Continuous Casting
Investments at USX
Corporation
Group 9
Karu Vysali (451)
Rahul Garg (464)
Kartik Narayana (467)
Uttama Hande (487)
Yamini Garg (489)
USX Corporation: History
• Assembled in 1901 as United States Steel through a series of mergers and acquisition. The core of which was Carnegie
Steel Corporation
• USS is a fully integrated company
• USS has maintained an aggressive investment posture in the early decades which has since then slowed down
• Post World War II, the share of the U. S. market declined steadily from 20.8% in 1980, 11.7% in 1986 to 14% in 1989.
• USS has been pummeled in competition by minimills, operating on steel scrap. Minimills catered to less quality-sensitive
customers in the early years of their inception but since then, owning to advancement in technology, have begun
producing higher quality products as well
• Minimills enjoy cost advantage owing to following reasons:
• Non-union labors
• Low equipment capital requirement
• Favorable utility rates and tax rates
• Able to see profitably at 20% less prices less compared to other integrated mills
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Challenges faced by Kappermeyer
• Adapting the needs of the USS’s existing customer base and constraints of the existing Mon Valley facilities would be
difficult
• The capacity requirement of USS is going to be a bottleneck in adaptation of CSP at Mon Valley. If the CSP technology
sis implemented at Mon Valley for 3 million ton capacity, it will require 3-4 strands working parallel
• The casting and rolling steps required to be coupled for CSP to be feasible, however, there is a 10 mile distance
between the two facilities at Mon valley where the steps take place separately currently.
• The risk of the CSP project was inherently higher for USS as the company would have to commit to the complete
project (casting and rolling) from the onset as compared to the sequential (casting and rolling decoupled) which had less
risk
• The Process was not capable of producing the quality of surface finish which is required by the largest customers of
Mon Valley – the appliance makers
• There is no way of predicting either the improvement in surface finish or customer acceptance. This makes the project
even riskier
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Should he sign the Proposal?
Proposal: Upgradation of Mon Valley steelmaking complex via conventional casting technology by 2-
phased investment of $600 million
CSP & Minimills show characteristics of Disruptive Technology
• Their quality output is low as evident from surface finish issues, but the operating costs are low when compared to
conventional technology.
• Their target customer base is niche, who are less quality sensitive and use for activities such as steel decking.
• But consider the fact that the industry had faced similar disruption in the form of continuous casters in 1960’s it can be
assumed that the quality issues of CSP can be eliminated rapidly in the future
Mr. Kappermeyer should not sign the proposal, because the proposal would force
Recommended
the company to commit for the dated technology for long duration, when the industry
Action is expected to face disruption in the form of CSP and Minimills
4
HOW SHOULD HE COMPETE WITH STEEL MILLS LIKE NUCOR?
In order to compete with Nucor, USS needs to make sure that it caters to its existing customers but also
stay relevant for the future customer’s demands. For that it needs to invest in the disruptive technologies
on the horizon i.e. CSP. It also needs to keep the division building CSP independent.
USS can setup 2 facilities with conventional equipment and CSP (disruptive technology). The former
facility can cater to present customers and needs, the latter facility can cater to future markets based on its
success.
While, customers are initially mostly resistant and sceptical of change, ensuring high product quality and
marketing of CSP manufactured products can eventually change customers perception.
”Pilot facility with new CSP technology can
help USS become future ready”
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