Better Days Ahead

Our team greatly appreciates your invitation to discuss our long-term strategy. We have never before been confronted with the economic and market conditions that we are seeing today—not in my career or in very few living peoples’ careers. We are confident that Nucor’s position of strength will not only allow us to capitalize on our competitive advantages, but will most importantly continue Nucor’s tradition of taking advantage of economic downturns to grow even stronger. Our confidence is not one of runaway ego, but one hardened in the fires of experience.

A graph of weekly U.S. steel mill capacity utilization (see chart on page 114) shows the dramatic and rapid impact on the U.S. steel industry of the global financial crisis that began unfolding this fall. I would caution you that even though this is the data published by the American Iron and Steel Institute, don’t think this is only happening here. I’m sure you’re paying attention to what is being written around the world. You are seeing the same thing on a global basis.

Capacity utilization has declined from a peak of 90.8 percent for the week ending Aug. 16, 2008, to a rate of just 50.2 percent for the week ending Nov. 29, 2008. Over this period, weekly output has dropped by 45 percent. The collapse in economic activity and, in turn, order activity for steel producers is unprecedented, as I said before, in our lifetimes.

While no one welcomes conditions as challenging as these, this economic crisis boldly highlights the value of Nucor’s conservative financial practices and extremely strong business model. It is very reasonable to expect that this environment will present unusually attractive growth opportunities for a company that is in Nucor’s unrivaled position of strength.

Our strengths have been built over the past four decades, arising out of a near bankrupt company. With our focus on continual improvement, we grow stronger and stronger, each and every year.

We view our strong balance sheet as an extremely important competitive advantage, more so in the environment that we are in today and going forward. This financial strength is highlighted by our position upholding the highest credit ratings in the North American metals and mining industry, even in these times of difficult credit. It is a big plus.

Nucor’s financial strength and financial flexibility has allowed our company to establish a long-standing Nucor tradition of emerging from economic downturns stronger than we were when we entered them, most recently in 2001, 2002 and 2003. Remembering that the steel industry is a cyclical business, it is worth noting that Nucor generated very healthy cash flow during the extremely tough steel industry years that I just mentioned, roughly $.5 billion dollars in each of those three years.

During cyclical downturns, lower scrap and steel prices reduce the working requirements of our business, and our team puts that strong cash flow to work, making attractive investments that have made significant contributions to our profitability over the past five years.

Nucor’s cost structure is highly variable. Scrap and scrap substitutes represent more than half, and sometimes considerably more than half, of our costs of making steel. The price of scrap is highly elastic in responding to changes of underlying demand for steel and steel products. In periods of decreasing demand for steel, our margins in profits are cushioned after a transition period of inventory adjustments. Other significant components of our costs are also highly variable in nature, including labor, energy, alloys and other raw materials. And, as you know, we have no legacy costs.

We also benefit from the highly flexible nature of our production process, which uses electric arc furnaces. Electric arc furnaces can be literally turned on and off at will. This allows our…steel mills to almost instantaneously adjust our production to match market demand.

Our diversified product mix (which includes sheet steel, bar and structural steel, plate steel, rebar fabrication and distribution and scrap brokerage and processing) makes Nucor North America’s most diversified steel producer. Not in a little way, but in a big way in all areas. Our product diversification is critical to our ability to earn superior returns through the ups and downs of the different steel markets that we face. The bottom line is that product diversification does reduce earnings volatility throughout the cycle.

Nucor’s employees are Nucor’s most significant competitive advantage. Many times people in the HR area of companies will say, "People are our most important resource." We absolutely, positively disagree with that. The right people are a company’s most important resource, and you better take the time and effort, when you’re bringing people onboard, to make sure they’re the right people.

More important, managing with a long-term perspective is at the core of everything Nucor does. With that long-term focus, Nucor’s commitment to our employees drives our success. Our commitment to our employees, our customers, innovation [and] strong balance sheets takes advantage of those difficult times when they arrive, as they always do.

Our strengths are important. They position us to not only weather the current economic crisis, but to take advantage of it to expand our long-term earnings power. From our position of strength, Nucor will continue with disciplined execution of our multi-pronged growth strategy. Here are those four prongs once again: Nucor will optimize existing operations. Nucor will pursue strategic acquisitions. Nucor will continue greenfield growth where we can capitalize on significant cost advantages from new technologies and/or unique marketplace opportunities or niches. And, four, Nucor will grow
internationally.

The opportunities in front of us will not be just here in North America, they will be global. We now have a strong footprint and a team in Europe to benefit from that.

