NEW YORK Nucor Corp. is pushing forward with various downstream and raw materials growth initiatives as it looks to broaden its value-added product offerings and better manage its input costs, the steelmakers top executives said.
To fund those projects, the Charlotte, N.C.-based company allotted some $1 billion for capital expenditures this year, about $692 million of which was already spent in the first nine months of the year, chief financial officer James Frias said during the companys third-quarter earnings conference call.
"The largest project is our Louisiana direct-reduced iron (DRI) raw materials facility currently under construction," Frias said. "There are many other projects being implemented throughout our upstream, steelmaking and downstream businesses to develop new products, increase quality and reduce costs."
The DRI project, which saw construction begin in 2011, is still on schedule for a mid-2013 ramp-up, Nucor president and chief operating officer John Ferriola said during the conference call.
"Our team at Nucor Steel Louisiana made excellent progress during the third quarter on the construction of our new DRI plant in St. James Parish. Their can-do attitude and high energy level allowed them to overcome significant challenges arising from this summers record low level of the Mississippi River," Ferriola said. "Two major milestones reached this quarter were the placement of the DRI vessel on the structural module that supports it and the erection of the iron ore storage domes."
Combining Nucors new 2.5-million-ton-per-year Louisiana capacity with its existing 2-million-ton-per-year DRI capacity in Trinidad "brings us to about two-thirds of our goal to control from 6 million to 7 million tons of annual capacity in high-quality scrap substitutes," Ferriola said.
After the company finishes building the sites first DRI unit, it expects to begin work almost immediately on a second DRI plant of the same size at the same location, Nucor chairman and chief executive officer Daniel R. DiMicco said. "When we start up the one that we are projecting for mid-year and we see that some of the different technologies ... than we are used to working with prove to be as effective as weve been told, we will begin immediately."
For the time being, the DRI plant will be supplied with iron ore pellets from the companys three existing suppliers: two Brazilian companies and one Canadian firm. Down the line, Nucor is looking to secure additional supply sources in "other parts of the world," DiMicco said, suggesting that acquiring its own iron reserves is still an option if the economics make sense.
"If we make a move in that space, it will be because the opportunity says its the right price and the right time to do it," he said. "We are constantly exploring opportunities throughout the downstream (and) through the upstream space literally on a daily basis."
Meanwhile, Nucors efforts to expand its value-added reach also are progressing. The company brought online in the third quarter a new vacuum-tank degasser at its Hertford County, N.C., mill and is now testing new grades with plate customers, Ferriola said, noting that the mills new normalizing line is slated to start up by the middle of 2013.
Nucors Hickman, Ark., sheet mill will start up its own vacuum-tank degasser within the next three weeks, which "will allow Hickman to participate in the higher-value-added OCTG (oil country tubular goods) products market along with opening new opportunities in Mexico," he said.
The steelmakers previously announced plan to add wider and lighter-gauge sheet products to its output mix at its Berkeley, S.C., facility also is on track, Ferriola said. "Equipment orders have been placed and construction is under way. We expect this project will be up and running in late 2013."
Meanwhile, a recent slowdown in demand for special bar quality (SBQ) products has not deterred Nucors plan to expand SBQ and wire rod capacity by a combined 1 million tons at three steel mills (amm.com, Jan. 25).
"What were doing with our SBQ expansions in Memphis and at two of our other mills that focus on SBQ is based upon how we see the future. If it was based upon how we saw it today, we would probably stop them all," DiMicco said. "But we are very confident that were going to see an influx of manufacturing coming back to this country for a host of reasons in sectors that are strong consumers of SBQ-type products and in the energy area as well."