Tag Archives: how to select a steel mill

How to Select a Steel mill ( Micro level approach)

In continuation to the macro factors dealt in the previous post, let’s delve in to the micro factors to be considered in selecting a steel mill in this section.

The macro parameters can be common to other industries but they are quite indispensable while analyzing a steel plant.

Micro factors are those which determine how steel is being made and what is being made. Normally buyers emphasize more on micro factors.

Micro factors are as important as micro factors and should be analyzed in many aspects before selecting a source. These are the factors that would guide in answering “How to Select a Steel mill”? (Not in the order of importance).

1.       Production facilities : 

In Steel Industry, the quality of a mill mainly depends on the route of steel making and the facilities they employ. Since Steel is a high volume product, checking all the products for quality is improbable. So it is important to employ the right kind of Iron & Steel making route and right equipments to produce.

There are different ways of producing steel. These are mentioned in the order of preference / ranking from in terms of quality control.

  1. Blast Furnace – Basic Oxygen Furnace
  2. Corex –Energy Optimization Furnace
  3. Sponge Iron ( Any kind of Sponge Iron making) – Electric Arc Furnace
  4. Scrap – Electric Arc Furnace
  5. Scrap – Induction Furnace

Some of the common facilities to all the above can be,

Vacuum degassing – This can control the gas levels in steel.

  1. Ladle Refining furnace – Where required chemistry is achieved.
  2. Continuous casting / Ingot Casting
  3. Rolling
  4. Finishing Facilities

To summarize, the mill with blast furnace and BOF will have better quality steel. It also depends on the application. For example for re-bars, even Induction furnace would do. So it is important to consider the application while looking at the production facilities.

2.       Product Range:

 The mill with a vast range of products stands to benefit as this can be a means of diversifying that can serve the steel demand of various end user industries.

If a mill has quite limited range of products aimed at only one industry, for example if a mill has only re-bars, then there is a risk if the construction industry performs bad.

Ideally for a flat product mill it is better to have – Hot rolling mill, Cold Rolling mill, Metal coating mill, Plate mill.

For a long product mill which is concentrating on commodities, it is better to have re-bars, angles, channels and beams.

For an Alloy Steel long product mill – Bars – (Round, Square, Hexagon), Wire rods.

Ideally many big steel plants have the combination of all, to ensure that they are present in all major products.

3.       Quality Control:

As mentioned earlier, it is impractical to produce 100% good steel and it’s impossible to inspect 100% steel produced. This does not mean that Quality control is difficult.

By opting for higher levels of automations and by complying with efficient quality systems like Six Sigma, TPM, Quality control can be achieved at a steel plant.

Controlling the parameters at different stages of the production and ensuring that the production department follows this is one of the main roles.

Defining the rules of sample inspection and method of production also takes care of the quality.

The overall view should be that quality is not a role of quality control department and that it is a collective role of all the departments. This attitude will ensure reduction of defective steel products.

It is important that the steel buyer audits the relevant records at different levels of production to ensure the effectiveness of the system being followed.

The percentage of internal rejections & the number of customer complaints is a yardstick of how effective is the quality control.

4.       Accreditation / Certification :

When a steel mill gets accredited to various renowned quality standards viz., ISO, and other private quality standards, it can be an indication that a system is in place.

Today ISO certification has become a mandatory and basic requirement of every steel plant.

Some steel plants servicing to automobile customers have also accredited with ISO/TS-16949, which calls for stringent system.

5.       Research & Development :

 The amount of investment a steel plant makes in research and development, new product development will encourage and bolster customer’s confidence in them.

Keeping abreast of technological improvements is a must.

Today many steel plants engage in early development of products with their customers’ right from the design stage. This has ensured that steel cannot be sold just as a commodity. This can be possible only with a strong R&D highly qualified team and modern testing facilities.

Steel plants should position themselves as steel solution providers rather than steel makers and sellers.

 6.       Distribution model / Geographical spread :

“Go to Customer” is the mantra for any product and in today’s scenario; Steel Industry seems to have aligned itself to this.

For any customer, they should feel that the steel plant is close to them. This is possible by means of service centers, stocking points.

For a Steel buyer to depend on the steel mill, it is important to ensure that the steel mill is flexible enough in deliveries and quantities.

There are service centers, stockiest, steel retail centers opened by many steel mills that take care of small and timely requirements of customers.

A buyer has to look if the steel mill has a robust distribution system with presence in major industrial/ end user hubs.

7.       Sales Organization Structure:

For a Steel buyer, accessing the sales personnel irrespective of any level is the most important aspect.

The steeper and multi-level the sales organization structure, the difficulty level increases for a customer.

A buyer has to check as how customer friendly the sales team is and how their orders are taken care of.  The key account manager plays a major role.

Also if there are Zonal managers, then the influence of Zonal manager over the top management plays an important role.

In many steel plants, the facilities and product may be good, but due to poor people management and attitude towards customer, their market share will dwindle.

A mutual understanding, developing a mutual trust and co-operation for the benefit of both the parties should be aimed at.

The sales organization structure should define the roles of each level with clarity and without any overlap.

8.       Existing customer base  / References :

One of the easiest ways of judging a steel mill is based on their existing clientele. While this can be a good and simple way, but this does not indicate that all customers can be served by the mill. The needs of every customer are different and only few steel plants can serve to diversified clients.

These are some of the important parameters that can be of relevance to all steel buyers,

If you are looking for a metric or a ranking method based on micro and macro parameters and base your decision making on this scientific method, please feel free to contact me at madhu@knowyoursteel.com

Happy Steeling!!