Nucor

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This morning in metals news, Nucor announced a major project at its Bourbonnais, Illinois plant, Aleris has a new automotive sheet facility in Kentucky and Chinese automotive sales drop in October.

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Nucor Announces Plant Expansion in Illinois

Nucor is building a merchant bar mill at its plant in Bourbonnais, Illinois plant, the company announced Wednesday.

The full-range merchant bar quality (MBQ) mill will have an annual capacity of 500,000 tons and is expected to cost $180 million, according to the Nucor release. The project will take approximately two years to complete.

“This new MBQ mill is right in line with our long-term strategy for profitable growth. It takes advantage of our position as a low-cost producer to displace tons currently being supplied by competitors outside the region. It also builds on our market leadership position by further enhancing our product offerings of merchant bar, light shapes and structural angle and channel in markets in the central U.S.,” said John Ferriola, chairman, CEO and president of Nucor.

“Combined with our other full-range bar mills, we are now strategically located to supply all markets with high-quality bar products and exceptional service.”

Aleris Announces New Automotive Sheet Facility

Aleris opened a new automotive body sheet facility in Lewisport, Kentucky, the company announced.

The project represents a $400 million investment, according to the Aleris release.

Chinese October Automotive Sales Fall

According to data from the Chinese Association of Automobile Manufacturers (CAAM), yearly sales are up, while sales for October dipped from the previous month.

According to CAAM, In October, the production and sales of automobiles in China reached 2,604,000 and 2,704,000 units, respectively, down 2.5% and 0.2% from September. Meanwhile, production and sales were up 0.7% and 2% year-on-year.

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For the first 10 months of 2017, the production and sales of automobiles were 22,957,000 and 22,927,000 units, respectively, up 4.3% and 4.1% year-on-year.

misunseo/Adobe Stock

Before we head into the weekend, let’s take a look back at the week that was.

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  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

Free Download: The October 2017 MMI Report

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Although we have entered the fourth quarter of 2017, it’s the time of year during which companies update shareholders and other interested entities on their third-quarter performance.

Alcoa and Nucor were among the latest metals companies to announce their third-quarter earnings (on Wednesday and Thursday, respectively).

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Alcoa, which specializes in bauxite, alumina and aluminum products, reported third-quarter net income of $132 million, or $0.72 per share.

The company also posted $2.96 billion in third-quarter revenue, up from $2.86 billion in the second quarter.

The company raised its 2017 outlook for adjusted EBITDA  — or earnings before interest, tax, depreciation and amortization — to $2.4 billion, up from a previous estimate of $2.1 billion to $2.2 billion.

“Alcoa continues to benefit from favorable commodity markets, and we’ve raised our projections for profitability in 2017 and global aluminum demand growth for the balance of the year,” said Roy Harvey, president and chief executive officer, in a company release announcing the third-quarter earnings. “We continued to execute on our three strategic priorities — our strong cash generation aligns with our priority to strengthen the balance sheet, while our recent Rockdale announcement advances our priorities to reduce complexity and drive returns.”

The company is approaching a milestone, having initiated its run as an independent, publicly traded firm on Nov. 1, 2016.

“As we approach our first anniversary as an independent, publicly-traded company, we’ll continue to be guided by our three strategic priorities to further strengthen our Company and Alcoa’s foundation for the future,” Harvey said.

The company’s EBITDA got a boost earlier this month when Alcoa announced the termination of a power contract tied to its Rockdale Operations — fully curtailed since 2008 — in Texas. According to the release, beginning in the fourth quarter the termination is expected to result in an additional $60 million to $70 million in annual net income and adjusted EBITDA.

Growth in the aluminum market has added wind to the firm’s sails. As for supply, Alcoa expects the global market to be balanced for 2017, departing from its second-quarter projection of a slight surplus surplus.

“The improvement is mostly due to planned and actual curtailments in Chinese smelting capacity as well as increased Chinese demand,” the Alcoa release states.

