Steel Mills

Nucor Exceeds Guidance in 3rd Quarter

Written by Sandy Williams

Nucor beat guidance forecasts with earnings of $245 million for the third quarter of 2014, up from $147 million in both Q2 2013 and Q3 2013. Consolidated net sales increased 8 percent to $5.70 billion.

Strong third quarter earnings were attributed to improved performance in sheet steel, structural, bar, and plate steel that was partially offset by higher than expected losses in the raw materials segment.

Total shipments to outside customers were 6,784,000 tons, a 6 percent increase from second quarter and 10 percent from third quarter 2013. Average sales price per ton was up 1 percent from second quarter and 5 percent year over year.

Steel production was up 4 percent to 5.4 million tons with total steel shipments up 7 percent to 5.7 million tons. Steel mill utilization was at 78 percent for the first nine months of 2014.

Energy costs increased $1 per ton in the third quarter and $2 per ton over the first nine months of 2014 on a year-over-year basis. Nucor emphasized that their investment in natural gas has the Louisiana DRI plant covered though 2016. A decision was reached with Encana to extend the drilling suspension until the end of 2015.

Nucor is excited to have acquired Gallatin Steel in the third quarter.  The addition of the sheet mill will increase Nucor’s hot rolled sheet steel capacity by 16 percent to more than 13 million tons.  

At Berkeley, the $95 million investment to make wider and thinner hot rolled is expected to increase Berkeley’s market segment to 4 million tons annually. 

The Nucor Louisiana DRI mill continues to be tweaked with production outages in June, July and September contributing, along with higher iron ore prices, third quarter start-up costs of $45 million. DRI production continues to have excellent quality and volume levels and profitable results are expected during first quarter 2015.

Fourth quarter should have a moderate decline due to seasonal factors. Excess steel capacity and dumping of foreign steel continues to be the biggest challenge to the steel industry. Nucor applauded the recent decision by the DOC to terminate the suspension agreement on hot rolled products from Russia. The recent rebar, OCTG and wire rod decisions are all encouraging, said Nucor Chairman, Chief Executive Officer and President John Ferriola, but the need exists to do more.

Specifically on the Russian agreement, Ferriola said “We see that as a positive and it is more than taking tons out of the market” (approximately 700,000 tons). He added, “The termination of suspension agreement raises the floor of the sheet prices in the market.”

There are some issues that make it tougher for imports to the U.S said Ferriola. One is transportation, “It is one thing to get it to ports in the U.S. and another to get it to the customer.” He noted trucking has been an issue and the approaching winter weather will become another. Importers have to look at multiple risks bring in products to the U.S., for instance, product quality, delays, transportation costs, trade issues, etc.

Regarding a potential suit on cold rolled and galvanized steel, Ferriola said litigation attorneys continue to collect data to file at an appropriate time. Ferriola said he is “confident we will submit a good case and we will present that case aggressively.”

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