Nucor to Help “Make America Great Again” by Bringing Back Manufacturing

Shipments to outside customers totaled 5,815,000 tons in the fourth quarter of 2016, a 1 percent decrease from the third quarter of 2016 and an increase of 14 percent from the fourth quarter of 2015.

Nucor steel production totaled 4,990,000 tons in Q4. Steel mill shipments in Q4 decreased 1 percent from Q3 but increased 16 percent from the fourth quarter of 2015. Fourth quarter downstream steel products shipments to outside customers decreased 11 percent from Q3 and remained consistent with the Q4 2015. Operating rates at Nucor’s steel mills were at 74 percent, down from 76 percent in Q3.

Nucor is expecting earnings to increase in first quarter 2017 with improved volume in the steel mills segment, particular at the sheet and plate mills. Higher steel prices are expected to continue into first quarter and, combined with lower imports due to successful trade cases and higher input costs, will create an improved and more sustainable market in 2017. Investment benefits made in tubular products will be realized in second quarter. The steel products segment is expected to show decreased profitability due to typical seasonality.

The raw materials segment is anticipated to return to profitability in first quarter as scrap pricing increases. Scrap and scrap substitutes averaged $236 per ton in fourth quarter, down 6 percent from Q3 and up 8 percent from Q4 2015.

The acquisition of Southland Tube in Birmingham, Alabama closed on January 9, 2017 and is expected to build market share in the high strength steel tubing market.

During the earnings conference call, Chairman and CEO John Ferriola stressed the continuing need to work with the Administration to enforce trade regulations to achieve a level playing field for free and fair competition. Ferriola said he was pleased with the appointment of cabinet members that will be dealing with trade policy. Several trade cases are currently underway and more will be brought when necessary, he said.

The Vietnam circumvention case is of particular concern. Galvanized steel coming from Vietnam has gone up by 300 percent, said Ferriola, without any additional production of hot band in the country. Since there is “no new magical steel technology that we are unaware of,” the steel substrate is mostly likely coming from China. He called it an example of “blatant circumvention” that needs to be stopped.

Ferriola was also encouraged with the strong infrastructure bill that is under consideration that would spend a trillion dollars over the next several years. The spending would represent about “50 million tons of steel over the ten year period—5 million tons per year,” said Ferriola. Five million is not insignificant when compared to total US consumption of 100 million tons per year, he added.

Nucor stands ready to leverage another million additional tons of unused capacity, some of which will be designated for their new pipe and tube segment that will serve the nonresidential construction market. The acquisitions of Independence Tube and Southland Tube will make Nucor a leader in the HSS steel tubing market. Republic Conduit will produce steel electrical conduit that is used to protect and route electrical wiring in nonresidential construction. The tube mills are located strategically near Nucor’s sheet mills, offering opportunity for the sheet mills to earn additional business from the pipe and tube mills.

When asked whether Nucor is capable of supplying the required pipeline for the Keystone Xl project, Ferriola said they currently have the manufacturing capability for the designated diameter and for widths of up to 5/8 inches. He was unsure of how much demand there will be since much of the steel has been purchased. He noted that “a lot of the material on the ground is not produced domestically” and speculated on whether it will be disqualified from use under the Buy America stipulation.

The joint venture with JFE Steel in Mexico is scheduled to start construction in May or June. Nucor is watching the situation in Washington carefully in regards to how any changes to NAFTA may affect the project. The plan is to locate in Mexico but Ferriola said that “if we have something definitive that says that is not the place to put it, we will have options.” The project is a “big plus” for Nucor that will improve its ability to make high value-added products and work with quality producer JFE.

Ferriola confirmed that he was asked to provide President Trump insight on what issues are hurting American steel and manufacturing. He has done that and has been invited to participate in the administration’s manufacturing forum. Ferriola said he is “looking forward to working with President Trump to Make America Great Again by bringing manufacturing back into the United States.”