We will grow internationally by leveraging strategic partnerships and our new technologies. This multi-pronged growth strategy gives Nucor tremendous flexibility. Our multi-pronged strategy allows us to be patient, to grow where the growth opportunities are at that point in time. Even though our company is much bigger today, our growth opportunities are actually much greater than when we were a smaller company pursuing only one growth strategy, that of greenfield plant construction. As always, our objective is profitable growth, generating attractive returns for Nucor shareholders and their valuable capital that they have entrusted to our stewardship. That is exactly what our team did during the last downturn in 2001-2002.

The returns generated over the past five years have been driven by our expanded platforms in upstream, steelmaking and downstream businesses. The potent combination of our optimization of existing operations, acquisitions and greenfield growth has dramatically expanded our earnings power in raw materials, steelmaking and downstream steel products. In raw materials we now have the capability to supply both iron and scrap to our steel making operations.

Our new iron plant in Trinidad started production in late 2006 and has an annual capacity of 1.8 million metric tons. In February 2008, we acquired the David J. Joseph Co. (Cincinnati). With the DJJ and subsequent acquisitions, our annual scrap processing capacity has grown to approximately 5 million tons.

In steelmaking, our annual capacity has nearly doubled to more than 25 million tons today from the 13 million tons in 2000. The more than 6 million tons of annual capacity growth and productivity gains…highlight the fact that optimization of operations is the most powerful and rewarding growth vehicle. In downstream steel products, our annual capacity has nearly tripled to 4.5 million tons. Of course downstream businesses have a long history of generating attractive returns on capital growth.

While our team is encouraged by our progress, we are never satisfied. Our journey is one of climbing a mountain with no top. We are looking forward to a future where Nucor’s best years are ahead of us. Our work continues in a number of very exciting growth platforms. These growth platforms are in our core steel making business, upstream, downstream and international markets. Today with these multiple growth platforms, Nucor is in its best position ever for profitable growth. I will quickly highlight a few of them.

Growing our core business remains the most powerful platform. [Our growth initiatives] include our SBQ (special bar quality) mill in Memphis (Tenn.), the galvanizing facility in Decatur (Ala.), the e-treat facility at our Hertford (N.C.) plate mill and our Arizona rebar and wire rod rolling facility.

Our DJJ team is just getting started in both acquisitions and greenfield operations. In addition to being the best of the best in the scrap business, DJJ has a number of other very attractive growth businesses. These include rail and logistics services, raw materials brokerage and mill and industrial services. They will also enhance the long-term profitability of Nucor’s steel-making operations.

Since our March 2007 acquisition, Harris Steel’s rebar fabrication annual capacity has more than doubled to more than 1.5 million tons. Harris Steel’s rebar distribution business also has an annual value of another 450,000 tons. In addition to being a very attractive profit generator for Nucor, Harris steel rebar fabrication, placement and distribution businesses enhance the long-term earnings power and leadership power of Nucor’s rebar mills.

In July, we established our initial international growth platform with the acquisition of 50 percent ownership in Duferdofin-Nucor. The joint venture of beam and long products mills has three mills in Italy: Pallanzeno, San Zeno, Giammoro. San Giovanni is home to a fabricating facility. Total production in 2007 was approximately 1 million short tons. With the new mill in Giammoro that is starting production, Duferdofin-Nucor’s total annual capacity will approach 2 million short tons. The venture also includes distribution companies of the former Duferdofin operation.

Construction is nearly complete at our Castrip plant in Arkansas. It will be our second Castrip production facility, with operation to start up in early 2009. In addition to lower capital costs, Castrip technology dramatically reduces energy consumption and cuts the overall environmental impact of steel making by generating significantly lower emissions. The Castrip process consumes 95 percent less energy than an integrated steel facility and 92 percent less energy than even our thin-slab sheet mills.

We have a lot of growth opportunities ahead of us, and the current conditions will provide more. We expect more to come, not just in the next six to 12 months, but well into the future. You should expect us to continue to be extremely disciplined and focused in taking advantage of the best opportunities that develop ahead.

I’ve been a member of the Nucor team since 1982 and I’ve been in the steel business for a total of 34 years. I’ve never been more excited than I am today about the company’s opportunities to profitably grow. As I’ve said many times and I continue to support, Nucor’s best years are ahead of us.

Slides from Daniel DiMicco’s presentation for the Goldman Sachs 2008 Global Steel CEO Forum are available from Nucor’s Web site at http://media.corporate-ir.net/media_files/irol/10/107115/goldman2008.ppt.