Nucor to Commission Gallatin Expansion in June, New Plate Mill on Track

“They’ve come through Covid and they’ve come through supply chain issues, and they remain on track for a start up at the end of the year,” Al Behr, executive vice president of plate and structural products, said on an earnings conference call with analysts on Thursday, April 21.

As for Gallatin, Nucor has already commissioned its new electric arc furnace (EAF) and ladle metallurgy furnace (LMF). Its caster and second down coiler will be commissioned in the coming weeks, Nucor president and CEO Leon Topalian said on the same call.

The company will then take a seven-day outage in early June to install Gallatin’s roughing mill and hot mill crop shear. The result: “By June, all of Gallatin’s new capabilities and capacities will be online,” he said.

Recall that Nucor in 2018 announced plans to roughly double Gallatin’s capacity from 1.6 million tons per year to 3 million tons per year. Doing so required adding a second EAF and caster.

Nucor expects to ship approximately 500,000 tons of Gallatin’s new capacity in 2022, with the facility hitting at a run rate of three million tons per year by the third quarter, Topalian said.

Rex Query, executive vice president of sheet and tubular products, said it would be roughly six to seven weeks before Gallatin was fully commissioned. He also said that Gallatin had taken an “extended outage” in December and January following various issues that delayed equipment installation by a matter of months.

And Topalian noted that Gallatin was not alone in taking downtime around the same period. Prices were falling late last year and early in the first quarter of this year, and so Nucor decided to take maintenance outages that had been delayed in 2021 – a period of high steel prices and strong demand.

Nucor also made a conscious decision “not to chase tons” as the market was falling. Prices fell in part because the distribution sector – which usually buys aggressively in January and February – largely sat out of the market amid questions about how far prices might fall and how protracted the downturn might be, he said.

Prices pivoted sharply upward following the war in Ukraine. And now orders from distribution are back – demand that Nucor has the capacity to chase and that could drive spot prices even higher, Topalian said.

Approximately 75% of Nucor’s business on the sheet side is contract based, a much higher percentage than in any of its other product groups. And most of those contracts are based on monthly terms, meaning that higher spot prices will flow into contract prices on a one-month lag. A smaller number of contracts are based on quarterly or more extended terms, he said.

Topalian’s comments came after analysts asked why utilization rates at Nucor’s mills had fallen so much – to 77% in the first quarter of this year from 95% in the first quarter of 2021.

Topalian pointed out that market conditions now are broadly similar to those a year ago. Automotive demand was – and still is – challenged by supply chain problems, notably chip shortages. And energy demand has been “tepid” this year despite sharply higher prices for oil and natural gas. (Last year, oil and gas prices were still low.)

Weakness in those segments has been offset not only from a rebound in demand from service centers but also from continued strong demand from the construction sector, notably for manufacturing facilities and for warehouses, server farms and other physical structures needed to support the digital economy. Another bright spot is physical infrastructure required for electric vehicles, said Chad Utermark, executive vice president of fabricated construction products.

“I think you are going to see – well, I know you are going to see – a significant increase in utilization rates across both our sheet and plate groups,” Topalian said.

By Michael Cowden, Michael@SteelMarketUpdate.com