Nucor Corp. said Thursday its second-quarter profit fell mainly on a slump in steel prices, but predicted a better second half in part because of stronger trade protection laws.
The Charlotte, N.C.-based firm, the biggest steelmaker in the U.S. by capacity, said earnings fell 15% to $124.8 million, or 39 cents a share, from $147 million, or 46 cents, a year earlier. Though down, the results were well ahead of the company’s guidance for earnings of 20 cents to 25 cents a share.
Revenue decreased 18%, to $4.36 billion, reflecting a 13% drop in average sales price a ton. Shipments to outside customers dropped 5%, including a decline of 2% in steel mill shipments that reflected reduced production.
“Pricing remains under pressure from exceptionally high levels of imports,” the company said. Imports made up an estimated 32% of the finished steel market in the first half of 2015, up from 27% in the first half of 2014. The benchmark hot-rolled coil index has fallen 23% to $464 per ton since the start of the year.
The American steel industry is being reshaped by a global steel glut fueled by record exports from China as that economy cools. China buys roughly half the world’s steel, so any hiccup matters. Not all the imports into the U.S. come from China, but many are displaced from countries where China has grabbed market share. The environment has frustrated American steelmakers because their domestic market is relatively solid, with the exception of the oil and gas industry, which has suffered from the oil price swoon.
Without the imports, this “would otherwise be a good environment for domestic producers,” Deutsche Bank analyst Jorge Beristain wrote in a note this week.
Nucor predicted improved earnings in the current third quarter, with the strongest end markets being automotive and construction. Nucor last month said pricing has started to stabilize in its steel mills segment, but margins had weakened as a decline in selling prices outpaced a drop in raw-material costs.
Nucor and other U.S. steelmakers have sought help from the government in response to a flood of imports, saying they are the victims of illegal trade practices.
Earlier this month, the U.S. International Trade Commission made a preliminary ruling that China and four other countries had “dumped”, or sold at unfair prices, steel into the U.S. The U.S. Commerce Department will rule before the end of the year whether or not to impose duties. Congress recently passed legislation making it easier to industrial companies to obtain tariffs on imports.
Nucor said Thursday that “while these trade law changes alone will not address the serious challenges facing the U.S. steel industry because of systemic steel overcapacity overseas, they do strengthen our hand against illegal trade practices.”