By John W. Miller and Tess Stynes
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 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."
Write to John W. Miller at john.miller@wsj.com and Tess Stynes
at tess.stynes@wsj.com
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