NEW YORK Nucor
Corp. is expecting a number of planned investments in its
flat-rolled division to propel the steelmaker into more
value-added and high-margin market segments, its top executive
N.C.-based steel producer, which saw second-quarter net income
fall 24.2 percent compared with the same period last year, said
much of its weakness this past quarter was due to steel sheet
pricing falling to multiyear lows (
amm.com, July 18). But planned upgrades at a
number of its mills scheduled to finish in the latter half of
the year and early next year, coupled with the startup of its
newest direct-reduced iron (DRI) facility, may mean a brighter
financial future for the steel producer, it said.
"We are now five years
into what remains a stagnant global economic environment, and
in turn, extremely difficult steel market conditions,"
president and chief executive officer John Ferriola said during
an earnings call July 18. "Over the next several years, our
unrelenting focus will remain on executing our strategic plan
and converting our $8 billion of investments into higher highs
and profitability once the next cyclical upturn inevitably
arrives. At the same time, we will continue to plan for
tomorrow while executing today."
2.5-million-ton-per-year DRI facility is expected to begin hot
commissioning in August and production at the plant will start
by the end of September, Ferriola said. The port facility there
will have one mile of Mississippi River frontage and be capable
of receiving vessels up to 950-feet long and cargos of about
115,000 tonnes, he said.
of the DRI plant, coupled with the 2 million tons of annual
capacity at its existing Trinidad DRI facility, Nucor will
achieve two-thirds of its long-term goal to control 6 million
to 7 million tons of annual capacity in high-quality scrap
substitutes, Ferriola said, adding that once this facility is
up and running, the company may look into building an
additional DRI facility for which it has already achieved the
"Given the scope of
this project, start-up hiccups are to be expected," he said.
"However, our confidence is extremely high in the process
On the value-added
product side, Nucors Hertford County, N.C., plate mill
started in June production of its new 120,000-ton-per-year
normalizing line. The new line brings Hertford Countys
value-added plate products annual capacity to 240,000
On the sheet side,
Nucor said it remains "on time" and "on budget" to complete an
upgrade at its Berkeley County, S.C., mill by the first quarter
of 2014, which will provide Berkeley with the ability to
produce wider and lighter-gauge sheet steel and tap into a
number of growth segments, including agricultural, heavy truck
and high-strength applications.
Nucor, which recently
secured a long-term, low-cost supply of natural gas, said that
it expects that cash flow to be positive by 2016.
One end-use area in
particular in which Nucor sees growth is the pipe and tube
segment. A number of new and expanded tube mills have been
announced for the U.S. market, and Ferriola said Nucor is in
discussions about supplying them substrate.
"I can tell you that
we have every single one of them, and were in discussions
with every single one of them. Were even in some
discussions with new suppliers or new production facilities
that currently have plans to provide their own substrate.
Were in discussions with them, working actively to
convince them that (its) advantageous to do business with
us and avoid the capital expenditure of building their own
melting facilities," Ferriola added.
But looking forward,
while the company expects earnings to improve compared to the
second quarter as it continues to move up the value chain, a
number of downward pressures remain.
"On the negative side, we expect pre-operating, start-up
costs at our Louisiana facility to actually increase in the
third quarter. Overall, the outlook continues to be challenged
by anemic economic growth and excess global steel capacity,"
chief financial officer James D. Frias said.