Nucor’s Waiting for ‘Christmas Gift’ from Trump Administration
Nucor and the Trump administration
Nucor’s (NUE) and Steel Dynamics’ (STLD) 3Q17 earnings lifted the broader steel space (SPY) (SPX). Other steel stocks, including US Steel Corporation (X), AK Steel (AKS), and ArcelorMittal (MT), closed with gains on October 19, 2017. Let’s look at some key takeaways from Nucor’s 3Q17 earnings call.
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Louisiana DRI plant
In its 3Q17 conference call, Nucor touched upon the issue of frequent outages at its Louisiana DRI (direct reduced iron) facility. According to Nucor, “In light of this unacceptable performance pattern, we are currently focused on developing a more holistic approach to achieving system-wide reliability at the plant.” The company also talked about “potential design and engineering modifications at Louisiana.”
Nucor also gave an update on its electrode costs. It’s worth noting that electrode prices have recently spiked on capacity curtailments in China. According to Nucor, it buys electrodes under contract prices, which should insulate the company from the recent price increase. It stated that it has electrode inventory until 1Q18. However, Nucor said it might see an increase in electrode costs in the second half of 2018.
Section 232 imports probe
Nucor also expressed optimism over the Section 232 imports probe that was ordered by the Trump administration earlier this year. Jim Frias, Nucor’s CFO (chief financial officer), noted during the 3Q17 call, “I’m still confident that President Trump will fulfill his commitments to our industry and that we will see 232 hopefully early part of next year absolutely may be there will be a nice Christmas gift to the industry and we will see at the end of this year.”
Notably, US steel imports have been rising this year. US steelmakers are banking on the Trump administration in their fight against what it believes to be illegally traded steel. Be sure to read Steel Could be the Trump Administration’s Biggest Test to find out how the Section 232 imports probe could impact the US steel industry.