Steel Mills

Nucor Reports Strong Quarter, Not Expecting Steel Shortage

Written by Sandy Williams

Nucor Corp.’s first quarter 2018 consolidated net sales increased 9 percent from the previous quarter to $5.57 billion. Total tons shipped jumped 6 percent to 6.967 million tons. Consolidated net earnings were $354.2 million.

Earnings in the steel segment improved in the first quarter due to higher steel prices and an 8 percent increase in steel mill shipments from the fourth quarter to 6.26 million tons. Average sales price per ton was 3 percent higher in Q1. The operating rate at Nucor steel mills improved to 92 percent from 82 percent in the fourth quarter and 88 percent in Q1 2017.

Scrap and scrap substitute cost increased 6 percent sequentially to $337 per ton. During the company earnings call, improvement was noted at both scrap recycler David J. Joseph and Nucor’s Louisiana DRI facility. The Louisiana facility is scheduled for a one-month preventive maintenance shutdown beginning June 18.

Second-quarter earnings are expected to be significantly higher than first-quarter based on strong March metal margins and profits.

Said Nucor in its earnings release, “We believe there is sustainable strength in steel end-use markets, and we are encouraged by recent actions by the government to address the massive flood of dumped and illegally subsidized imports into the United States. We believe broad-based tariffs with few exceptions are needed to address the historic volume of unfairly traded imports and transshipping that is done to avoid trade duties. We expect improved performance for our steel products segment in the second quarter of 2018 as compared to the first quarter as rising steel input costs are being passed on to customers.”

Backlogs in Nucor’s fabrication segment are healthy, although there has been some margin compression due to higher steel prices.

The two new rebar micromills that Nucor announced for Florida and Missouri are expected to enlarge the company’s geographical footprint and fill demand for customers that are currently being served by competitors outside the region. The scrap supply from David J. Joseph will give Nucor a logistical advantage. Nucor executives said they are expecting that Section 232 tariffs will have an impact on reducing rebar imports into the U.S.

President and CEO John Ferriola was confident in Nucor’s strategy to improve profits through value-added products despite the current attractiveness of hot-rolled pricing. Nucor can be flexible to produce product for whatever need the market has at a given time, said Ferriola.

When asked if the U.S. will see a significant decline in imports after the May 1 exemption deadline, Ferriola said it is hard to predict what will happen. “We need and expect May 1 to be a firm date,” he said, adding that after that date either imports will go down or they will continue but at a fair price having paid the 25 percent tariff. Ferriola said he does not believe there will be a shortage of steel.

Currently, the tightest market is for flat products, including sheet and plate. Long product availability is not currently a problem.


Latest in Steel Mills