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Nucor (NUE) to Build $1.35B Steel Plate Mill in U.S. Midwest

Anindya Barman

Nucor Corporation’s NUE board has authorized it to build a new state-of-the-art plate mill in the U.S. Midwest. The steel giant plans to spend $1.35 billion to construct the mill which is expected to have a capacity to produce 1.2 million tons of steel plate products annually. The project is expected to create around 400 full-time jobs.

The new plate mill, which is expected to be fully operational in 2022, will make cut-to-length, coiled, heat-treated, and discrete plate ranging from 60-160 inches wide and in gauges from 3/16 of an inch to 14 inches in thickness.

The mill will allow Nucor to supply plate products that it does not presently offer. The company currently operates plate mills in North Carolina, Alabama and Texas. Nucor is currently evaluating locations for the new mill and expects to select a site early this year.  

Midwest is the biggest plate-consuming area in the United States. The new mill will strengthen the company’s ability to serve customers in the Midwest and boost its position in steel plate products.

Nucor noted that the investment is in sync with its commitment to deliver sustainable and profitable growth along with superior returns to stockholders. The company also said that the Trump administration’s trade actions on imported steel and tax reform have provided it the confidence to make this investment.

American steel makers including Nucor are benefiting from higher domestic steel prices courtesy of trade actions. Broad-based tariffs which the Trump administration imposed on imported steel under Section 232 of the Trade Expansion Act of 1962 are also boosting production capacity of domestic steel makers amid lower imports.

Nucor is significantly investing in a number of expansion programs to beef up capacity. It has invested around $230 million to add an additional cold mill in Arkansas. It is also spending $240 million in a new galvanizing line at its sheet mill in Arkansas that will have an annual capacity of around 500,000 tons.

Moreover, Nucor is investing $650 million for expansion of the production capability of its flat-rolled sheet steel mill, Nucor Steel Gallatin, in Kentucky. The move will enhance the production capability of the plant to roughly 3,000,000 tons from 1,600,000 tons annually.

Nucor’s shares have lost 21.2% in the past year, outperforming the industry’s 31.3% decline.


 

Nucor, in December 2018, said that it expects earnings per share in the band of $1.90-$1.95 for the fourth quarter. This reflects a decline from $2.13 in the third quarter but an increase from $1.20 in the year-ago quarter. The results in the year-ago quarter include a net benefit of $175.2 million or 55 cents per share associated with the impacts of U.S. federal tax legislation.

For 2018, Nucor expects record annual earnings in the range of $7.25-$7.30 per share, marking an increase of roughly 22% from the earlier record earnings of $5.98 registered in 2008.

Per the company, strong economic conditions in the United States resulting from regulatory and tax reforms supported earnings. The company also noted that the tariffs imposed under Section 232 have been a major tailwind contributing to 2018 earnings. Nucor also continues to witness strong demand and higher average prices on year-over-year comparison basis across most products.

Nucor Corporation Price and Consensus

 

Nucor Corporation Price and Consensus | Nucor Corporation Quote

Zacks Rank & Stocks to Consider

Nucor currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks worth considering in the basic materials space include Ingevity Corporation NGVT, Quaker Chemical Corporation KWR and Cameco Corporation CCJ.

Ingevity has an expected earnings growth rate of 21.5% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have gained 14% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Quaker Chemical has an expected earnings growth rate of 21.1% for the current year and carries a Zacks Rank #2 (Buy). Its shares have gained 20% in the past year.

Cameco has an expected earnings growth rate of 20% for the current year and carries a Zacks Rank #2. The company’s shares have rallied 25% over the past year.

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