Steelmaker Nucor Evaluates Capital Projects as It Cuts Planned Spending

Researched by Industrial Info Resources (Sugar Land, Texas)--Like other companies, steelmaker Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina) is taking some hits from the COVID-19 pandemic, but executives at the company seem relatively upbeat about the future. In all the U.S. regions where Nucor operates, its operations have been deemed essential services, allowing the company to continue supplying undertakings such as military and hospital construction.

Demand in certain sectors is down, however. In the company's quarterly earnings conference call on Tuesday, Chief Executive Officer Leon Topalian said, "The coronavirus pandemic's impact to our overall business has been varied. Automotive and oil and gas end-use markets have been the most severely impacted, while demand for nonresidential construction projects continues to be quite strong. Our facilities serving these construction applications continue to operate at high utilization rates. We are well-positioned to weather the economic downturn and emerge from it poised to grow again once it's behind us."

The company has reduced its capital spending plans due to COVID-19. Topalian said, "Nucor is currently evaluating all of our capital projects across the enterprise to determine which projects will continue to move forward, which projects we will pause as we assess the depth and severity of the pandemic and oil crisis facing our globe, and finally those projects that we will redirect to another time." While Topalian did not specify projects that could be delayed, a company press release said that Nucor had decided to delay capital projects that have not begun. The company's initial capital spending plans in 2020 was $2 billion, but it now estimates it will spend less than $1.5 billion. In the conference call's question and answer session, Chief Financial Officer Jim Frias said it was too early to make plans for 2021.

Among the company's projects planned to kick off in the near future has been the $1.35 billion grassroot steel plate mill in Brandenburg, Kentucky, which was set to begin construction this summer. The 1.2 million-ton-per-year facility would produce cut-to-length, coiled, heat-treated and discrete plates ranging in width from 60 to 160 inches and in gauges from 3/16 of an inch to 14 inches. The original completion date for the project was set for first-quarter 2022. For more information, see Industrial Info's project report.

Also planned to begin construction this summer was the addition of an electric arc furnace at Nucor's thin slab steel mill in Ghent, Kentucky, to increase production capacity to 3 million tons per year and allow the mill to produce coils up to 73 inches wide. For more information, see Industrial Info's project report.

Projects currently underway that Industrial Info has confirmed have been delayed because of the pandemic include a $90 million raw materials handling and storage operation at Nucor's direct reduced iron plant in Convent, Louisiana, which has been delayed for 60 to 90 days. Construction kicked off in the first half of last year, and the completion date has been moved closer to the end of the year. For more information, see Industrial Info's project report.

Nucor reported first-quarter 2020 net earnings of $20.3 million, compared with $501.8 million in the prior-year quarter. Included in the just-passed quarter were writedowns on assets of $287.8 million related to equity investments in Italy.

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