23,092,000	841	19,429.3	764.4	34	504.6
2013	23,730,000	803	19,052.0	693.6	30	488.0
2014	25,413,000	830	21,105.1	1,102.7	44	713.9
2015	22,680,000	725	16,439.3	570.8	26	357.7

EXHIBIT 2Nucor's Sales of Steel Mill and Finished Steel Products to Outside Customers, by Product Category, 1990-2015

	Tons Sold to Outside Customers (in thousands)
	Steel Mill Products	Finished Steel Products
Year	Sheet Steel (2015 capacity of ~13.1 million tons)	Steel Bars (2015 capacity of ~9.1 million tons)	Structural Steel (2015 capacity of ~3.7 million tons)	Steel Plate (2015 capacity of ~2.9 million tons)	Total (2015 capacity of ~29 million tons)	Steel Joists (2015 capacity of ~715,000 tons)	Steel Deck (2015 capacity of ~530,000 tons)	Cold Finished Steel (2015 capacity of ~920,000 tons)	Rebar Fabrication (2015 capacity of ~1.7 million tons) and Other Products*	Total Tons Sold
2015	8,080	4,790	2,231	1,905	17,006	427	401	449	4,397	22,680
2014	8,153	5,526	2,560	2,442	18,681	421	396	504	5,411	25,413
2013	7,491	5,184	2,695	2,363	17,733	342	334	474	4,847	23,730
2012	7,622	5,078	2,505	2,268	17,473	291	308	492	4,528	23,092
2011	7,500	4,680	2,338	2,278	16,796	288	312	494	5,154	23,044
2010	7,434	4,019	2,139	2,229	15,821	276	306	462	5,154	22,019
2009	5,212	3,629	1,626	1,608	12,075	264	310	330	4,596	17,576
2008	7,505	5,266	2,934	2,480	18,185	485	498	485	4,534	25,187
2007	8,266	6,287	3,154	2,528	20,235	542	478	449	1,236	22,940
2006	8,495	6,513	3,209	2,432	20,649	570	398	327	174	22,118
2005	8,026	5,983	2,866	2,145	19,020	554	380	342	169	20,465
2004	8,078	5,244	2,760	1,705	17,787	522	364	271	165	19,109
2003	6,954	5,530	2,780	999	16,263	503	353	237	117	17,473
2002	5,806	2,947	2,689	872	12,314	462	330	226	110	13,442
2001	5,074	2,687	2,749	522	11,032	532	344	203	126	12,237
2000	4,456	2,209	3,094	20	9,779	613	353	250	194	11,189
1995	2,994	1,799	1,952		6,745	552	234	234	178	7,943
1990	420	1,382	1,002		2,804	443	134	163	104	3,648

*Other products include steel fasteners (steel screws, nuts, bolts, washers, and bolt assemblies), steel mesh, steel grates, metal building systems, light gauge steel framing, and scrap metal.

EXHIBIT 3Five-Year Financial and Operating Summary, Nucor Corporation, 2011-2015 ($ in millions, except per share data and sales per employee)