Nucor Earnings Drop From Previous Quarter, But YTD Earnings Highest Since 2008

Nucor, meanwhile, announced Thursday consolidated net earnings of $268.5 million, or $0.83 per diluted share, for the third quarter of 2017. In the second quarter of this year, Nucor reported earnings of $323.0 million, or $1.00 per diluted share. As for the third quarter of 2016, it reported earnings of $305.4 million, or $0.95 per diluted share.

However, earnings through the first nine months of this year exceed those of the same time frame of every year since 2008, according to Jim Frias, Nucor’s chief financial officer.

For the period of January-September, Nucor reported consolidated net earnings of $948.4 million, or $2.94 per diluted share, compared with consolidated net earnings of $636.6 million, or $1.99 per diluted share, for the first nine months of last year.

“Nucor’s disciplined strategy for profitable growth is working,” Frias said during Nucor’s third-quarter earnings call on Thursday. “During the steel industry’s protracted downturn, we have invested aggressively to increase our capabilities for delivering value to our customers and profitable growth for our shareholders.”

Frias added that the third-quarter earnings decline from the previous quarter is largely attributable to lower capacity utilization rates and metal margins in its steel segment, in addition to an unplanned outage at its Louisiana DRI plant, which began in late July before operations resumed earlier this month.

Looking ahead, Frias said they see stable or improving conditions in a number of markets for 2018, including non-residential construction, automotive, energy, heavy equipment and agriculture.

“Although illegally traded imports remain at unacceptable levels, we are encouraged by the cumulative benefits of the U.S. steel industry’s successful trade cases,” Frias added.

Similarly, Chairman and CEO John Ferriola touched on this year’s “renewed surge of illegally traded imports into the U.S.,” citing the 27% year-to-date market share for finished steel imports.

“Nucor continues to believe significant work remains to be done to achieve free and fair trade for U.S. manufacturers,” Ferriola said. “More specifically, it’s time for comprehensive and broad-based remedies that address the illegal foreign trade practices that have materially weakened our nation’s economic vitality.”

He also added that Nucor applauds the U.S. International Trade Commission’s affirmative ruling Oct. 5 regarding washing machine imports (stemming from a petition filed by Whirlpool). A public hearing on remedies with respect to the case was held yesterday, Oct. 19.

In other company developments, last month Nucor announced its board of directors had approved a new steel bar micro mill project. Nucor is considering the states of Nebraska, Kansas, Missouri, South Carolina and Florida for the project.

Free Download: The October 2017 MMI Report

Other metals companies also have earnings announcements on the horizon. AK Steel will announce its third-quarter earnings Oct. 31.  U.S. Steel‘s third-quarter earnings call is scheduled for 8:30 a.m. EDT on Nov. 1.

The steel market is doing rather well, particularly in the U.S., but an improvement in demand is helping lift earnings in Europe, too.

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The phrase “a rising tide lifts all boats” is probably true of steel companies — it is also true to say it doesn’t lift all boats equally.

ArcelorMittal, part way through a major re-structuring program to re-focus the business on value add growth areas and exit less attractive market segments, is doing rather well judging by both the share price and recent reporting.

The Northwest Indiana Times reported last week that the world’s largest steelmaker grew its second-quarter profit by 19% to $1.3 billion, lifting its first-half profit to $2.3 billion (compared to just $696 million during the same period in 2016).

Demand in the U.S. — though it has been impacted by imports, the firm claims — was high, as the firm shipped 21.5 million tons of steel in the second quarter, a 2% increase over the first quarter. So far this year, however, its steel shipments in H1 declined by 2.4% to 42.5 million tons compared to the year before.

So, margins are up but volumes are down. North American shipments dropped 3.4% to 5.4 million tons and crude steel production fell 7.3% to 5.8 million tons, the Northwest Indiana Times reports. Yet, with sales prices up 5.7%, sales values were up 3.3% to $4.6 billion in North America, leading to much-improved profits.

