Steelmakers Pour On More Investments, Shaking Off Economic Concerns
Major steel companies this week turned in quarterly results that were mostly better than expected, after steel prices rose sharply in spring because of the war in Ukraine. While prices have retreated in recent weeks, steel executives said demand isn’t deteriorating.
“Right now, in our order book, we don’t see it,” said
Mark Millett,
chief executive of
Steel Dynamics Inc.
STLD -5.84%
Steel Dynamics and
Nucor Corp.
NUE -6.74%
are major suppliers of steel to the construction sector, where projects such as warehouses, data centers and other commercial buildings have been driving demand for more steel. The sector also is expected to get a further boost from increased federal spending on infrastructure projects like roads and bridges.
“Nonresidential construction has been one of our most resilient markets,” said
Al Behr,
Nucor’s vice president of plate and structural products. “We would expect that to continue in 2023.”
The companies supply a variety of manufactured steel construction products, including steel decking and building joists. Second-quarter profit from Steel Dynamics’ fabrication unit, which produces its building products, was nearly $600 million, up from $28.4 million a year earlier, as sales rose to $1.1 billion from $330.9 million.
A Nucor steel mill in Sedalia, Mo.
Photo:
lawrence bryant/Reuters
Steel companies over the past year have generated strong profits as companies increased production and prices amid depleted inventories, and surging demand for consumer items like appliances. Investors, however, have grown concerned about a potential economic slowdown diminishing demand for steel. Shares for Steel Dynamics and Nucor have both fallen 25% over the past three months, while
Cleveland-Cliffs Inc.
CLF -8.87%
is down 46%, according to FactSet.
United States Steel Corp.
X -2.95%
, shares of which have fallen 41% in three months, is scheduled to report quarterly results July 28.
Cleveland-Cliffs CEO
Lourenco Goncalves
on Friday played down the threat of a recession and higher interest rates weighing on auto demand, arguing that supply-chain problems and Covid-19-related production outages over the past two years have left the vehicle market undersupplied.
“The automotive industry could have produced 8 million to 10 million more vehicles than they actually did over the past two years,” he said. “Pent-up demand for cars, trucks and SUVs has developed.”
Mr. Goncalves said he is counting on accelerating auto production in North America to boost sales and profit for the steelmaker, which is the auto industry’s largest steel supplier. He said Cleveland-Cliffs is positioned to benefit from greater production of electric vehicles, because it is a large producer of the specialized steel used in electric motors.
“In the second half of 2022, we expect to get more automotive volume,” he told analysts Friday.
North Carolina-based Nucor stepped up its investments in building products by acquiring C.H.I. Overhead Doors last month from private-equity firm
Kohlberg Kravis Roberts
& Co. LP for $3 billion. The company, which supplies overhead doors for garages and industrial buildings, expands Nucor’s lineup in building products, Mr. Topalian said.
With a pair of acquisitions last month of Pennsylvania-based steel pole manufacturers Summit Utility Structures LLC and Sovereign Steel Manufacturing LLC, Nucor established a new business unit to supply towers and structures for the utility, transportation and telecommunication industries.
Steel Dynamics, which is ramping up production at a new $2 billion steel mill in southern Texas, jumped into the aluminum industry this week with a plan to build an aluminum rolling mill in the southeastern U.S. The $2.2 billion project will feature a rolling mill, with an annual capacity to produce 650,000 metric tons of aluminum sheet, and two satellite plants, including one in Mexico, that will melt aluminum scrap harvested by Steel Dynamics’ metals recycling unit. The company hasn’t yet announced the plants’ locations.
Indiana-based Steel Dynamics said 80% of the new mill’s shipments will go to beverage can manufacturers and the automotive industry, where lightweight aluminum is replacing steel, especially on electric-powered vehicles. Aluminum producers lately have been adding capacity in the U.S.
Steel Dynamics, which expects the new mill to start operating in 2025, predicted the aluminum business will generate $650 million to $700 million a year in pretax profit. Steel Dynamics said it intends to fund the project with cash.
“Aluminum has been on our radar for many years,” Mr. Millett said. “The growing North American supply deficit in aluminum flat rolled makes this an ideal time to penetrate the market. I believe it’s low risk.”