	2015	2014	2013	2012	2011
FOR THE YEAR
Net sales	$ 16,439.3	$ 21,105.1	$ 19,052.0	$ 19,429.3	$ 20,023.6
Costs, expenses and other:
Cost of products sold	14,858.0	19,198.6	17,641.4	17,915.7	18,142.1
Marketing, administrative and other expenses	459.0	520.8	481.9	454.9	439.5page C-363
Equity in (earnings) losses of minority-owned enterprises	(5.3)	(13.5)	(9.3)	13.3	10.0
Impairment and losses on assets	244.8	25.4		30.0	13.9
Interest expense, net	173.5	169.3	146.9	162.4	166.1
Total	15,730.0	19,900.6	18,260.9	18,576.3	18,771.8
Earnings before income taxes and
non-controlling interests	709.2	1,204.6	791.1	852.9	1,251.8
Provision for income taxes	213.2	388.8	205.6	259.8	390.8
Net earnings (loss)	496.1	815.8	585.5	593.1	861.0
Less earnings attributable to the minority interest partners of Nucor's joint ventures*	138.4	101.8	97.5	88.5	82.8
Net earnings (loss) attributable to Nucor stockholders	$357.7	$713.9	$488.0	$504.6	$778.2
Net earnings (loss) per share:
Basic	$1.11	$2.22	$1.52	$1.58	$2.45
Diluted	1.11	2.22	1.52	1.58	2.45
Dividends declared per share	$1.49	$1.48	$1.4725	$1.4625	$1.4525
Percentage of net earnings to net sales	2.2%	3.4%	2.6%	2.6%	3.9%
Return on average stockholders' equity	4.8%	9.3%	6.4%	6.7%	10.7%
Capital expenditures	$374.1	$668.0	$1,230.4	$1,019.3	$450.6
Acquisitions (net of cash acquired)	19.1	768.6		760.8	4.0
Depreciation	625.8	652.0	535.9	534.0	522.6
Sales per employee (000s)	690	921	859	906	974
AT YEAR END
Cash, cash equivalents, and short-term
investments	$2,039.5	$1,124.1	$1,511.5	$1,157.1	$2,563.3
Current assets	5,754.4	6,441.9	6,410.0	5,661.4	6,708.1
Current liabilities	1,385.2	2,097.8	1,960.2	2,029.6	2,396.1
Working capital	4,369.2	4,344.1	4,449.8	3,631.8	4,312.0
Cash provided by operating activities	2,157.0	1,342.8	1,077.9	1,200.4	1,032.6
Current ratio	4.2	3.1	3.3	2.8	2.8
Property, plant and equipment	$4,891.2	$5,287.6	$4,917.0	$4,283.1	$3,755.6
Total assets	14,250.4	15,615.9	15,203.3	14,152.1	14,570.4
Long-term debt (including current maturities)	4,360.6	4,376.9	4,380.2	3,630.2	4,280.2
Percentage of long-term debt to total capital**	37.0%	36.0%	35.6%	31.5%	35.7%
Stockholders' equity	7,416.9	7,772.5	7,645.8	7,641.6	7,474.9
Shares outstanding (000s)	317,962	319,033	318,328	317,663	316,749
Employees	23,700	23,600	22,300	22,200	20,800

*The principal joint venture responsible for these earnings is the Nucor-Yamato Steel Company, of which Nucor owns 51 percent. This joint venture operates a structural steel mill in Blytheville, Arkansas, and is the largest producer of structural steel beams in the Western Hemisphere.

**Total capital is defined as stockholders' equity plus long-term debt.

NUCOR'S STRATEGY TO BECOME THE BIGGEST AND MOST DIVERSIFIED STEEL PRODUCER IN NORTH AMERICA, 1967-2016

In its nearly 50-year march to become North America's biggest and most diversified steel producer, Nucor relentlessly expanded its production capabilities to include a wider range of steel shapes and more categories of finished steel products. However, most every steel product that Nucor produced was viewed by buyers as a "commodity." Indeed, the most competitively relevant feature of the various steel shapes and finished steel products made by the world's different producers was that, for any given steel item, there were very few, if any, differences in the products of rival steel producers. While some steelmakers had plants where production quality was sometimes inconsistent or on occasions failed to meet customer-specified metallurgical characteristics, most steel plants turned out products of comparable metallurgical qualityone producer's reinforcing bar was essentially the same as another producer's reinforcing bar, a particular type and grade of sheet steel made at one plant was essentially identical to the same type and grade of sheet steel made at another plant.

The commodity nature of steel products meant that steel buyers typically shopped the market for the best price, awarding their business to whichever seller offered the best deal. The ease with which buyers could switch their orders from one supplier to another forced steel producers to be very price competitive. In virtually all instances, the going market price of each particular steel product was in constant flux, rising or falling in response to shifting market circumstances (or shifts in the terms that particular buyers or sellers were willing to accept). As a consequence, spot market prices for commodity steel products bounced around on a weekly or even daily basis. Because competition among rival steel producers was so strongly focused on price, it was incumbent on all industry participants to be cost-competitive and operate their production facilities as efficiently as they could.

Nucor's success over the years stemmed largely from its across-the-board prowess in cost-efficient operations for all the product categories in which it elected to compete. Nucor's top executives were very disciplined in executing Nucor's strategy to broaden the company's product offerings; no moves to enter new steel product categories were made unless management was confident that the company had the resources and capabilities needed to operate the accompanying production facilities efficiently enough to be cost-competitive.

Finished Steel Products

Nucor's first venture into steel in the late 1960s, via its Vulcraft division, was principally one of fabricating steel joists and joist girders from steel that was purchased from various steelmakers. Vulcraft expanded into the fabrication of steel decking in 1977. The division expanded its operations over the years and, as of 2016, Nucor's Vulcraft division was the largest producer and leading innovator of open-web steel joists, joist girders, and steel deck in the United States. It had seven plants with annual capacity of 715,000 tons that made steel joists and joist girders and nine plants with 530,000 tons of capacity that made steel deck; typically, about 85 percent of the steel needed to make these products was supplied by various Nucor steelmaking plants. Vulcraft's joist, girder, and decking products were used mainly for roof and floor support systems in retail stores, shopping centers, warehouses, manufacturing facilities, schools, churches, hospitals, and, to a lesser extent, multistory buildings and apartments. Customers for these products were principally nonresidential construction contractors.