Even U.S. Steel is doing better. CEO Dave Burritt said U.S. Steel saw “higher prices and volumes in all of our segments.” Burritt also said management believes that if the steel market continues going as it is currently, it could earn as much as $1.70 per share this year – adding the caveat that unfortunately it doesn’t see the market continuing in the same manner for the rest of the year.

Analysts are questioning whether the present share value is justified, suggesting after falling some 30% already this year it could have further to go.

Analysts such as Citi see major “downside” in 2018 and 2019 to U.S. Steel’s share price, predicting a loss for the year even though the first half has been relatively (for U.S. Steel) strong.

Waning Optimism and What Comes Next

Some steel sector share prices were boosted earlier this year by the hope President Trump would pump billions into infrastructure. Then, as hopes faded for that outcome, they got a sugar rush from the prospect of trade measures to curb imports of foreign steel.

But the Motley Fool, quoting the Wall Street Journal last week, reported comments by the president suggesting he was kicking trade action into the long grass.

Trump said he does not want to impose tariffs and quotas on imported steel “at this moment.” Objections from trade partners (who don’t want their exports curbed), and from domestic steel users as well (who like the idea of cheap foreign steel) are sapping the administration’s support for the trade action. It’s hardly surprising, but until recently the steel lobby had been putting a powerful case for action, and it took time for counterarguments to gain traction.

The president went on to say that instead of imposing sanctions “very soon,” as the steel industry was hoping, his staff will need to do “statutory studies … addressing the steel dumping” issue. And while the president promised action “fairly soon,” he also said the administration plans to address health-care reform, tax reform, and may even want to get an infrastructure bill passed by Congress before returning to the steel issue.

So, for the time being, forget about it — “he has other fish to fry” seems to be the position.

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Without curbs to imports, the view for steel companies’ profits remaining robust becomes less compelling.

Companies like Nucor and Arcelor will continue to do well, but others, like U.S. Steel and AK Steel, will struggle later this year and into 2018.

Those not involved in the steel industry tend to look at large, integrated blast furnace steel plants as dated technology light-years from the gleaming glass and concrete operations of IT or electronics. However, steelmakers are constantly striving for technological improvements.

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In fact, the very marginal nature of steel production in the western world means that constant innovation is a necessity for a firm’s survival. Comparisons between U.S. Steel and Nucor Corp. illustrate this point. When U.S. Steel was focused on cost reduction and rationalization at the turn of the century, Nucor was innovating and investing not just in alternative electric arc furnaces, but in direct casting and other downstream technologies. As a result, Nucor is now North America’s most successful steel company but they’re not alone in looking to technology for their future prosperity.

Continuous Casting

An interesting article in the Economist details efforts at a number of steel producers around the world to find a better alternative to the traditional blast furnace. The slab casting and re-rolling route is epitomized by the likes of U.S. Steel and the major Asian steel mills. For years, the only real challenger to this process was the electric arc furnace which enjoys the benefits of scrap as a raw material and greater flexibility and economies of scale allowing it to operate profitably on a fraction of the cost required throughout for a traditional blast furnace-based integrated steel plant.

Liquid steel.

Innovation in steelmaking is coming from novel uses of liquid metal. Source: Adobe Stock/Photollug.

One of the major attractions most EAF plants have is that they produce final product by the continuous casting route. The liquid metal is taken from the refining vessel and, for flat-rolled products, continuously cast into 80-120-mm thick slabs, which can then be further rolled to thinner gauges. Read more

President Donald Trump has formed a manufacturing jobs initiative, one that will include executives from Ford Motor Co., Dow Chemical, U.S. Steel Corp. and others.

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Part of Trump’s overall jobs creation agenda, the project will involve ongoing meetings between the president and business leaders to “share their experiences and gain their insights.” According to a press release, Trump will call on the executives listed for perspectives on “how to best promote job growth and get Americans back to work again.”

