Nucor Corp.: Expanding Domestically, Fighting Currency Manipulation

Oct. 4, 2006
Success hasn't distracted the No. 2 steel producer from speaking against China's trade practices.

Nucor Corp. executives can't complain about much these days. Coming off a second quarter during which its profit rose 40% over the year-ago period, the Charlotte, N.C.-based steel recycler expects a strong third quarter with earnings projected to range from $1.50 per share to $1.60 per share. That's up from 93 cents per share recorded in third-quarter 2005.

Even so, Nucor, an IndustryWeek IW 50 Best Manufacturer for 2006, still has concerns. The company has been a vocal advocate of imposing trade sanctions on China to level the playing field for U.S. steel makers and other manufacturers.

"We have let the currency issue get out of hand with China, in particular, and other Asian currencies in general," said Nucor CEO Dan DiMicco in a Sept. 28 speech at The Union Club in Cleveland. "The magnitude of the distortion makes correction all the more difficult and dangerous. The undervaluation cannot be fixed quickly or we risk damage to both economies. But the longer we wait to correct the problem, the worse and more dangerous it becomes."

In a recent interview with IW, Bob Johns, Nucor's director of marketing, made similar statements, saying, "I would say anything that is tradable is subject to the same conditions we have . . . and people need to wake up to that fact and fight the issue."

While Nucor fights trading practices abroad, the second-largest U.S. steel producer is expanding domestically. In September, Nucor purchased Verco Manufacturing Co. for $180 million. Verco produces steel floor and roof decking in Phoenix and two facilities in California. The addition of Verco will add 500,000 tons to Nucor's total annual steel deck capacity.

In July, Nucor said it will build a steel mill in the southern U.S. that will produce special bar quality products. The new mill will have an estimated capacity of 850,000 tons and will produce high-quality carbon and alloy rounds and cornered squares from 3 inches to 9 inches for the automotive, heavy equipment and service center markets.

Nucor Corp.
At A Glance
Nucor Corp.Charlotte, N.C.Primary Industry: Primary metalsNumber of employees: 11,5002005 In ReviewRevenue: $12.7 billionProfit Margin: 10.32%Sales Turnover: 1.78Inventory Turnover: 9.23Revenue Growth: 11.64%Return On Assets: 21.36%Return On Equity: 37.91%

"This is a great opportunity to position Nucor as a market leader in special bar quality products," DiMicco said in a July statement. "We have consistently said over the last six years that we would not build a greenfield steel mill unless we could take advantage of a unique market niche and/or a significantly better cost structure compared to the competition. This project definitely fits that strategy."

A month earlier, the company unveiled plans to construct its fourth sheet steel galvanizing facility, which will be located at its sheet mill in Decatur, Ala., at a cost of $150 million. Annual steel production capacity at the plant will be about 500,000 tons, and the facility will have the ability to produce 72-inch-wide sheet steel.

And in May Nucor subsidiary Nucor Steel Connecticut Inc. purchased Connecticut Steel Corp. for about $43.9 million. Located in Wallingford, Conn., this bar products mill has an estimated annual capacity of 85,000 tons of wire-mesh fabrication and structural-mesh fabrication. The company also said in May that it will build its fourth metal building systems and components production facility at a cost of $27 million. That plant will be located in Brigham City, Utah, and will have an annual capacity of about 45,000 tons.

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