Nucor: Falling Imports, Better Business Environment Factor into Plans for New Steel Mill

Researched by Industrial Info Resources (Sugar Land, Texas)--A wide variety of factors, ranging from a sharp drop in steel plate imports to a more benign business environment, led to Nucor Corporation's (NYSE:NUE) (Charlotte, North Carolina) decision to build a 1.2 million-ton-per-year steel plate mill in the U.S. Midwest, according to Chief Executive Officer John Ferriola.

Ferriola explained the rationale behind the $1.35 billion project during a January 7 conference call with industry analysts. Industrial Info is tracking nearly $5 billion worth of Nucor projects. For more information, see Industrial Info's project report. For related information, see Industrial Info market brief, Nucor Grassroot Mill Announcement Brings Capex to $5 Billion.

Click on the image at right to view a graph showing Nucor project investments by U.S. market region.

"Today's healthy market for domestic plate has undeniably benefited from the share decline in imported plate," Ferriola said, noting that steel plate imports have dropped since spiking in 2014. Steel plate imports in 2017 were less than half of the imports in 2014, according to Nucor.

"The decline we have seen since 2014 happened in a large part because of the efforts of our domestic steel industry to seek and obtain relief from the illegal trade practices of some of our foreign competitors," Ferriola said. "In late 2016, a number of trade case decisions resulted in anti-dumping and countervailing duties being imposed on 12 nations that were found to be breaking the rules of trade. These remedies, together with duties still in place from cases back in 1997 and 2000, account for a total of 23 trade remedies that are now in place to enforce free and fair trade in the U.S. plate market."

For related information, see September 25, 2016, article - U.S. Steel Producers Say Chinese Rivals Ducking Anti-Dumping Fees.

Also, tax reform, an improved regulatory environment and strong trade enforcement under the Trump administration have given companies confidence to make long-term capital investments, Ferriola said.

However, the 25% steel import tariffs that were imposed last year did not play a pivotal role in Nucor's decision to develop the new mill, Ferriola said. The Trump administration placed the tariff on steel imports after determining record levels of imports threatened to impair U.S. national security under Section 232 of the Trade Expansion Act of 1962.

The import tariffs send "a very strong message, but bear in mind [Section] 232 is out of our control. The trade cases that we have prosecuted, that is on the books. That's not going to go away," Ferriola said. For related information, see September 13, 2018, article - Steel Production, Projects Rise in U.S. in Response to Import Tariff.

The location of the new mill in the Midwest will allow Nucor to provide on-time deliveries and service to customers in the region, the largest steel plate-consuming area in the country, Ferriola said. Sites under consideration for the mill are in Indiana, Kentucky, Ohio and West Virginia. Nucor expects to make a site selection early this year, and the mill to be operational in 2022. Nucor currently has steel plate mills in Hertford County, North Carolina; Tuscaloosa, Alabama; and Longview, Texas.

A U.S. infrastructure improvement initiative would increase demand for plate steel products, Ferriola said, adding, "We also feel confident that we will see energy continue to grow in the United States and that's going to be another market to supply, through line pipe,"

The new plate mill will produce cut-to-length, coiled, heat-treated, and discrete plate ranging from 60 to 160 inches wide, and in gauges from 3/16 of an inch to 14 inches in thickness. The mill will be able to produce 120,000 tons per year of heat-treated plate and 65,000 tons of ingot plate, Nucor said.

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