Primary Metals Manufacturing
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Industry Overview
The US primary metals industry includes 5,000 companies with combined annual sales of about $140 billion. Large companies include Nucor and US Steel (steel); Alcoa (aluminum); and Freeport-McMoRan Copper & Gold. The industry is highly concentrated: the 50 largest producers hold more than 90 percent of the raw steel market. Secondary production of products from raw steel and other metals is also concentrated.
Competitive Landscape
Demand comes largely from the manufacturers of durable goods like motor vehicles, machinery, containers, and construction steel. The profitability of individual companies depends largely on efficient operations, because most products are commodities sold based on price. Big companies have large economies of scale in production. Accordingly, most producers of secondary products buy raw metal from the large producers. Small companies can compete by operating efficient local mini-mills or producing specialty products. The industry is highly automated: average annual revenue per worker is close to $300,000.
Products, Operations & Technology
The industry includes manufacturers and processors of steel, iron, aluminum, copper, and specialty metals like titanium, molybdenum, and beryllium. Steel products account for about 50 percent of the market. Companies are involved in three major types of activities. Primary processing is the separation of metal from ores in a furnace to produce slabs or ingots of metal. Secondary processing involves mainly the rolling or drawing of metal slabs into sheets, plates, foil, bars, and wire. Foundry operations produce metal shapes by pouring molten metal into casts or molds. Some producers have fully integrated operations, from mining raw materials to manufacturing finished products, but most operate in just one type of activity.
Steel production first involves converting iron ore or scrap iron into molten steel. The ore-based process uses a blast or oxygen furnace in a blast mill, and the scrap-based process uses an electric arc furnace in a mini-mill. Next, molten steel is poured and solidified in a continuous caster to produce semi-finished products, like steel slabs, billets, and blooms. These materials are put through a mechanical and heat treatment known as hot rolling, and some hot-rolled sheets are rolled again at lower temperatures (cold rolling) to form finished flat products such as plates, coils, or sheets, or long products such as wire, bars, rails, or beams. These products may then be coated with protective anticorrosion material.
The production of aluminum, copper, and other metals is similar. Metal is separated from an ore by melting it. Metal alloys are produced by adding various elements to the main metal. For example, 17 percent chrome and 8 percent nickel are added to iron to create stainless steel. The different properties and characteristics of metal are produced by altering the chemical composition and the different stages of the process, such as rolling, finishing, and heat treatment.
Primary production of metals requires large amounts of ore and large amounts of energy, so producers often locate near ore deposits (copper companies); coal fields; or sources of cheap electricity (aluminum companies). To ensure a supply of raw materials, many primary producers control their own ore deposits. Transporting the finished product is typically by rail. Producers can make thousands of different products because metals can be made in many different grades of hardness or other properties. A producer of castings and forgings, such as Citation, sells 20,000 products to 2,000 customers.
The technology of making metals with desired physical and chemical properties is highly complex. Modern production technology allows better control of the process and is more energy-efficient, but is also expensive to install. Many modern plants are highly automated, partly to reduce the need for expensive labor. Computerized inventory systems are used to track thousands of products at multiple locations.
