Nucor's emerging market could affect Memphis, Blytheville steel mills
3 February 2016
Nucor Corp. is making a push with hopes to increase its sales to the auto industry by 40 percent to 50 percent over the next two years, which could impact production in two Mid-South steel mills.
Nucor CEO John Ferriola told analysts last week that Nucor (NYSE:NUE), which has a steel mill at the International Port of Memphis, saw its sales to the automotive industry rise by 1.4 million tons of steel products — an increase of 20 percent over 2014.
Ferriola said recent upgrades to its steel bar plant in Memphis make it capable of producing steel for autos.
Analysts have also noted that with a lot of auto production having moved to Mexico and the Southeast, Nucor’s mills are well positioned. About two dozen of its 50-plus plants are located in the South, and it has four additional plants near the Mexico border.
Not all of those plants would be able to produce automotive-grade steel. But its mill in Blytheville, Arkansas, is another of the plants that make sheet steel the industry is interested in.
Nucor is well into the admittedly long approval process for getting its steel products approved for use by major automotive manufacturers.
“We fully expect to be able to get up to 2 million tons over the next couple of years, and that’s going to be in both sheet products and in our [special bar quality products],” Ferriola said. “Let’s be honest. The automotive industry is taking a look at the entire steel industry today and they look at Nucor and our balance sheet, and they see a long-term sustainable supplier.”
The steel industry has been in a substantial downturn since 2009. Nucor still posted fourth-quarter and full-year earnings last week that were something of a mixed bag. But it has one of the strongest balance sheets in the industry.
Nucor has long had increased sales to automakers in its sights, but it has had to overcome technical challenges and quality issues. And it had to work against the industry preference for dealing with companies who produced steel in blast furnaces as opposed to the electric arc furnace process that Nucor uses to produce steel from scrap and scrap substitutes.