Steel Mills

Nucor Confident on Strong Long-Term Appetite for Steel
Written by David Schollaert
October 24, 2023
Nucor Corp. remains bullish long-term on steel demand, but an underlining theme during the steelmaker’s third-quarter earnings conference call with analysts on Tuesday, Oct. 24, was tempered near-term expectations.
“We’re excited about three steel-intensive mega-trends each supported by federal legislation,” Nucor chair, president, and CEO Leon Topalian said.
But they’re only in the “bottom of the first inning,” he cautioned, using a baseball metaphor to detail demand for plate, rebar, and sheet as it pertains to government-funded infrastructure work.
Infrastructure Spend
While the metaphor doesn’t reflect tons shipped, Topalian said it was meant to indicate that much of the federal and state funding – from appropriations, project engineering and development, the permitting and bidding process, to ultimately order taking and steel product manufacturing – is still in its early stages.
The Infrastructure Investment and Jobs Act (IIJA) has progressed the least with respect to steel-related orders, said Topalian. The CHIPS Act has had the most significant impact on Nucor’s order book thus far. He said the Inflation Reduction Act (IRA) falls somewhere in between.
Nucor has shipped plate, beam, and piling products related to a first wave of bridge projects. But it expects more to come from state-level projects — specifically, highways.
“So while we are starting to see more orders related to ground-mounted solar and onshore wind, there’s still a lot of upside in the years still to come,” added Topalian.
UAW Strike Impact
With little exposure to the auto industry, just about 1.5 million tons, or roughly 5-6%, of the steelmaker’s overall volume, the UAW’s strike hasn’t had a directly profound impact on its business.
Despite concerns of a greater impact on the overall economy should the work-stoppage persist, Nucor remains excited and committed to doubling its automotive capacity over the next 3-5 years. “We’re moving from 1.5 million tons to about 3 million tons overall volume and footprint,” Topalian said.
Ramp Ups and Run Rates
Nucor’s $1.7-billion state-of-the-art plate mill in Brandenburg, Ky., is at just roughly half of its second-half initial ramp-up target. The company initially said it would reach 300,000 tons in H2, but the steelmaker is closer to 160,000 tons.
“Rather than hitting volume targets, we want to be strategic in bringing volumes forward,” said Topalian. The company wants to make sure it is not impacting returns at other plate mills.
Nucor hopes to be closer to a 500,000-ton run rate in 2024, he said.
It’s been a similar trend at its $650-million expansion project at Gallatin. The mill in Ghent, Ky., is currently full run rate capable. The company has focused on improving automation issues that had impacted consistency in Q3.
Q4 Earnings Will Move Lower First
Nucor expects fourth-quarter earnings to be lower than Q3 on lower realized prices and volumes. Sequential declines in Q4 earnings could potentially exceed the decline seen in Q3.
Due to contract exposure, recently improved sheet prices are not expected to improve average realized selling prices until later in Q4, executives said during the call.
And while the steelmaker remains bullish in the long term, near-term market conditions have softened. That’s because of uncertainty from the UAW strike, higher interest rates, and credit tightening, among others, as leading factors, they said.
Despite some headwinds, Nucor’s downstream steel product business performed well overall.
“It’s a great platform for continued growth, but it is softening and coming down from historic highs from 2021 and 2022,” said Topalian. “They’re moderating, but there’s no cliff. There is some softening in backlogs but still 20-25% above pre-pandemic levels.”

David Schollaert
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