Steelmaker Nucor Boosts 2019 Capex to $1.8 Billion

Researched by Industrial Info Resources (Sugar Land, Texas)--Most large U.S. steel producers had a good 2018, thanks to the Trump administration's invoking a 25% tariff on steel imports from most countries. Among these companies is Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina), which has boosted planned 2019 capital spending to $1.8 billion from 2018's $1 billion.

In the company's fourth-quarter and full-year 2018 earnings conference call, Nucor Chief Executive Officer John Ferriola said, "The Section 232 steel tariffs provided [a] tailwind for Nucor. Between the tariffs and the cumulative trade cases the industry has won in recent years, unfairly traded imports to the U.S. market have declined significantly."

The company recently announced plans to construction what Ferriola described as a "state-of-the-art plate mill to be located in the Midwest. The mill will have an annual capacity of 1.2 million tons and is expected to be operational in 2022. This investment will position us right in the heart of America's plate-consuming region, which will give us logistical advantages over our competitors." The company is underway with site selection for the mill, which it expects to complete early this year. For more information, see Industrial Info's project report and January 11, 2019, article - Nucor: Falling Imports, Better Business Environment Factor into Plans for New Steel Mill.

Among Nucor's other proposed projects is the expansion of its Gallatin mill in Kentucky. The project would increase the plant's production capacity from 1.6 million tons per year to 3 million tons per year and allow the mill to produce coils up to 73 inches wide. Construction is expected to be completed in mid-2021. For more information, see Industrial Info's project report.

This year, Nucor plans to kick off construction of a steel rebar micromill in Sedalia, Missouri. The mill will have a production capacity of 350,000 tons per year. Danieli Corporation (Cranberry Township, Pennsylvania) is the technology provider on the project, which is expected to be completed in 2020. For more information, see Industrial Info's project report.

The addition of new capacity to the U.S. steel sector can sometimes come with a price. AK Steel Holding Corporation (NYSE:AKS) (West Chester, Ohio), a much smaller producer than Nucor, also reported its earnings. The company had full-year 2018 earnings of $186 million, compared with $103.5 million in 2017. Despite the strong year, the company has decided to permanently shut down its Ashland steel mill in Kentucky, which has been mostly idled for the years, with the exception of hot dip galvanizing coating line.

In the company's conference call, Chief Executive Officer Richard Newport said, "This administration's strong actions in addressing unfair global trade issues, including the Section 232 tariffs, have strengthened our industry. However, global overcapacity, particularly from China, remains a systemic problem. This, along with recent announcements of new steelmaking capacity and the restart of existing mills, will create more competition in the commodity steel market in the United States. ...Thus in this environment, we ultimately concluded that a restart of the Ashland plant operations would not enhance our earnings profile or provide an adequate return to our investors over the long term."

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