Chaparral Steel

Net-shape casting of structural shapes (near-I-beam), 1 person-hour/ton by 1990, exporting to Japan, $450,000 sales per employee. Management culture: blame for not innovating rather than for failed experiments; production employees spend a week/year with sales visiting customers.

So the mini mills — originally they wanted to make the garden variety. The cheapest stuff is concrete reinforcing bar. It just has to be the right diameter, and it's got the lowest price per ton of virtually anything. So this company called Chaparral Steel, which was started by a guy Gordon Forward, who graduated this department back in 1975, saw the hundred-dollar scrap price versus $180 cast iron price, and he was one of the guys who said you can make some money there. He started Chaparral Steel down in Texas.

Gordon Forward, who was a graduate of this department and was named one of the top managers in the United States, was a Canadian who started, with a couple of other people, Chaparral Steel, a mini-mill, in the mid '70s. Some people were saying, oh, the Japanese have much more efficient steel mills. But the market for that steel was the United States, and as he used to point out, it cost $30 a ton to ship it to the United States, so as long as he could make the steel for less than $30 worth of labor per ton, "they can eat their steel," he used to say. He was going to make it here if he could beat them on the labor cost, and he did.

**The lecture's central case.** Founded by Gordon Forward, MIT DMSE grad. Mini mill at 1/10 the capital cost of an integrated mill. Near-net-shape dog-bone casting reduced I-beam rolling passes from 21 to 7. 75% energy savings, inline induction reheat, 28-minute total processing time, fine-grain chill-cast structure. Product met both A36 and grade 50 specs simultaneously, allowing inventory consolidation. Wiped out I-beam imports to US, exported 20% of product overseas including Asia. Folding-table corporate dining room contrasted with Bethlehem's executive dining room.

So now let me tell you the Chaparral Steel story. Chaparral Steel was founded by a graduate of this department, who's now retired. He's from Vancouver, but he worked for a Canadian steel company in the mid '70s. Gordon — his name is Gordon Forward — used to be on the department's visiting committee back when I was department head. Gordon realized in the mid '70s that it cost $200 a ton to make cast iron in the blast furnace, but you could buy scrap iron at the time, scrap steel, for $100 a ton. What do you do with the cast iron from the blast furnace? You put it into the steelmaking furnace and make it into steel. If it cost you $200 for the liquid cast iron, and you could buy steel scrap for $100 a ton, you have a $100-a-ton advantage on a $300 or $400-a-ton product. That's not a bad advantage.

central worked example of mini-mill productivity disruption. Covers: Canadian founders (Gordon Forward), Midlothian Texas plant, rebar starting market, 0.8 person-hours per ton, net-shape casting of I-beams, four-strand rolling for #3 rebar, $450,000 sales per employee, profit sharing, "what have you done for me lately" innovation culture.

vertically integrated recycling — automobile shredding → steel scrap; foam cushions → cement kiln fuel; Motorola semiconductor wastewater → arsenic-bearing cement input. Secretary's "is it like car exhaust?" framing solved their public-relations problem with the Midlothian City Council.

Gordon Forward, a graduate of MIT's Materials department, ran a minimill in Midlothian, Texas, that pushed continuous casting toward near-net shape — first a partial dog-bone profile, eventually I-beams — cutting downstream rolling costs by roughly two-thirds.

This happens to be one where they're not just doing a big flat ten-inch-thick plate. This was a steel company in Midlothian, Texas, run by Gordon Forward, a graduate of this department. They actually were getting to net-shape casting. They were making I-beams and they were casting something that was almost a final I-beam product. It took them a while to get there. Here's a slide of one of their earlier products where they had, instead of a simple rectangle, a partial dog-bone shape. Eventually they got to the one I showed you before. They cut their rolling costs down by about two-thirds if you got near-net shape. You can roll much faster and more productively, and so you got other follow-ons in productivity. You started out with continuous casting and then went to other casting technologies.