In 1979, Nucor began fabricating cold finished steel products. These consisted mainly of cold drawn and turned, ground, and polished steel bars or rods of various shapesrounds, hexagons, flats, channels, and squaresmade from carbon, alloy, and leaded steels based on customer specifications or end-use requirements. Cold finished steel products were used in tens of thousands of products, including anchor bolts, hydraulic cylinders, farm machinery, air conditioner compressors, electric motors, motor vehicles, appliances, and lawn mowers. Nucor sold cold finish steel directly to large-quantity users in the automotive, farm machinery, hydraulic, appliance, and electric motor industries and to steel service centers that in turn supplied manufacturers needing only relatively small quantities. In 2015, Nucor Cold Finish was the largest producer of cold finished bar products in North page C-365America and had facilities in Missouri, Nebraska, South Carolina, Utah, Wisconsin, Ohio, Georgia, and Ontario, Canada, with a capacity of about 920,000 tons per year. It obtained most of its steel from Nucor's mills that made steel bar. This factor, along with the fact that all of Nucor's cold finished facilities employed the latest technology and were among the most modern in the world, resulted in Nucor Cold Finish having a highly competitive cost structure. It maintained sufficient inventories of cold finish products to fulfill anticipated orders. Sales of cold finished steel products were 449,000 tons in 2015, down 11 percent from 504,000 tons in 2014.

Nucor produced metal buildings and components throughout the United States under several brands: Nucor Building Systems, American Buildings Company, Kirby Building Systems, Gulf States Manufacturers, and CBC Steel Buildings. In 2016, the Nucor Buildings Group had 11 metal buildings plants with an annual capacity of approximately 465,000 tons. Nucor's Buildings Group began operations in 1987 and currently had the capability to supply customers with buildings ranging from less than 1,000 square feet to more than 1,000,000 square feet. Complete metal building packages could be customized and combined with other materials such as glass, wood, and masonry to produce a cost-effective, aesthetically pleasing building built to a customer's particular requirements. The buildings were sold primarily through an independent builder distribution network. The primary markets served were commercial, industrial, and institutional buildings, including distribution centers, automobile dealerships, retail centers, schools, warehouses, and manufacturing facilities. Nucor's Buildings Group obtained a significant portion of its steel requirements from the Nucor bar and sheet mills. Sales were 307,000 tons in 2015, an increase of 5 percent over 292,000 tons in 2014.

Another Nucor division produced steel mesh, grates, and fasteners. Various steel mesh products were made at two facilities in the United States and one in Canada that had combined annual production capacity of about 128,000 tons. Steel and aluminum bar grating, safety grating, and expanded metal products were produced at several North American locations that had combined annual production capacity of 103,000 tons. Nucor Fastener, located in Indiana, began operations in 1986 with the construction of a $25 million plant. At the time, imported steel fasteners accounted for 90 percent of the U.S. market because U.S. manufacturers were not competitive on cost and price. Iverson said, "We're going to bring that business back; we can make bolts as cheaply as foreign producers." Nucor built a second fastener plant in 1995, giving it the capacity to supply about 20 percent of the U.S. market for steel fasteners. Currently, these two facilities had annual capacity of over 75,000 tons and produced carbon and alloy steel hex head cap screws, hex bolts, structural bolts, nuts and washers, finished hex nuts, and custom-engineered fasteners that were used for automotive, machine tool, farm implement, construction, military, and various other applications. Nucor Fastener obtained much of the steel it needed from Nucor's mills that made steel bar.

Beginning in 2007, Nucorthrough its newly acquired Harris Steel subsidiarybegan fabricating, installing, and distributing steel reinforcing bars (rebar) for highways, bridges, schools, hospitals, airports, stadiums, office buildings, high-rise residential complexes, and other structures where steel reinforcing was essential to concrete construction. Harris Steel had over 70 fabrication facilities in the United States and Canada, with each facility serving the surrounding local market. Since acquiring Harris Steel, Nucor had more than doubled its rebar fabrication capacity to over 1,700,000 tons annually. Total fabricated rebar sales in 2015 were 1,190,000 tons, up from 1,185,000 tons in 2014. Much of the steel used in making fabricated rebar products was obtained from Nucor steel plants that made steel bar. Fabricated reinforcing products were sold only on a contract bid basis.

