Gordon Forward mini mill competition strategy

The mini-mill founder figure. Tom names Forward as the most successful mini-mill builder, though he attributes him to Nucor rather than Chaparral.

I've taken you from one person-year per ton in the making of steel to the modern age — by 1990 we were at sort of three or four person-hours per ton, or six. Then the mini-mills came along in 1975, and some of these guys learned that you could buy scrap steel on the world market for a hundred dollars a ton. You could make cast iron from virgin ore for 180 a ton. They said, "I like that idea of 80 a ton excess profit by just melting old steel rather than taking virgin ore. I'm going to build an electric furnace plant." One of the guys who did this, a guy named Gordon Forward, a graduate of this department — Nucor Steel — is the one who made it the biggest. They made what they called mini-mills.

Gordon Forward (1975 MIT 3-department graduate) founds Chaparral Steel in Texas. Tom recurringly slips and calls him "Gordon Forward."

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's economic insight: scrap steel at $100/ton vs. $200/ton blast-furnace cast iron gave mini mills a $100/ton advantage on a $300–400/ton product. Forward was on the MIT DMSE visiting committee during Tom's department headship.

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.

Forward's $30/ton-labor-vs-Japanese-shipping-cost rule; profit sharing; "what have you done for me lately" culture; corporate-dining-room asceticism.

Gordon E. Forward (MIT, student of John Elliott who was student of John Chipman) as president of Chaparral Steel. Sent mill workers with salesmen to customers. Discovered the 3/8" rebar price premium and the split-rolling innovation: split bar in two then four through the rolling mill, halving speed but doubling productivity.

There's another guy, a graduate of this department, who helped with some of these transformations in the steel industry — Gordon Forward. Gordon Forward worked for John Elliott, who had been one of John Chipman's students, and John Chipman was kind of the father of scientific steelmaking in the world. In the 1970s, a few people in the world — Gordon Forward was Canadian — realized the price of scrap steel on the world market was about a hundred dollars a ton. The price of pig iron was about two hundred dollars a ton. So scrap steel was cheaper than iron, and they said there's got to be some money to be made for a hundred dollars a ton.