Businessmodel of Steel Dynamics

Customer Segments

Steel Dynamics provides a range of steel and scrap products. The Company principally serves customers operating within the metals industry, dividing its customers by product category:

• Sheet steel customers, comprising steel processors and steel service centre operators, which act as intermediaries between primary sheet steel producers and end-user manufacturers, as well as customers in the heating, ventilation and air conditioning, construction, agriculture, and consumer goods markets;
• Ferrous and no-ferrous scrap customers, comprising various end-users such as arc furnace steel mills, integrated steelmakers, foundries, secondary smelters, metal brokers, aluminium sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries, specialty steelmakers, alloy manufacturers, wire and cable producers, utilities, and telephone networks.
• Steel fabrication customers, comprising non-residential steel fabricators, metal building companies, general construction contractors, developers, and governmental entities. Steel Dynamics serves a large domestic customer base across the US, with its facilities primarily located in the Upper Midwest and the Southeastern states. The Company does not currently serve an international customers base outside of North America.

Value Propositions

Steel Dynamics provides value to its customers in the following ways:

• Its quality and low-cost production processes, with the Company committed to maintaining a low operating cost structure, without sacrificing quality, employing efficient plant designs combined with a high productivity rate, that enables it to provide an efficient service to clients
• Its secure supply of high-quality raw materials, with the Company having a secured reliable supply of ferrous raw material resources through its own metals recycling operations;
• Its diversified product portfolio, with the Company offering a broad range of products and services, organised into several product categories, including sheet products, long products, steel finishing and fabrication services, and metals recycling services;
• Its specialist personnel and experienced industry executives, with the Company employing specialist personnel across its three operating segments, led by a team of experienced industry executives; and
• Its strategic geographic locations, with the Company operating steelmaking facilities across the US near sources of scrap materials and close to its existing customer base, allowing it provide products quickly and reliably. ### Channels

Steel Dynamics operates a website at www.steeldynamics.com, through which it provides information on its various products, services, and locations. The Company does not an online sales channel, nor does it operate an online customer portal, however it does allow customers to make sales enquiries through an online contact form on its website.

Steel Dynamics makes it sales through an in-house direct sales force that is organised by operating segment and geographic region. Most of the Company’s ferrous scrap customers purchase processed scrap through negotiated spot sales contracts which establish a quantity purchase for the month. Steel Dynamics also collaborates with a range of third party distributors and independent sales agents, that support the Company’s own sales force.

Steel Dynamics operates its own network of processing facilities and electric arc furnace steel mills, through which it produces its products, as well as its own distribution centres and logistics infrastructure.

Customer Relationships

Steel Dynamics does not operate a self-service sales channel or customer portal. Instead, customers are able to interact directly with the Company’s sales personnel, who consult closely with clients to ensure that their individual needs are met. The Company and its customers mutually agree the details of sales and distribution, which typically last several years. Steel Dynamics seeks establish longstanding customer relationships.

Steel Dynamics provides ongoing support to its customers, including FAQs, news articles, scrap specifications, and product details. Customers are also able to contact members of the Company’s support personnel over the phone and via email, and receive a personalised response to queries and complaints. Steel Dynamics also has social media accounts with Twitter, Facebook, and LinkedIn, through which it can interact directly with customers and keep them updated with company developments.

Key Activities

Steel Dynamics is a steel producing and a metal recycling company. It is engaged in the manufacturing and selling of steel products, processing and selling of recycled ferrous and non-ferrous metals, and fabricating and selling of steel joist and deck products.

The Company organises its operations into three business segments: Steel Operations, which includes the operations of many of the Company’s most important divisions, including the Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanising lines, Structural and Rail Division, Roanoke Bar Division, Steel of West Virginia, and Iron Dynamics; Metals Recycling Operations, which includes both ferrous and nonferrous scrap metal processing, transportation, marketing, brokerage and consulting services; and Steel Fabrication Operations, which include a network of New Millennium Building Systems joist and deck plants across the US and Northern Mexico.

Key Partners

Steel Dynamics works in conjunction with a number of companies and organisations throughout the process of producing and distributing its products. These partners include:

• Supplier and Vendor Partners, including suppliers of tools, raw materials, services, equipment, and technology that are utilised across the Company various division and operating segments in support of its operations;
• Channel and Distribution Partners, including various distributors, logistics providers, and independent sales agents that support and supplement the Company’s sales and distribution activities;
• Community and Sustainability Partners, including various non-profits and charitable organisations with which the Company collaborates on community and environmental sustainability projects; and
• Joint Venture Partners, comprising steel processing and metals companies with which the Company collaborates on joint production, marketing and sales projects through mutually-owned entities. Steel Dynamics has launched several partnerships in recent years, including a joint venture deal with La Farga Group to produce copper wire rod from recycled copper and a partnership with Manchester University to provide a year-long leadership development program.

Key Resources

Steel Dynamics’s key resources are its raw materials and supply chain, its manufacturing and processing infrastructure, its catalogue of products, its sales and distribution channels, its partnerships, and its personnel.

Steel Dynamics owns and or leases a portfolio of properties, primarily in the US. This notably includes its network of steel mills, scrap processing facilities, fabrication facilities, and finishing plants, which are key to the Company ability to conduct its core business processes. The Company’s properties also include a network of administrative and sales offices.

Cost Structure

Steel Dynamics incurs costs in relation to the procurement of raw materials and supplies, the operation of its production and processing infrastructure, the operation of its sales and distribution channels, the management of its partnerships, and the retention of its personnel.

In 2015 Steel Dynamics accrued selling, general and administrative expenses – including all costs associated with sales, finance and accounting, and administrative departments, as well as labour and related benefits, professional services expenses – in the amount of $376.00 million. The Company’s plant, machinery, and equipment costs totaled $3.97 billion for the year, comprising the bulk of the Company’s total property, plant and equipment costs in the amount of $5.08 billion.

Revenue Streams

Steel Dynamics generates revenue through the manufacture, processing, and sale of metals and related products, including sheet products, and long products. The Company also provides various processing services, steel finishing services, fabrication services, consulting services, and metals recycling services, through which it derives a portion of its revenue.

In 2015 Steel Dynamics recorded total annual net sales of $8.75 billion, down on the $10.46 billion recorded by the Company in 2014. The majority of the Company’s sales are attributed to its Steel Operations segment, which in 2015 recorded net sales of $5.42 billion. The bulk of the remaining net sales were generated by the Company’s Metals Recycling Operations segment, which generated $2.34 billion.