Many of the executives listed as part of the initiative met with Trump on his first full day in office on Monday: Dow’s Andrew Liveris, Dell Computer‘s Michael Dell, Under Armour‘s Kevin Plank, Tesla Motors‘ Elon Musk Lockheed Martin‘s Marillyn Hewson, Klaus Kleinfeld of Arconic, Inc. and Nucor Corp.‘s John Ferriola. Scott Paul, President of the trade association the Alliance for American Manufacturing and union leaders Richard Trumka and Thea Lee, both executives in the leadership of the AFL-CIO, are also in initiative.

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Press Secretary Sean Spicer said at a press briefing on Monday that the group will meet next month and then going forward on a quarterly basis.

Here’s the full list of Trump’s manufacturing jobs initiative members:

  • Andrew Liveris, The Dow Chemical Company
  • Bill Brown, Harris Corporation
  • Michael Dell, Dell Technologies
  • John Ferriola, Nucor Corporation
  • Jeff Fettig, Whirlpool Corporation
  • Mark Fields, Ford Motor Company
  • Ken Frazier, Merck & Co., Inc.
  • Alex Gorsky, Johnson & Johnson
  • Greg Hayes, United Technologies Corp.
  • Marilynn Hewson, Lockheed Martin Corporation
  • Jeff Immelt, General Electric
  • Jim Kamsickas, Dana Inc.
  • Klaus Kleinfeld, Arconic
  • Brian Krzanich, Intel Corporation
  • Rich Kyle, The Timken Company
  • Thea Lee, AFL-CIO
  • Mario Longhi, U.S. Steel
  • Denise Morrison, Campbell Soup Company
  • Dennis Muilenburg, Boeing
  • Elon Musk, Tesla
  • Doug Oberhelman, Caterpillar
  • Scott Paul, Alliance for American Manufacturing
  • Kevin Plank, Under Armour
  • Mchael Polk, Newell Brands
  • Mark Sutton, International Paper
  • Inge Thulin, 3M
  • Richard Trumka, AFL-CIO
  • Wendell Weeks, Corning

The Department of Commerce issued final anti-dumping and subsidy orders on Thursday, affirming and adding on to initial tariffs on cold-rolled steel flat products from Brazil, India, Korea, Russia, and the U.K. The duties are already in effect and will remain so for five years to counteract dumping and government subsidization.

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Commerce determined that imports of cold-rolled steel from Brazil, India, Korea, Russia, and the U.K. have been sold in the U.S. at dumping margins of 14.43% to 35.43%, 7.60%, 6.32% to 34.33%, 1.04% to 13.36%, and 5.40% to 25.56%, respectively. Commerce also determined that imports of cold-rolled steel from Brazil, India, Korea, and Russia have received countervailable subsidies of 11.09% to 11.31%, 10%, 3.91% to 58.36%, and 0.62% to 6.95%, respectively.

Some producers in Brazil were hit with 46.5% total duties while some producers in the U.K. will only receive 6.02% tariffs, which will continue to be collected by Customs and Border Protection upon import into the U.S. One producer in the Republic of Korea was hit with 64.62% total duties on cold-rolled imports.

Brazil Investigation

Brazil’s Usiminas Siderurgicas de Minas Gerais did not respond to all of Commerce’s requests for information and, therefore, Commerce calculated a final dumping margin based on adverse facts available of 35.43% and levied 11.09% countervailing duties on the company for a total penalty of 46.52% tariffs.

Korea Investigation

In the Korea anti-dumping investigation, Commerce found that dumping had occurred by mandatory respondents POSCO/Daewoo International Corporation and Hyundai Steel Corporation at dumping margins of 6.32% and 34.33%, respectively. Commerce calculated a final dumping margin of 20.33% for all other producers/exporters in Korea.

What’s interesting about this investigation is that while Commerce calculated a final subsidy rate of 3.91% for Hyundai Steel, the second mandatory respondent, POSCO, was unable to confirm certain key elements of its response when the Commerce team conducted verification at its headquarters in Korea. Therefore, Commerce calculated a subsidy rate based on adverse facts available of a whopping 58.3% meaning that POSCO gets a total anti-dumping/countervailing duties tariff of 64.62%. Commerce calculated a final subsidy rate of 3.91% for all other producers/exporters in Korea.

