Nucor expects lower 2Q profits on steel, scrap prices

US steelmaker Nucor anticipates lower profits in the second quarter of 2019 amid lower steel and scrap prices, and squeezed margins in its direct-reduced iron (DRI) operations.

The North Carolina-based company said in its second quarter guidance today that service center destocking has reduced order rates and profits in its steel mills segment. An overhang of domestic ferrous scrap and related falling prices has also resulted in customers adopting "aggressive inventory management," the company said.

The national average price for #1 busheling ferrous scrap fell to $294/gt delivered in June, a $112/gt decrease from the beginning of the year.

Hot-rolled coil (HRC) ex-works midcontinent last week was assessed at $565/st, continuing nine consecutive weeks of decreasing prices since 9 April. HRC prices fell by $139.25/st during that span and have dropped by $175/st since the start of 2019.

The company expects profitability of steel products segments to rise in the second quarter, pointing toward improvement in non-residential construction demand because of better weather.

Nucor flagged some softening in the automotive sector, but sees the rest of its end markets as stable.

Tighter margins in Nucor's DRI segment are expected to affect profits from its raw materials segment compared with the previous quarter. Nucor's two DRI plants will be offline at different points this summer, with the Trinidad plant offline for 25 days beginning in June and the Louisiana plant down for 60 days beginning in late August.