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‘Incredibly Resilient’ Construction Market Buoys Nucor Outlook, Alcoa and Steel Dynamics Also Upbeat

April 21, 2023
Orders rooted in various pieces of stimulus legislation are starting to come in, executives said.

There wasn’t much ambiguity or hedging in Leon Topalian’s commentary.

“While there’s an awful lot of talk about looming recessions and headwinds we’re facing and whatnot, I will just tell you that the objective measures as we look into Q2, we think Q2 is going to be a stronger quarter,” the chairman, president and CEO of steel titan Nucor Corp. told analysts on an April 20 conference call to discuss his team’s first-quarter results. “Non-res[sidential] construction continues to be incredibly resilient and we think strong going forward.”

Charlotte-based Nucor reported first-quarter profits of $1.1 billion on net sales of $7.1 billion. Total sales to outside customers rose slightly from a year ago but substantially lower prices meant operating profits fell by more than 40%.

Key to the upbeat outlook from Topalian and his team are the beginnings of a wave of orders for steel and related products to help build factories making semiconductors and electric-vehicle batteries as well as transportation and energy infrastructure projects. Topalian said passage of the Inflation Reduction Act, CHIPS and Science Act and Infrastructure Investment and Jobs Act will require about 8 million tons of steel-making capacity annually for the next decade, “not an inconsequential number.”

There are short-term catalysts aiding Nucor, too, however: Executive Vice President Rex Query said on Nucor’s call that the market softness of late 2022—which followed inventory building in the face of great uncertainty after Russia invaded Ukraine in February—has been digested.

“As we’ve entered 2023, we see a much more stable market,” Query said about the sheet products market. “We see more confidence in the marketplace and underlying demand [...] You’ve now seen stabilizing in some pricing at a higher level and we see demand stabilizing. Our backlogs at this point are on par with where we were at the end of [the] first quarter in 2022 […] As we move forward in Q2 and even into Q3, we see that continuing.”

The Nucor team’s peers at Steel Dynamics Inc. and Alcoa Corp. voiced similarly confident assessments. Alcoa President and CEO Roy Harvey said “the demand is still there” for his firm’s products and that there are relatively limited options available to quickly ramp up supply, which is putting a solid floor under prices after the steep decline of last spring and summer.

“Based on our backlog, customer sentiment and manufacturing momentum, we expect steel fabrication earnings to remain strong throughout the year, including the second half,” Steel Dynamics CFO Theresa Wagler said April 20.

The optimistic tones from metals manufacturers was supported by Friday’s latest reading of the S&P Global Flash PMI Composite Output Index, a measure decently correlated U.S. gross domestic product. The indicator posted its best number in 11 months, with respondents saying they are seeing greater confidence among customers driving a rise in new orders.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas JournalT&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.

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