Steel Mill Products

Nucor entered the market for steel mill products in 1968, when the decision was made to build a facility in Darlington, South Carolina, to manufacture steel bars. The Darlington mill was one of the first steelmaking plants of major size in the United States to use electric arc furnace technology to melt scrap steel and cast molten metal into various shapes. Electric arc furnace technology was particularly appealing to Nucor because the labor and capital requirements to melt steel scrap and produce crude steel were far lower than those at conventional integrated steel mills where raw steel was produced using coke ovens, basic oxygen blast furnaces, ingot casters, and multiple types of finishing facilities to make crude steel page C-366from iron ore, coke, limestone, oxygen, scrap steel, and other ingredients. By 1981, Nucor had four steel mills making carbon and alloy steels in bars, angles, and light structural shapes; since then, Nucor had undertaken extensive capital projects to keep these facilities modernized and globally competitive. During 2000-2011, Nucor aggressively expanded its market presence in steel bars and by 2012 had 13 bar mills located across the United States that produced concrete reinforcing bars, hot-rolled bars, rods, light shapes, structural angles, channels, and guard rail in carbon and alloy steels; in 2015, these 13 plants had total annual capacity of approximately 9.1 million tons. Four of the 13 mills made hot-rolled special quality bar manufactured to exacting specifications. The products of the 13 bar mills had wide usage and were sold primarily to customers in the agricultural, automotive, construction, energy, furniture, machinery, metal building, railroad, recreational equipment, shipbuilding, heavy truck, and trailer industries.

Recently, Nucor had completed a $290 million project to expand its wire rod and special quality steel bar production capabilities at three existing bar mills by 1 million tons annually. The expansion enabled Nucor to produce engineered bar for the most demanding applications (and realize a significantly higher price) while maintaining its market share in commodity bar products by shifting production to its other bar mills that were operating below capacity. Incremental investments were underway in 2016 to expand Nucor's special quality steel bar production capabilities. In addition, an existing wire rod and bar mill in Kingman, Arizona, was renovated to boost production capacity from 200,000 tons annually to 500,000 tons annually and put Nucor in a strong position to serve wire rod and rebar customers in the southwestern U.S. market.

Expansion into Sheet SteelIn the late 1980s, Nucor entered into the production of sheet steel at a newly constructed plant in Crawfordsville, Indiana. Flat-rolled sheet steel was used in the production of motor vehicles, appliances, steel pipe and tubes, and other durable goods. The Crawfordsville plant was the first in the world to employ a revolutionary thin slab casting process that substantially reduced the capital investment and costs to produce flat-rolled sheet steel. Thin-slab casting machines had a funnel-shaped mold to squeeze molten steel down to a thickness of 1.5-2.0 inches, compared to the typically 8- to 10-inch-thick slabs produced by conventional casters. It was much cheaper to then build and operate facilities to roll thin-gauge sheet steel from 1.5- to 2-inch-thick slabs than from 8- to 10-inch-thick slabs. When the Crawfordsville plant first opened in 1989, it was said to have costs $50 to $75 per ton below the costs of traditional sheet steel plants, a highly significant cost advantage in a commodity market where the going price at the time was $400 per ton. Forbes magazine described Nucor's pioneering use of thin-slab casting as the most substantial, technological, industrial innovation in the past 50 years.⁵ By 1996 two additional sheet steel mills that employed thin-slab casting technology were constructed and a fourth mill was acquired in 2002, giving Nucor the capacity to produce 11.3 million tons of sheet steel products annually. Nucor also operated two Castrip sheet production facilities, one built in 2002 at the Crawfordsville plant and a second built in Arkansas in 2009; these facilities used the breakthrough strip casting technology that involved the direct casting of molten steel into final shape and thickness without further hot or cold rolling. The process allowed for lower capital investment, reduced energy consumption, and smaller scale plants, and improved environmental impact (because of significantly lower emissions). A fifth sheet mill with annual capacity of 1.8 million tons, strategically located on the Ohio River in Kentucky, was acquired in 2014, giving Nucor a total flat-rolled capacity of 13.1 million tons.

