Steel Dynamics Inc.
Steel Dynamics' under-construction flat roll mill in Sinton, Texas

Nucor’s Relative Negativity an Outlier Among Steel Companies

Dec. 19, 2022
Several manufacturers have recently said pricing and/or demand have bounced off their bottoms.

A market shift can be quite messy. There’s lots of noise and conflicting data points but much less in the way of clear signals.

However, the steel sector seems to be marking an unusually unambiguous bottom as we wrap up 2022. Executives at Nucor Corp., U.S. Steel Corp., Stelco Holdings Inc. and Steel Dynamics Corp. last week updated investors on their fourth-quarter outlooks and only one sang a tune that was at times notably different when discussing demand, pricing and the risks of a recession. To recap:

  • U.S. Steel CEO David Burritt was the most upbeat of the group, saying that commercial demand in the United States is improving and that scrap prices are climbing again. “Flat-rolled customer inquiries are accelerating and spot steel selling prices are improving,” Burritt added while noting that his team’s flat-rolled operations will still put up worse numbers than in the third quarter because of seasonal demand trends and customers trimming their stocks.
  • Also positive were executive at Steel Dynamics, who said they think flat roll steel prices have bottomed and should rise in the new year, boosted by continued healthy order volumes, and expect their steel fabrication order backlog to remain “historically strong” through 2023. “Underlying steel demand and corresponding order activity remain intact from the automotive, non-residential construction, industrial, and energy sectors with some weakness in the residential sector,” the company said in its statement.
  • Leaning noticeably more negative are the leaders of Charlotte-based Nucor, who said their fourth-quarter results should be generally in line with the downward forecast they gave following their Q3 report but also were the only ones to mention the R-word. The company’s steel mills, they added, are dealing with both falling demand and falling prices and said “economic uncertainty and recession concerns could impact future demand” in Nucor’s steel products group.
  • Alan Kestenbaum, CEO of Canada-based Stelco, told BNN Bloomberg the tide appears to have turned in just the past few weeks. Customers, he said, appear intent on not missing what looks to have been a bottom in prices and have started rebuilding their inventories. But, he added, that doesn’t mean 2023 will come close to approaching the at-time giddy heights of the sector’s past two years.

Case in point on that last idea: Despite the Nucor team’s caution, full-year per-share profits are still forecast to come in above the record number from 2021. Still, the broader economic tide is turning as the Federal Reserve’s interest-rate increases work their way through the economy, including in sectors key to steel’s fortunes such as autos and construction.

A key question, as so often in cyclical markets, is finding a solid balance. Recent futures action for hot rolled steel suggests we could be close: Since early November, prices have general stayed within a band of $650 to $680 per ton after sliding steadily for most of the year.

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