Primary Metals Manufacturing
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Industry Overview
The US primary metals industry includes about 3,500 companies with combined annual sales of about $230 billion. Large companies include Nucor and US Steel (steel); Alcoa (aluminum); and Freeport-McMoRan Copper & Gold. The US industry is concentrated: the 50 largest companies generate more than 60 percent of revenue.
Major companies based outside the US include steel makers ArcelorMittal (Luxembourg); Baosteel (China); Nippon Steel and JFE (Japan); POSCO (South Korea), and Tata Steel (India), as well as aluminum producers Rusal (Russia) and Rio Tinto Alcan (Canada).
The industry includes companies engaged in smelting and/or refining ferrous and nonferrous metals, such as iron and steel mills, rolled steel shape manufacturers, aluminum producers, and copper foundries. Metal ore mining and fabricated metal parts manufacturing are covered in separate industry profiles.
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 capital-intensive: average annual revenue per worker is about $650,000.
Products, Operations & Technology
Major sources of revenue for the industry include steel mill products such as sheets, bars, and plates (about 40 percent of sales). Other activities include aluminum sheet, plate, and foil manufacturing; copper rolling, drawing, and extruding; and the production of shapes from iron, steel, and specialty metals such as titanium, molybdenum, and beryllium.
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 or natural gas (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.
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.
