Dive Brief:
- Steel giant Nucor’s revenue fell 15% year over year to $7.44 billion in Q3, according to its earnings report last week.
- The lackluster performance was driven by softening demand in manufacturing, construction and automotive markets, as well as elevated import levels for certain steel products, according to the report.
- The steelmaker expects a further drop in profits as prices are likely to continue to fall and seasonal volumes decline, EVP and CFO Steve Laxton said on the Q3 earnings call.
Dive Insight:
Nucor’s Q3 profit hit nearly $250 million, down 78% from 2023 and down 61% from the prior quarter. Laxton said the steel industry is grappling with lower realized pricing as demand decreases.
“The story is really imports, as [CEO Leon Topalian] touched on... fabricated structural imports have more than doubled since 2020. And that's really where we're seeing pressure on pricing,” EVP of Fabricated Construction Products Brad Ford said on the call.
The company’s steel mills and steep products segment earnings were down roughly 50% and 20%, respectively from Q2.
“For our tubular products, declining sheet prices have meant lower substrate costs, but this benefit has been offset by weaker tube pricing. Softer demand, additional new domestic supply and increased imports have combined to weigh on pricing and margins for tubular products,” Laxton said.
CEO Leon Topalian noted that the upcoming election may impact steel tariffs. Nucor has received bipartisan support on raising Section 232 steel tariffs and protecting American-made metal, but, more is needed to prevent imports from countries like China and Mexico, Topalian said on the call.
“While the broader U.S. economy continues to be resilient, decreased steel demand from several of our end-use markets, along with higher import volumes, has put pressure on our margins throughout the year,” Topalian said. “The Federal Reserve’s recent actions are a good start, but it will likely take more time, more rate relief and looser lending conditions before we start to see the flow-through effect in the construction, industrial and consumer durables market that are so impactful to steel demand.”
Specifically for China, the United States Trade Representative raised the tariffs to 10% and 25% on China-made steel and aluminum in April. China steel imports hit an all-year high in July at approximately 71,600 metric tons, according to the Interational Trade Administration.
Even amid the disappointing financial performance, Nucor executives highlighted several optimistic signs for realizing future demand in the industry. The CEO mentioned the steel infrastructure build-out needed for new factories funded by the CHIPS and Science Act will drive up demand, although the company hasn’t seen meaningful flow-through yet.
Laxton mentioned the Federal Reserve’s interest rate cut may lead to more stability in the new year.
“So we remain very excited about the potential as we move into 2025 and as we continue to see the interest rate cuts in the continued pace in that space that we are positioned well to take advantage of those opportunities,” he said.
Nucor is constructing two highly automated utility tower manufacturing facilities in Indiana set to be complete in 2025. The steelmaker is building a West Virginia $3 billion steel mill plant that’s expected to be finished by the end of 2026.
