Nucor, AK Steel Expect Steel Market to Grow in 2018 as Prices, Demand Improve

Researched by Industrial Info Resources (Sugar Land, Texas)--Steel producers Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina) and AK Steel Corporation (NYSE:AKS) (West Chester, Ohio) saw differing results for revenues and profits in 2017, but both are highly optimistic about 2018, anticipating solid demand in major end-use markets, such as automotive and construction. Industrial Info is tracking more than $1.7 billion in active projects involving Nucor and AK Steel.

Both companies are optimistic about recent pricing momentum for end-use steel products. AK Steel noted in its quarterly earnings release that the average selling price per flat-rolled steel ton in the fourth quarter increased 4% from the same period in 2016 to $1,024 per ton, primarily as a result of higher spot market pricing and higher automotive selling prices; for the full year, the price increased 7% to $1,022 per ton, driven by higher contract and spot prices. Nucor's total 2017 steel shipments were 13% higher than in 2016, but AK Steel's were down 6%, "primarily the result of a decline in shipments to the automotive market."

Nucor cited steel imports--which surged in summer 2017 and accounted for an estimated 27% share of the U.S. steel market at the end of the year--as a negative factor in the profitability of its steel mills. Nucor and AK Steel are among the domestic producers who are pressuring the U.S. federal government to combat what the companies consider unfair trade practices, and they enjoyed some success in 2017: The U.S. Department of Commerce imposed duties on some steel imports, including corrosion-resistant and cold-rolled steel that originated in China and was shipped to the U.S. through Vietnam, which it said evaded U.S. anti-dumping and anti-subsidy orders. For more information, see December 7, 2017, article - U.S. Slams Steel Imports from Vietnam that Started in China.

AK Steel expects to see its annual capital spending continue its upward trend: It estimates its 2018 capital investments will total about $160 million, compared with $153 million last year and $128 million in 2016. Nucor reported a net benefit of $175.2 million related to the U.S. federal tax legislation enacted in the fourth quarter, although AK Steel reported a $32.1 million one-time, non-cash charge. For related information, see December 4, 2017, article - Capex Momentum Builds at U.S. Steel Mills.

Among Nucor's recently announced projects is a $250 million rebar micro mill in Sedalia, Missouri, about 90 miles east of Kansas City. The facility is expected to produce up to 350,000 tons per year of steel rebar, which will be supplied to the Kansas City, upper Midwestern and Plains markets. Nucor says the product currently supplied to these areas travels long distances, giving the new mill a logistical advantage. It is expected to start up in 2019, pending the final approval and awarding of state and local incentives, as well as required permits and regulatory approvals. For more information, see Industrial Info's project report.

Nucor is looking at two steel mill expansion projects in the U.S. Midwest: a $230 million addition at a sheet-rolling mill in Blytheville, Arkansas, which began in the fourth quarter and is expected to boost production to 500,000 tons per year, and a proposed, $180 million addition to the Kankakee Steel Mill in Bourbonnais, Illinois, which would boost output to the same number if approved and built. For more information, see Industrial Info's reports on the Blytheville and Bourbonnais projects.

Nucor JFE Steel Mexico, a Mexican joint venture between Nucor and JFE Steel Corporation (Tokyo, Japan), is at work on a $270 million steel sheet galvanizing plant in Nuevo Leon, Mexico. The facility, which began construction in first-quarter 2017, will produce 400,000 tons per year of galvanized steel sheet. It is expected to be completed in early 2020. For more information, see Industrial Info's project report.

Many of AK Steel's projects are focused on improving furnace-based operations through the installation of new equipment and repairs and upgrades to existing facilities. A $3 million capital-improvement program at a steel works facility in Dearborn, Michigan, which is expected to overhaul a pair of oxygen furnaces, each with a capacity of 2.6 million tons per year, is expected to wrap up in the fourth quarter. AK Steel also is planning next year's $3 million capital-improvement program at the same facility. For more information, see Industrial Info's project reports on the 2018 and 2019 programs.

Elsewhere in the Great Lakes region, AK Steel is considering a pair of proposed improvement projects: A $5 million addition at a stainless steel mill in Coshocton, Ohio, which will install a new, 75,000-ton-per-year annealing furnace; and a $5 million oxygen-furnace relining at a steel-works facility in Middletown, Ohio, which will upgrade equipment at the 2.7 million-ton-per-year plant. For more information, see Industrial Info's reports on the Coshocton and Middletown projects.

Nucor reported net income of $1.32 billion for the year, compared with $796 million in 2016; net sales stood at $20.25 billion, up 25%. AK Steel reported net income of $10 million for the year, compared with a net loss of $7.8 million in 2016; net sales stood at $6.08 billion, up 3.4%.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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/.