Running a steel mill
More than 30% of the total steel production in the world comes from mini steel mills. In Europe, the figure goes up to 50%, and it is even higher in North America, India, Africa. Therefore, entrepreneurs who want to start a steel mill have their task cut out. Setting up a mini mill is the lucrative choice here. It has to be a mini mill, a secondary production facility because integrated steel mills are huge investments. Moreover, from the business angle, mini mills make a sensible investment because these are feeders to larger steel plants. The mini mills have turned out to be the most efficient alternative to traditional converter steel plants. Therefore, there is an assured market for the finished products.
Mini-mills are less expensive to set up. It uses Electric Arc Furnaces instead of Blast Furnaces thereby making the manufacturing process very flexible. Unlike blast furnaces, electric arc furnaces can be started and stopped at will. Blast furnaces are not only huge investments, but they also come with a high running cost. These cannot be turned on and off at short intervals, and have to be run continuously. Having decided on the type of mill, the next step is to plan for raw materials.
Raw material supply
Mini-mills do not use iron ore as a raw material. Instead, they depend on scrap steel, which is the main raw material. This scrap steel is obtained as byproducts of manufacturing and from used automobiles and equipment. Direct reduced iron or DRI is also used in small quantities to generate better quality steel. It is true that the quality of steel from mini-mills is not as good as that of prime producers. However, from the business perspective, its feasibility is very high.
The choice of equipment
Mini-mills are synonymous with flexibility, economy and high performance. High performance can be achieved by using the right configuration and quality of equipment. The technological aspects contribute greatly to the high performance and profitability of mini-mills. Selection of the right equipment and its layout is extremely important to achieve shorter production cycles. There is equipment available that can produce finished product from scrap in merely two hours. Lower shutdown time of equipment enhances production efficiencies. The focus should be on seamless integration of metallurgical, technical and logistical relationships.
Focus on business capabilities
Creating the infrastructure is just the beginning. Driving the business toward profitability requires well thought out strategies. Learning from industry experience, strategies have to be devised to drive the business in the right direction. Attention has to be given in the following areas:
- There has to be good synergy between the supply of raw materials and capacity utilization in production.
- The planning process has to be order-based and not quantity-based.
- Sales forecast has to be close to accurate in order to lower inventory of raw materials.
- Finished product inventory has to be restricted to the industry standards.