Entry into Structural Steel ProductsAlso in the late 1980s, Nucor added wide-flange steel beams, pilings, and heavy structural steel products to its lineup of product offerings. Structural steel products were used in buildings, bridges, overpasses, and similar such projects where strong weight-bearing support was needed. Customers included construction companies, steel fabricators, manufacturers, and steel service centers. To gain entry to the structural steel segment, in 1988 Nucor entered into a joint venture with Yamato-Kogyo, one of Japan's major producers of wide-flange beams, to build a new structural steel mill in Arkansas; a second mill was built on the same site in the 1990s that made the Nucor-Yamato venture in Arkansas the largest structural beam facility in the Western Hemisphere. In 1999, Nucor started operations at a third structural steel mill in South Carolina. The mills in Arkansas and South Carolina both used a special continuous casting method that was quite cost-effective. In 2014, the Nucor-Yamato page C-367mill completed a $115 million project to add several new sheet piling sections, increase production of single sheet widths by 22 percent, and provide customers with a lighter stronger sheet covering more area at a lower installed cost. Going into 2016, Nucor had the capacity to make 3.7 million tons of structural steel products annually.

Entry into the Market for Steel PlateStarting in 2000, Nucor began producing steel plate of various thicknesses and lengths that was sold to manufacturers of heavy equipment, ships, barges, bridges, rail cars, refinery tanks, pressure vessels, pipe and tube, wind towers, and similar products. Steel plate was made at two mills in Alabama and North Carolina that had combined capacity of about 2.9 million tons. In 2011-2013, Nucor greatly expanded its plate product capabilities by constructing a 125,000-ton heat treating facility and a 120,000-ton normalizing line at its North Carolina plate mill. These investments yielded two big strategic benefits: (1) enabling the North Carolina mill to produce higher-margin plate products sold to companies making pressure vessels, tank cars, tubular structures for offshore oil rigs, and naval and commercial ships; and (2) reducing the mill's exposure to competition from foreign producers of steel plate who lacked the capability to match the features of the steel plate Nucor produced for these end-use customers.

The Cost-Efficiency of Nucor's Steel MillsAll of Nucor's 24 steel mills used electric arc furnaces, whereby scrap steel and other metals were melted and the molten metal then poured into continuous casting systems. Sophisticated rolling mills converted the billets, blooms, and slabs produced by various casting equipment into rebar, angles, rounds, channels, flats, sheet, beams, plate, and other finished steel products. Nucor's steel mill operations were highly automated, typically requiring fewer operating employees per ton produced than the mills of rival companies. High worker productivity at all Nucor steel mills resulted in labor costs roughly 50 percent lower than the labor costs at the integrated mills of companies using union labor and conventional blast furnace technology. Nucor's value chain (anchored in using electric arc furnace technology to recycle scrap steel) involved far fewer production steps, far less capital investment, and considerably less labor than the value chains of companies with integrated steel mills that made crude steel from iron ore.

However, despite Nucor's demonstrated skills in operating steel mills at low costs per ton, it had been stymied throughout the 2010-2015 period in its quest to operate its 24 steel mills as cost-efficiently as they were capable of being operated. Ever since the Great Recession of 2008-2009, the combination of an anemic economic recovery, depressed market demand for steel products, industrywide overcapacity, and fierce competition from foreign imports in certain product categories had forced Nucor to operate its steel mills well below full capacity. Whereas in the first three quarters of 2008, Nucor's steel mills operated at an average of 91 percent of full capacity, the average capacity utilization rates at Nucor's steel mills were 54 percent in 2009, 70 percent in 2010, 74 percent in 2011, 75 percent in 2012, 76 percent in 2013, 78 percent in 2014, and 68 percent in 2015 (including tons shipped to outside customers and tons shipped to Nucor facilities making finished steel products). Likewise, subpar average capacity utilization rates at Nucor's facilities for producing finished steel products54 percent in 2010, 57 percent in 2011, 58 percent in 2012, 61 percent in 2013, 66 percent in 2014, and 61 percent in 2015had impaired Nucor's ability to keep overall production costs for finished steel products as low as they would otherwise have been at higher levels of capacity utilization. Nucor's unused capacity for producing so many types of steel mill and finished steel products during 2009-2015 represented one of the longest and deepest periods of overcapacity in Nucor's history.

Pricing and Sales

Since 2012, approximately 86 percent of the steel shipped from Nucor's steel mills had gone to external customers. The balance of the company's steel mill shipments went to supply the steel needs of the company's joist, deck, rebar fabrication, fastener, metal buildings, and cold finish operations. The big majority of Nucor's steel sales were to customers who placed orders monthly based on their immediate upcoming needs; Nucor's pricing strategy was to charge customers the going spot price on the day an order was placed. Shifting market demand-supply conditions and spot market prices caused Nucor's average sales prices per ton to fluctuate from quarter to quarter, sometimes by considerable amountsseeExhibit 4. It was Nucor's practice to quote the same payment terms to all customers and for customers to pay all shipping charges.

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