Nucor CEO John Ferriola said that in the current challenging environment, he is encouraged by second-quarter results, but not satisfied.
Illegally traded imports continue to be a problem in the United States for Nucor and the domestic steel industry, Ferriola said during the company’s second-quarter conference call. He cited a 15 percent year-over-year increase in finished steel imports during the first half of 2017. Imports claimed 29 percent of market share in June 2017, the same as the record annual levels set in 2015. Year-to-date import market share is at 27 percent. “Further evidence,” he said, “that traditional trade cases are very often too slow to keep up with the shifting tactics of nations that are abusing the rules of trade.”
“We recommend remedies be targeted to measurable goals for steel, import share of U.S. market and our industry’s capacity utilization,” said Ferriola. “It is also critical that appropriate adjustments be made to the remedies if policy targets are not reached. While it may require a trial in every process to determine what remedies are effective, we are confident that our nation’s leaders will stay the course until there is free and fair trade in our steel markets.”
The company is “cautiously optimistic” as it looks toward the second half of the year. “Over the next couple of months, we’ll certainly know what’s going to happen with 232 and that it’ll have a very significant impact,” said Ferriola. “My take on it frankly right now is it’s probably not going to be everything we hope it to be, but it’s certainly going to be more than what we have right now.”
Ferriola, like Steel Dynamics CEO Mark Millett, said whatever actions result from the Section 232 will “be icing on the cake.”
Domestic competition from new steel players Big River Steel and Mingo Junction are not a concern for Nucor, said Ferriola. “We always worry more about the imports. Frankly there is new competition from non-domestic companies.” Nucor is confident in its ability to compete and be successful on a level playing field.
Ferriola called the Section 232 action a “holistic solution” that will provide an environment where mills can get the right returns to make investments and the certainty of operating utilization rates, based on reasonable limits to market penetration by imports.
On recent price increases, Ferriola said: “In terms of the general increases that you have seen, we had a $30 increase a couple weeks ago that’s been well supported by the marketplace,” and the steelmaker expects the same for the just announced $25 flat roll hike. “As I’ve said in the past, we don’t go out with those unless we are very confident we’re able to collect them. We look at demand, which continues to look strong. We look at service center inventories, which continue to be very low.”
Nucor reported net earnings of $323 million for second-quarter 2017, compared to $356.9 million in the first quarter. Consolidated net sales were $5.17 billion, up 7 percent from the first quarter and 22 percent from Q2 2016. Average sales price per ton increased 5 percent from the first quarter. Nucor’s consolidated shipments totaled 6.7 million tons during the quarter. Steel mill shipments gained 3 percent from the first quarter while downstream steel products shipments were up 9 percent. Nucor operated at a 90 percent capacity utilization rate during the second quarter.
Aggressive competition challenged hot-rolled sheet sales, while plate mill profitability improved. Rebar fabrication operations were hit with downward pricing pressure as a result of surging rebar imports.
Nonresidential construction looks healthy through the end of 2017, and Nucor is encouraged by improvement in the energy markets. Automotive market share has improved and is expected to continue to grow through the second half.
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