Write to Bob Tita at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Major steel companies this week turned in quarterly results that were mostly better than expected, after steel prices rose sharply in spring because of the war in Ukraine. While prices have retreated in recent weeks, steel executives said demand isn’t deteriorating.
“Right now, in our order book, we don’t see it,” said
Mark Millett,
chief executive of
Steel Dynamics Inc.
STLD -5.84%
Steel Dynamics and
Nucor Corp.
NUE -6.74%
are major suppliers of steel to the construction sector, where projects such as warehouses, data centers and other commercial buildings have been driving demand for more steel. The sector also is expected to get a further boost from increased federal spending on infrastructure projects like roads and bridges.
“Nonresidential construction has been one of our most resilient markets,” said
Al Behr,
Nucor’s vice president of plate and structural products. “We would expect that to continue in 2023.”
The companies supply a variety of manufactured steel construction products, including steel decking and building joists. Second-quarter profit from Steel Dynamics’ fabrication unit, which produces its building products, was nearly $600 million, up from $28.4 million a year earlier, as sales rose to $1.1 billion from $330.9 million.
A Nucor steel mill in Sedalia, Mo.
Photo:
lawrence bryant/Reuters
Steel companies over the past year have generated strong profits as companies increased production and prices amid depleted inventories, and surging demand for consumer items like appliances. Investors, however, have grown concerned about a potential economic slowdown diminishing demand for steel. Shares for Steel Dynamics and Nucor have both fallen 25% over the past three months, while
Cleveland-Cliffs Inc.
CLF -8.87%
is down 46%, according to FactSet.
United States Steel Corp.
X -2.95%
, shares of which have fallen 41% in three months, is scheduled to report quarterly results July 28.
Cleveland-Cliffs CEO
Lourenco Goncalves
on Friday played down the threat of a recession and higher interest rates weighing on auto demand, arguing that supply-chain problems and Covid-19-related production outages over the past two years have left the vehicle market undersupplied.
“The automotive industry could have produced 8 million to 10 million more vehicles than they actually did over the past two years,” he said. “Pent-up demand for cars, trucks and SUVs has developed.”
Mr. Goncalves said he is counting on accelerating auto production in North America to boost sales and profit for the steelmaker, which is the auto industry’s largest steel supplier. He said Cleveland-Cliffs is positioned to benefit from greater production of electric vehicles, because it is a large producer of the specialized steel used in electric motors.
“In the second half of 2022, we expect to get more automotive volume,” he told analysts Friday.
North Carolina-based Nucor stepped up its investments in building products by acquiring C.H.I. Overhead Doors last month from private-equity firm
Kohlberg Kravis Roberts
& Co. LP for $3 billion. The company, which supplies overhead doors for garages and industrial buildings, expands Nucor’s lineup in building products, Mr. Topalian said.
With a pair of acquisitions last month of Pennsylvania-based steel pole manufacturers Summit Utility Structures LLC and Sovereign Steel Manufacturing LLC, Nucor established a new business unit to supply towers and structures for the utility, transportation and telecommunication industries.
Steel Dynamics, which is ramping up production at a new $2 billion steel mill in southern Texas, jumped into the aluminum industry this week with a plan to build an aluminum rolling mill in the southeastern U.S. The $2.2 billion project will feature a rolling mill, with an annual capacity to produce 650,000 metric tons of aluminum sheet, and two satellite plants, including one in Mexico, that will melt aluminum scrap harvested by Steel Dynamics’ metals recycling unit. The company hasn’t yet announced the plants’ locations.
Indiana-based Steel Dynamics said 80% of the new mill’s shipments will go to beverage can manufacturers and the automotive industry, where lightweight aluminum is replacing steel, especially on electric-powered vehicles. Aluminum producers lately have been adding capacity in the U.S.
Steel Dynamics, which expects the new mill to start operating in 2025, predicted the aluminum business will generate $650 million to $700 million a year in pretax profit. Steel Dynamics said it intends to fund the project with cash.
“Aluminum has been on our radar for many years,” Mr. Millett said. “The growing North American supply deficit in aluminum flat rolled makes this an ideal time to penetrate the market. I believe it’s low risk.”
Write to Bob Tita at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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