Steel mini mills rise (1970s–1990s)

Mini-mills appear from 1975 — buy scrap at $100/ton, melt in electric furnaces, undercut integrated mills. Tom attributes the success to "Gordon Forward, a graduate of this department" at Nucor. *(See editorial register for the factual issue: Gordon Forward was at Chaparral, not Nucor. Tom's conflation preserved on the page.)*

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 (Chaparral) and Ken Iverson (Nucor) realized $100/ton scrap was the cheaper feedstock vs. $200/ton pig iron. By present, ~50% of US steel is electric-furnace output.

The basic oxygen process, which uses a supersonic oxygen jet and makes everything in 20 minutes, took everything over in that same amount of time. The electric furnace was growing, because scrap became more and more available. We had been putting so much steel into the environment, we were getting more and more scrap back. A whole series of new mills called mini-mills replaced the integrated mills, starting in the 1970s, because some of these guys like Gordon Forward or Ken Iverson at Nucor realized you could buy scrap at $100 a ton, you could buy pig iron at $200 a ton. Both end up as the raw material for steel. Which one did you use? The $100-a-ton product or the $200-a-ton product? Duh. That was the growth of the mini-mills. From 1975 to today, about 50% of the steel made in the United States comes from electric furnace mills.

Gordon Forward's $30/ton transoceanic shipping argument: if mini mills can produce within $30 of Japanese/Korean cost, they win on freight alone. Mini mills + process technology pushed labor to <20 person-minutes/ton.

Mini mills, which we'll talk about in a second, and process technology cut it off here. When I worked for a steel company in 1975, it was 50/50 labor and raw materials. Back here it was labor-intensive. Today it's like 90% raw materials, because we've taken all the labor out. Here's the labor on a log scale, and we're down to less than twenty minutes a ton — person-hour per ton — to produce steel. As Gordon Forward, a graduate of this department who started a mini mill, said: if the Koreans or the Japanese want to sell steel in the United States, all he has to do is produce it within $30 of their cost. Because the raw materials — coke, limestone, and iron ore — they're transported, they're commodity around the world. Everybody's paying the same price pretty much. But it costs $30 a ton to ship a ton of steel across the Pacific Ocean. So Forward said, if I can make it for only $30 a ton more than they make it in their big fancy integrated mills, I could build a smaller mill and I can beat the price. And he did, and we'll talk about that.

Generic framing: scrap at $100/ton vs. pig iron at $200/ton in the 1970s opened the electric-furnace mini-mill business model.

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.