U.S. Steel, Nucor Sunny on 2017, Herald Trump's Stance on Infrastructure, Trade Laws

Researched by Industrial Info Resources (Sugar Land, Texas)--Executives at United States Steel Corporation (NYSE:X) (Pittsburgh, Pennsylvania) and Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina) had warm words for the new administration of President Donald Trump, pointing to steel industry-friendly support for trade laws and infrastructure spending. Although both companies encountered detrimental pricing conditions in 2016, they expect the market environment to improve this year. Industrial Info is tracking $116.28 million in active U.S. Steel projects and $770.5 million in active Nucor projects.

U.S. Steel's net sales for full-year 2016 were down 11.34% from 2015 to $10.26 billion, and the company reported a $440 million loss, which was an improvement from 2015's net loss of $1.64 billion. Nucor's net sales were down 1.41% to $16.21 billion, but due in part to $245 million in 2015 impairments, net earnings stood at $796.27 million, compared with only $80.72 million in 2015. Lower prices hurt key segments for both companies in the final quarter of the year, including U.S. Steel's domestic Flat-Rolled, European and Tubular businesses, and Nucor's Steel Mills, Raw Materials and Steel Products businesses.

Both companies have more optimistic views on market conditions for the first quarter of 2017, although both acknowledged that volatility remains high. U.S. Steel, which is keeping its near-term focus on innovation and operational performance, expects its Flat-Rolled, European and Tubular segments to improve. Nucor expects improvement in its profitability from first-quarter and full-year 2016, emphasizing an improved pricing outlook for this Steel Mills and Raw Materials segments.

"We entered 2016 facing very challenging market conditions, but remained focused on our Carnegie Way transformation efforts," said Mario Longhi, the president and chief executive officer of U.S. Steel, in a statement. "Despite lower average realized prices and shipments in 2016, our results are better as we continued to improve our product mix and cost structure." He added: "While we will benefit from improved market conditions, they continue to be volatile and we must remain focused on improving the things that we can control."

Nucor also said it expects to benefit from stronger steel volume and a decline in imports. Late last year, Nucor announced two planned acquisitions: steel-tubing manufacturer Southland Tube (Birmingham, Alabama) for $130 million and Independence Tube Corporation (Decatur, Alabama) for $435 million.

Industrial Info is tracking more than $320 million in Nucor projects across the U.S. South, including two under construction: the $15 million expansion of a spiral welded steel pipe plant in Iuka, Mississippi, and $11 million in additions at a flat-rolled steel minimill in Trinity, Alabama. For more information, see Industrial Info's project reports on the Mississippi and Alabama projects.

U.S. Steel's efforts are more concentrated in "Rust Belt" states and manufacturing areas in the northern states. These include a $2 million rebuilding and relining of a basic oxygen furnace at a steel works facility in Gary, Indiana, and the $1.5 million restart of the Keetac Taconite Mine and Pellet Plant in Keewatin, Minnesota. The facilities produce 7.5 million and 6 million tons per year, respectively. For more information, see Industrial Info's project reports on the Indiana and Minnesota projects.

Trump Offers Hope on Trade Laws, Infrastructure Spending
In a quarterly earnings call, John Ferriola, the chairman, chief executive officer and president of Nucor, expressed hope over the Trump administration's proposals on infrastructure spending, which he said could spur bipartisan support: "We also are very encouraged by the discussion about a strong infrastructure build. Both President Trump and Senator [Sherrod] Brown [D-Ohio] are speaking about something significant in the neighborhood of about $1 trillion over the next 10 years. That has a significant impact on steel consumption. We believe that for every trillion dollars spent, you're looking at about 50 million tons of steel -- 50 million over the 10-year period, with the trillion dollars to be spent over the 10-year period."

However, the changing landscape for U.S. trade policy has caused Nucor to reconsider a proposed, $270 million sheet-galvanizing plant in Garza Garcia, Mexico, which would produce 400,000 tons per year of steel-galvanized sheets. Trump is backing a proposed 20% tariff on Mexican imports, which could make the project unaffordable. For more information, see Industrial Info's project report.

"Right now we plan for the plant to be in Mexico, but if something changes and we have some definite direction that says that's not the place to put it, we do have options," he said in the company's earnings call.

Longhi, who met with Trump shortly after he assumed office, said he was optimistic the new administration would enforce trade laws that benefit domestic steel production: "The current administration has very openly declared that they're going to do everything they can to make these rules to be properly enforced. One of the areas that still remains a concern is about circumvention. That's still delicate area that requires a lot more work to be done."

Last year, the executives of several major steel companies, including U.S. Steel and Nucor, publicly accused China of avoiding anti-dumping fees by diverting steel products to be sold in the U.S. through Vietnam. For more information, see September 26, 2016, article - U.S. Steel Producers Say Chinese Rivals Ducking Anti-Dumping Fees; January 13, 2017, article - U.S. Makes WTO Complaint Over Chinese Aluminum Subsidies; and January 25, 2017, article - AK Steel CEO: Still Much to be Done for U.S. Steel Sector Woes.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.