Group Work EMP -14

Group No : 3
Team
Amit Borkar
Milind Kelkar
Surinder Singh
Mukesh Jain
Suman Dutta

LOWELL STEEL - Process Flow Diagram

Iron Ore
Purchased Scrap
4200
21774 Return Scrap 2510

Return Scrap 8613

Iron Ore 78603

Scrap 11000
Iron Making in Blast Steel Making in Open
Hearth & Ingot Casting
Furnace Hot Metal 45500
(70000)
Ingots Slab Making in Blooming Mill Slabs
Net cost per ton of hot metal Net cost per ton of hot metal (53255)
Coke 45750 62874 Net cost of Slabs $85.35 41880
$44.14 $72.77

Limestone 18708
Perkin

1500
Ingot Sales

7126 Slab Sales

9874
selling pric 80 selling pric $ 95.00
Profits 9% 82.65
7.23 Profits 10%

Figures in Tons per Month

Q1 Can you improve on the profitability of Lowell Steel operation without opening the 11th open hearth furnce? How? Be specific.
Ans
Lowel Steel Corporation can be increased without openenig the 11th open hearth furnace by following ways
a) Increase the capacity of two blast furnace to its optimum at 46,000 tons. This will give additional 500 tons of input to Open Hearth Furnace.
The effect of this will reduce the scrap requirement by 500 tons form current 21774 tons.
The ration of molten iron in the metal charge for the open hearth furnace is between 62-65% and the furnaces are operated between 50-70% molten iron in the charge.
 The ration can be increased to 66%. This will optimize the furncce molten charge and reduce the scrap required.
% of charge 66%
Scrap Current Revised
Tons 21774 21274
Cost per ton $ 48.00 $ 48.00
Total Scrap cost $ 1,045,152.00 $ 1,021,152.00
Melting cost $ 2,008,370.00 $ 2,030,440.00
Total $ 3,053,522.00 $ 3,051,592.00
Savings in Scrap $ 1,930.00

b) Lowell Steel Corporation can increase the RTY (Rolled Throughput Yield) at Open Hearth and HR Rolling process.
The current yeild are 84.7% and 93.6%. There is huge scopoe for increasing the efficiencies at both the process.
Normal industry standard suggest the efficiens to be 90-93%.
Thus considering Lowell Steel improves its efficiencies and improve on the rolled through put, its profitability will increase.
1.1*72.77 $ 80.05
10% @48 $ (4.80)
Net metal cost $ 75.25
above metal $ 7.24
Net Cost $ 82.49
Old cost $ 85.35
Savings $ 2.86 per tonne

c) The increased output to be processed in the HR Rolling mill, as the contribution by the HR Rolling mill is 25%.
Lowell Steel Corp can totally concentrate its market on the HR Coils and Strips as it is giving them return of 25%.
Provided they are able to find the appropriate market for the goods.

Q2 How would the process change if the eleventh open hearth furnace were opened?

Ans The additional O.H furnace enable Lowell steel to decrease the Hot Metal %age from 65% to 59% thereby increasing the scrap used and reduced profitability
However, Lowell's strength is not the Cost ,but low tonnage & high variety that it caters to and hence the increase in production will affect its topline positively
Open hearth furnace cost
Elements Cost per ton Cost per Tons
Hot metal 0.597 44.14 26.35
Ore & Misc. 0.523 50 26.15
Steel scrap 0.06 24 1.74
1.18 54.24
Decreased Hot metal in percentage will show increased trendresulting in increased melting time with finally resulting in to total cycle time.
But as per the process the furnace reaction will get reduce and willimpact the maintainance cost on positive side.

Q3 Should Lowell Steel start up the eleventh open hearth furnce in May 1956?
Ans In May 1956, Lowell Steel Corp should had started the 11th furnace.
If out put of eleventh furnace is sold in Ingot form then cost will go up.This is shown in below table. Hence it is recoommended to complete the total processing of the raw material till HR Strips.
As value addition is increased the company can realize more profits.
The cost will increase because the hot metal as incredient/elelment used in each open hearth furnace will reduce from 65% to 59.7%.
This will lead to higher percentage of scrap consumption and will result in to increased cost of steel products than the current costs due to costly scrap material.

Output of open hearth furnace 77000

Max. blast furnace liquid metal avl. 46000
 Composition % 59.74%

Open hearth furnace cost

Tons % Cost per tons Cost per Tons
Hot metal 0.597 $ 44.14 $ 26.35
Ore & Misc. 0.523 $ 50.00 $ 26.15
Steel scrap 0.06 $ 24.00 $ 1.74
1.18 $ 54.24
$ 19.78
Revised cost of Ingot $ 74.02
Current cost of Ingot $ 72.77
Increase in cost of Ingot per MT $ 1.25

7000 Tons output of Ingot till finish products to be processd & finish products will be sold its selling price of $140 per tons
Selling price $ 140.00
Sale value $ 980,000.00
Cost of finish produc $ 103.80
Profit $ 253,386.00

With the addition of eleventh open hearth furnace the incremental sales is 980000 & incremental profits are 253386

Q4 How sensitive is your decision to the price of scrap?

Ans The decisions are highly sensitive to the price of scrap.
As per the predictions the prices of scrap will go up by @5 to 10%.
Current Scrap cost $ 48.00
Increased cost $ 50.00
Predicted cost $ 55.00
@ 10%
Scrap prices are sensitive as it contributes @ 40% of the molten charge and is of more cost than other ingrdients.
Increased cost 13%
Increased in cost 6%
 HR Strip in HR Rolling
Mill
(39200)
Net cost of hot rolled strip
$102.55

18700
Market

9000
Subsidaries

11500
Lowell
selling pric $ 140.00
27%
Profits 25%
raw material till HR Strips.