Continuous Casting Investments at USX Author`s Name

Institution`s Name
1- Do you think Kappmeyer should sign the proposal, and why?
Keith Kappmeyer signed a $600 million two-phased investment to upgrade the company`s large Mon Valley steelmaking complex. This huge investment was done to modernize the mills to keep its number one as one of the world`s top steel producers. In fact, Kappmeyer and his team had done similar programs earlier in the 1980s to modernize its other sheet steel manufacturing plants in various states and they were about the fact that it was perhaps the last such continuous casting investment which would be carried out at USS for as a minimum a decade. Once this steel caster was set up, the economics would motivate the USS to run it for years before it could reassess substituting it with more advanced equipment, and modern process technology. In view of the fact the rather fast pace of process technology transformation in the steel making industry, Kappmeyer wanted to assure himself one more time that this capstone casting commitment at Mon Valley would actually assure USS a strong competitive place in the hotly contested North American market for flat-rolled steel goods all over the 1990s.
2- Did USS team get the right answer to the wrong question? What if, rather than whether USS should install CSP in Mon Valley, Kappmeyer has asked whether USS should invest in or participate in this technology?
The analysis clearly finds the traditional casting technology was the correct investment in 1990 for the Mon Valley complex. Kappmeyer and his colleagues could understand the impact of continuous thin slab casting would finally have on the general structure of the industry, and who would be the next to set up a continuous thin slab caster.
As it was clear that compact strip manufacturing was not the right method for sustaining such a position, Kappmeyer was confident that deciding which programs or technologies must focus of USS`s future growth efforts was a significant business enterprise.
3- What should USS`s next technological move be? Should USS take another long shot to leapfrog ahead of Nucor? Or should it get on the ground neck-to-neck with Nucor, employing a viable commercial technology as soon as possible incrementally improving CSP?
Nucor`s $260 million Crawfordsville investment comprised more than 25% of Nucor`s net worth. Nucor was certainly the most powerful minimill, and it would be quite complex for another minimill company to organize the investment to set up a CSP mill — even at the rather low investment difficulty of entry. If the less significant minimills were eliminated, Kappmeyer doubted when, if ever, the state of affairs would be right for USS or other integrated steel producer to position at stake of its own on thin-slab casting.
Despite the difficulties in applying unproven process technology at commercial scale, Nucor did claim that these innovations in casting and rolling would decrease its final cost of sheet and strip steel production, in contrast to the estimated production expenditures at fully integrated mills with which it has a competition. The majority integrated American manufacturers thought that the estimated cost savings were exaggerated.
Traditionally new steel processing technologies had been launched by the companies which were putting new capacity in response to potential growths, as the newest mills were always considered to be more productive. One rationales why the American steel industry was so overdue in espousing the constant casting technologies in which no new integrated greenfield facilities — which were the likely locations in which new technologies could be applied. It was however improbable that any new integrated greenfield mills could be necessary in the foreseeable future. The USS`s present 75% consumption level of its production capacity was average for the steel-making industry.
4- Would you have answered that question differently than you did when the problem was framed as a Mon Valley issue?
The Mon Valley steelmaking complex needed huge modernization investments. The USS had put its efforts into two stages, which were well-explained in the investment authority given to Kappmeyer. The first stage comprised of the designing, building and manufacturing for a cost of about US $250 million, and the second stage of the modernization was a US $300 million upgrading. The estimated cost for the second phase was only a rough idea, as the equipment stipulation was not yet finished. This upgrade was quite significant for USS, since the clients wanted to minimize their set-up costs.
In reality, Kappmeyer and his associates had done precisely that kind of thing earlier: the present proposal to set up a continuous caster and to upgrade the hot-rolling plant at Mon Valley was very similar to programs USS had dealt in the late twentieth century to upgrade its other sheet steel manufacturing plants in different states of the USA. In fact, Kappmeyer knew this was perhaps the last such investment which would be done at USS for many years. When up-gradation is done, steelmaking economics would support USS to run it for years before it could consider substituting it with advanced equipment and the process technology. In view of the fact the rather fast pace of process technology change in the steel manufacturing, Kappmeyer wanted commitment at Mon Valley would actually would help USS a strong competitive position in the strongly contested North American market for steel products all over the
1990s.
Despite the fact the analysis had made it clear that traditional casting technology was the correct investment in 1990 for the Mon Valley complex, the impact would eventually have on the overall structure of the steel making industry.

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