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By Elizabeth Collins, CFA | 11-06-2009 01:41 PM

Building a Moat in a Commodity Industry

The Steel Dynamics COO on keeping costs low, dealing with dollar volatility, and managing the threat of new competitors.

Securities mentioned in this video
STLD Steel Dynamics Inc

Elizabeth Collins: Hi. My name is Elizabeth Collins and I'm the Associate Director of the Basic Materials team here at Morningstar. Joining me today is Dick Teets, the COO of Steel Dynamics. Dick, thanks for joining me today.

Dick Teets: My pleasure. Thank you.

Collins: So, for steel companies, it seems to me like having low costs is important. How do you compare your operating costs with other companies in the U.S. steel industry, and even on a global basis?

Teets: Well, Steel Dynamics is, we would tell you, the lowest-cost producer, or right in that echelon of companies from an operating perspective year in and year out. We have a very real and decisive advantage from a capital structure. We are low-cost from an installation perspective and from an ongoing operations, from a lean management and a lean employee head-count perspective. We are very aggressive in our purchasing of not only the capital goods, but consumables. And that translates, then, on a quarter-in and quarter-out basis of low-cost production.

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