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Shipments, Steel Prices Damage Nucor’s 1Q15 Profits

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Nucor’s 1Q15 profits

Nucor (NUE) reported its earnings on April 23. Earnings registered a 38% drop in profits on a year-over-year (or YoY) basis. What factors negatively impacted Nucor’s 1Q15 profits? We’ll take a close look in this part of the series.

Steel Dynamics (STLD) also posted lower profits in 1Q15. Steel prices in the United States have corrected over the last couple of years. Compared to 4Q14, Nucor’s average selling price dropped $70 per ton for plate and $67 per ton for beams.

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Fall in steel prices

The fall in spot steel prices is even more severe. Spot prices of hot rolled coils, regarded as a benchmark for steel products, have dropped by almost a quarter this year. However, since steel companies have most of their sales tied to contract customers, the impact of the decline in steel prices is offset to some extent.

U.S. Steel (X) is expected to release its 1Q15 earnings on April 28. Its average selling price could also come down in line with its peer companies. X currently forms 3.24% of the SPDR S&P Metals and Mining ETF (XME). Cliffs Natural Resources (CLF) forms 2.7% of XME.

Lower shipments

Nucor’s 1Q15 revenues dropped ~14% on a YoY basis as both steel shipments and average selling prices came down. You can see this in the above chart. In 1Q15, US steel production has declined more than 6% on a YoY basis. Steel demand from most end users, with the notable exception of the energy sector, has been strong.

Nucor’s sheet mill shipments in 1Q15 dropped 14% compared to the previous quarter. This is the largest ever quarter-over-quarter decline for Nucor. Overall, Nucor’s steel shipments dropped 8% on a quarter-over-quarter basis.

In the next part, we’ll take a closer look at Nucor’s 1Q15 earnings.

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