A recent article in the Wall Street Journal called attention to the surprising progress at ArcelorMittal USA Inc.s Burns Harbor, Ind., plant. Whats surprising is that the Burns Harbor plant was built in the early 1960s, seen then by most in the industry as one of the better integrated operations in North America.
However, the improvements cited were indeed impressive, with a meaningful spurt having occurred since ArcelorMittal acquired the operation. Burns Harbor is certainly the most productive three-vessel shop in North America. The WSJ article attributed the plants most recent improvements to ArcelorMittals practice of twinningthat is, pairing one steel plant with another, thereby encouraging the free interchange of technology and best practices in the hope that both will benefit. In this case, the twin chosen for Burns Harbor was an ArcelorMittal SA plant in Ghent, Belgium, also built in the 1960s and roughly equivalent in capacity and product mix. More than 100 engineers and operators made the trek to Ghent from 2007 to 2012.
Almost simultaneously, in the April issue of Iron & Steel Technology a paper titled Continuously Improving BOF Technology at ArcelorMittal Burns Harbor: Operating Practices based on Theoretical Understanding reported in technical detail the steps taken to improve the melt shop operation. The combination of theory and practice was impressive and produced dramatic results.
The model developed at Burns Harbor accommodated the use of lump ore as a coolant when scrap is costly, and provided for the use of coke in the charge when hot metal was scarcecalled hot metal stretching. Neither of these practices is in widespread use, but they have given Burns Harbor the flexibility to adjust to the scrap market as well as stretch the hot metal supply when needed. There have been many other improvements in the shop, all achieved with less than $1 million in capital investment. Burns Harbor improved to 50 heats per day from 42 previously; in the steelmaking world, that is a gigantic improvement at nominal investment and an example of how to improve the profit-loss statement. In addition to the Burns Harbor team participants, greatest acknowledgement was given to Key Robertson of ArcelorMittal Indiana Harbor No. 4 SP.
But no matter who deserves the credit for the improvements, the term continuously improving is significant. Sophisticated steel managersand there are manyknow even better than their predecessors that the drive to improve can never end. The man-hours-per-ton figures cited for Burns Harbor are class-leading, if not best in class, but all steel managers know that man-hours per ton is a very crude, if convenient, measure. It is significantly affected by operating rate, production mix, balance (e.g. between front-end and finishing capacities), etc. And, finally, it is probably appropriate only for measuring a trend in a given plant or company in an otherwise stable period of operation.
What is more important, because it is all-inclusive, is a measure of productivity as applied to capital, but there is no such convenient, or crude, measure that is in wide use. Stock prices for publicly owned companies is the best proxy, but it applies only to whole companies, not to individual plants. And even stock prices are affected by various external factors that sometimes, in the short run, affect or mask the measure. Some analysts place heavy emphasis on dividend practice; that, along with long-term price levels, is probably the best evaluation available of capital productivity. The recent run-up in raw material prices illustrates the vulnerability of steel companies to activities that are frequently external to their operations.
Burns Harbor managers and ArcelorMittal are to be commended for understanding that continuous improvement means continuous and is a necessary prerequisite to success in todays steel business.
Thomas C. Graham is a founding member of T.C. Graham Associates. He is a former chairman and chief executive officer of AK Steel Corp., president and chief executive officer of Armco Steel Co. LP, chairman and chief executive officer of Washington Steel Co., president of the U.S. Steel Group of USX Corp. and president and chief executive officer of Jones & Laughlin Steel Co. His column appears monthly. He invites readers comments and can be contacted at email@example.com.