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The successful petitioners for these investigations were AK Steel Corporation, ArcelorMittal USA, Nucor Corporation, Steel Dynamics, Inc., and United States Steel Corporation.

Today, the Commerce Department announced its affirmative preliminary determinations in the countervailing duty investigations of imports of cold-rolled steel flat products from Brazil, China, India, and Russia, and its negative preliminary determination in the CVD investigation of imports of cold-rolled steel flat products from South Korea.

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The investigations cover cold-rolled, flat-rolled steel products. It should come as no surprise that the largest subsidies are being assigned to Chinese importers.

Chinese Imports Take a Hit

In the China investigation, Commerce preliminarily determined that mandatory respondents Angang Group Hong Kong Co., Ltd. and Benxi Iron and Steel (Group) Special Steel Co., Ltd. and, a non-cooperative exporter — Commerce’s term for companies that do not respond to requests for information in the investigation — Qian’an Golden Point Trading Co., Ltd., received whopping subsidy rates of 227.29%.

steel coil processing machine inside of steel  plant

Imports of cold-rolled steel from the China, Brazil Russia and India will now have countervailing duties collected upon import into the US. Source: Adobe Stock/icarmen13.

All other exporters of cold-rolled steel flat products from China will be subject to that same subsidy rate of 227.29%. The rates are based on adverse facts available. Commerce determined that the Government of the People’s Republic of China, and the mandatory respondents, did not fully cooperate in the investigation.

Read more

United States Steel Corporation’s CEO Mario Longhi made the media rounds recently, evangelizing U.S. Steel’s – and most of the domestic industry’s – key plank in their policy platform: creating a globally fair playing field when it comes to international trade.

He showed up on Maria Bartiromo’s show, denouncing unfair subsidies in foreign economies and tariffs on certain US imports into countries such as China.

mario longhi us steel

Screenshot from video of Maria Bartiromo’s interview with Mario Longhi. Source: Fox Business.

He also spoke to Politico about the granting of “market economy” status to China next year, which would change how the Commerce Department determines anti-dumping duties on Chinese goods, including steel.

RELATED: MetalTalk! Podcast Episode 1 – ‘Dumping 101’

As you may know, China is pushing a bunch of steel beyond its borders. As my colleague Stuart Burns reports, while China’s steel production may have dropped, its exports have risen. In the first 8 months of this year, product exports reached 71.87 million metric tons, up 26.5% compared to the same period of 2014.

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In fact, the China Iron and Steel Association’s vice chairman is quoted as saying that this year, the country will export more than 100 mmt of steel – that’s equivalent to more than the entire production of North America. Or nearly as much, purely in exports, as the next largest producer, Japan, produces both for domestic and export combined, according to Burns.

Read more

John Correnti, an American steel executive who helped shift the domestic industry geographically and technologically, died Tuesday in Chicago.

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Correnti, 68, was chairman, founder and chief executive officer of Big River Steel LLC and was in Chicago for a board meeting of Navistar International Corp., the company said in a statement. The cause of death was not immediately provided.

Correnti was leading Big River Steel to build a $1.3 billion mill in Osceola, Ark., near the Mississippi River. The facility is planned to supply high-quality steel products to customers including automakers and energy companies.

Correnti served as CEO of Nucor Corp. from 1996 to 1999 and helped move the US steel industry away from its regional roots by expanding its reach to the South. Correnti also opened a steel mill for Severstal in Mississippi which was later sold to Steel Dynamics.

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Big River Steel released a statement saying, “Big River Steel will be one of many legacies John leaves with us all. John was a visionary, an innovator and a leader who dedicated his career to improving the steel industry and creating opportunities for those that worked within it.”

USW, ATI Digging in For Long Lockout

Picket lines staffed by locked out union workers appeared at several Allegheny Technologies, Inc. facilities this week. ATI has vowed to staff the plants with management and replacement workers and the United Steelworkers of America personnel locked out will be eligible for unemployment benefits during the lockout.

The two sides disagree about healthcare contributions for the union workers.