Steel Mills

Nucor sees federal programs adding to annual demand

Written by Stephanie Ritenbaugh

Nucor is optimistic about long-term activity from bridges and highways, semiconductor chip plants and renewable energy, but still sees some short-term challenges.

The North Carolina-headquartered steelmaker expects the federal programs that support these megatrends “to add somewhere between 5 million to 8 million tons of incremental annual demand for steel over the next several years,” executives said Tuesday, Jan. 30 on the company’s Q4’23 earnings call.

Still, some activity is slower than expected.

“Adoption rates for electric vehicles are tracking lower than some have predicted and several offshore wind projects have been canceled or delayed due to supply chain challenges as well as higher costs,” said Nucor chair, president, and CEO Leon Topalian. “Warehouse starts are expected to decline again in 2024, but we still expect them to stay above pre-pandemic levels. And despite some of these near-term headwinds, Nucor remains optimistic about the longer-term prospects for these end markets.”

Nucor shipped 2.675 million short tons of sheet steel in Q4’23, a 16% year on year (y/y) increase. Plate shipments of 373,000 st were 1% lower y/y.

The company is continuing to ramp up its electric arc plate mill in Brandenburg, Ky., with 2024 production projected at about 500,000 tons.

Meanwhile, work is underway at Nucor’s West Virginia sheet mill while the company plans to expand its rebar micro mill footprint in the US.

Looking at 2024, Nucor projects CAPEX at about $3.5 billion, about $2.4 billion of which is earmarked for its West Virginia sheet mill, Indiana coating complex, Lexington rebar mill, Berkeley galv line, and other projects.

In the first quarter, the company expects consolidated earnings to be higher compared to the prior three months as it banks on improved performance from the steel mills and raw materials segments, partially offset by weaker earnings from the steel products segment.

“For the Steel Mills segment, we expect quarterly earnings to increase due to higher realized pricing and higher volumes, in particular, from our sheet mills,” said CFO Stephen Laxton. “In the Steel Products segment, we expect lower realized pricing compared with the prior quarter. Across most of our steel products groups, current backlogs are consistent with historic norms, while margins have remained higher than historic averages. For the Raw Materials segment, we expect modest profitability on higher shipments and relatively stable pricing.”

Asked about performance at bar and beam mills in recent years and the outlook for volume, Topalian noted that the Nucor-Yamato in Arkansas is operating at a higher utilization rate than it was pre-pandemic.

“I think prior to the pandemic our average utilization rate at NYS, for example, is in the upper-60s to low-70s,” Topalian said. “That shifted much higher to the mid- to upper-70s, low-80s.

“The outlook and continued demand for our structural products and loan products remains pretty optimistic,” Topalian said. “Again, we’ve seen incredibly consistent returns in our longest products divisions and groups that we think will continue into 2024.”

Nucor added that investments in advanced manufacturing – EV battery plants and semiconductor chips, for example – backed by the government are pushing activity in the market.

In terms of renewable energy, the company has seen a lot of activity in the solar sector. Nucor saw about 22 gigawatts built in 2023 and expects about 36 gw in 2024.

One headwind, though, is the amount of available workers.

“A lot of these projects are competing for the same labor pool,” said Dan Needham, EVP commercial.

Stephanie Ritenbaugh

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