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Nucor’s galvanized business strong; plant will operate 24 hours a day, add 3rd crew
The steel market remains lousy, said Nucor officials Tuesday, but not for galvanized steel made in Decatur.
The plant is adding a third crew and, beginning Monday, will operate 24 hours a day.
“Our galvanized business has been very strong for the last quarter and into the first quarter,” said John J. Ferriola, chief operating officer of steelmaking operations.
During the earnings call, no other products were described as “strong.” Executives variously described the steel market as “lousy,” challenging” and “weak.”
“Nucor Steel Decatur’s start-up of its new galvanizing line has been a great success,” Ferriola said of the facility, which began production in 2009.
“Surface quality of both galvanized and galvannealed product has been excellent. The third crew has already been trained and is ready to take the facility to a 24-hour-a-day, seven-day-a-week operating schedule beginning Feb. 1 in order to serve a strong first-quarter order book for galvanized steel.”
Local Nucor officials did not immediately return calls Tuesday.
Most of the market for galvanized steel is in automotives and appliances, Ferriola said.
Galvanizing and galvannealing are processes that use zinc to give steel a rust-resistant coating.
Decatur’s plant increased Nucor’s production capacity for galvanized steel by one-third, to 2 million tons.
Nucor Chief Executive Officer Dan DiMicco said some of the strength in galvanized demand is the result of a drop in imports.
While markets remain suppressed — Nucor earnings were down 44 percent in the fourth quarter compared to the same quarter last year — there were signs of improvement.
Ferriola said he is seeing “slow improvement” in demand for steel used in power transmission systems, wind energy, bridge construction and automotive assembly.
Exports important
DiMicco said exports are an increasingly important part of Nucor revenue, accounting for 11 percent of steel-mill shipments in 2009.
He said he hopes to push exports to 15 percent in 2010.
Decatur’s success in galvanized steel was one of the few shiny spots in a financial statement rusted by the economy.
Soft construction demand is causing most of Nucor’s problems.
Earnings for the three-month period ended Dec. 31 fell to $58.9 million, or 18 cents per share.
The company earned $105.9 million, or 34 cents per share, during the same period last year.
Revenue fell 29 percent to $2.94 billion, from $4.15 billion in the prior-year period.
The results topped analysts’ forecasts for a profit of 7 cents a share on revenue of $1.58 billion.
Turned profit
While below that of the previous year, Nucor at least turned a profit. It suffered losses in each of the first three quarters of 2009.
The company says it expects its most challenging markets will continue to be in construction. Nucor makes a variety of steel construction products, including bars, beams, steel joists and girders, concrete reinforcing steel, and wire.
For the full year, the company posted a loss of $293.6 million, or 94 cents per share, compared with earnings of $1.83 billion, or $5.98 per share, in 2008. Revenue shed 53 percent to $11.19 billion, down from $23.66 billion in the prior year.
Shipments increase
Nucor did not release detailed first-quarter guidance but said it expected a 5 percent increase in steel-mill shipments, higher sale prices and higher scrap costs.
“Real demand is in for a long, slow recovery,” DiMicco said, although he hopes to see an uptick in construction-related demand this summer.
DiMicco said the recession resulted from years — if not decades — of economic mistakes, most involving neglect of the manufacturing sector.
“The Orwellian failure of the new economy — the services-are-right, don’t-make-things approach — is now proven complete in its devastation and stupidity.”
Nucor shares closed Tuesday at $43.56, down 1.3 percent.
Automotive hopes
A major market for Nucor Steel Decatur is automotive assembly, and it is a market that is showing slight signs of recovery.
Improved sales last month have many automakers predicting improved sales in 2010. December sales were up 1.9 percent over a year earlier.
While overall U.S. sales of cars and light trucks declined 21 percent to 10.4 million in 2009, Hyundai reported an 8 percent annual gain and Kia gained almost 10 percent for the year. Auto dealerships reported a post-Christmas rush as buyers sought year-end bargains.
Analysts expect sales to rise to 11.5 million to 12 million this year.
Nucor’s strategy in building the galvanized line includes greater market share in the automotive market. With Alabama a growing automotive force and steel-shipping costs high, improvements in the auto market could help Nucor.
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