Nucor expects larger slice of smaller auto market

North Carolina-based steelmaker Nucor expects to increase its steel deliveries into the auto market by 25pc even as auto sales appear to be shrinking this year.

Nucor chief executive John Ferriola said he expects the company to increase shipments to auto manufacturers and suppliers, known as original equipment manufacturers (OEMs), to increase from 1.6mn st currently to 2mn st by the end of the year. That is expected as the auto market is set to contract by upward of 400,000 vehicles this year to around 16.8mn in 2019, according to industry estimates

Ferriola pointed to investments in a cold mill at the company's Hickman, Arkansas, mill and the expansion of the Gallatin facility to double production to 3mn st/yr and separately is adding a 500,000st/yr galvanized hot-band line.

Ferriola attributed falling finished steel prices on continued high inventories, customers waiting to see where prices end up, and new or restarted mills undercutting the market.

Nucor's shipments fell to 5.99mn st in the first quarter, a 4.5pc decrease compared to the 6.27mn st it shipped in the same period of 2018. The company said bad weather added to delays in shipments.

The biggest drop was in Nucor's bars segment, where shipments fell by 11pc to 2mn st from 2.24mn st in the prior year.

Sheet shipments fell by 2pc to 2.64mn st from 2.7mn st in the prior year. Structural shipments fell to 564,000st, a 6.2pc drop from the 601,000st shipped in the first quarter of 2018, while plate shipments rose by 1.7pc to 606,000st from a year ago.

First quarter averages sales price per ton rose by 13pc year-over-year and fell by 4pc compared to the fourth quarter. Nucor did not release specific average sales pricing for the first quarter, but first quarter 2018 average sales price was $717/st, while fourth quarter pricing was $860/st. A 4pc drop from the fourth quarter would put first quarter 2019 pricing around $826/st.

The Argus US hot-rolled coil assessment averaged $696/st for the first quarter, down from $795/st in the fourth quarter 2018, as demand has slackened and price increases from US steelmakers failed to hold.

Nucor's average scrap and scrap substitute price increased by 4pc year over year to $352/st in the first quarter, but down by 2pc from the fourth fourth quarter.

Nucor operated its mills at 87pc in the first quarter, down five percentage points year-over-year and down a percentage point from the fourth quarter.

The company expects margins for sheet and plate mill products to weaken in the second quarter, while margins for structural and bar mill products should strengthen.

Nucor expects second quarter profit to remain in line with the first quarter's $501.8mn profit, which was up from $354.2mn in the first quarter of 2018.