Lower steel prices reduce Nucor's Q1 earnings

Earnings declined for Charlotte, North Carolina-based Nucor Corp. in the first quarter of the year compared with the fourth quarter of 2022 and the first quarter of 2022.

In the first quarter of 2023, Nucor achieved net earnings attributable to its stockholders of $1.14 billion, or $4.45 per diluted share. By comparison, Nucor achieved net earnings attributable to its stockholders of $1.26 billion, or $4.89 per diluted share, for the fourth quarter of 2022 and $2.1 billion, or $7.67 per diluted share, for the first quarter of 2022.

According to Nucor’s first-quarter earnings report, steel mill segment earnings increased from the fourth quarter of 2022, primarily because of higher margins and volumes. The steel products segment earnings in the first quarter decreased relative to the fourth quarter of 2022 primarily because of reductions in realized pricing.

Additionally, earnings for the raw materials segment increased in the first quarter compared with the fourth quarter of 2022 in light of higher volumes at Nucor’s direct-reduced iron (DRI) facilities and scrap recycling and brokerage operations.

“We had a very strong quarter, driven by solid performance in our steel products segment and increased demand for steel at our mills,” Nucor President and CEO Leon Topalian says. “Demand from nonresidential construction, our largest end market, continues to be robust, driven by strength in infrastructure and manufacturing investment. Average steel mill utilization rates and profit margins were both up in the first quarter compared to the fourth quarter, with sheet and plate mills seeing some of the largest gains. This, coupled with year-over-year gains in automotive and stability in energy, gives us confidence that 2023 will be another very profitable year for Nucor. My thanks to our 31,000 teammates for their dedication to safely meeting our customers' needs while executing our strategic growth agenda.”

According to Nucor, its net sales were $8.71 billion in the first quarter of the year, similar to the $8.72 billion achieved in the fourth quarter of 2022 and 17 percent lower than the $10.49 billion recorded in the first quarter of 2022. Average sales per ton decreased 11 percent in the first quarter of the year compared with the fourth quarter of 2022 and decreased 18 percent compared with the first quarter of 2022.

First-quarter steel production results and second-quarter outlook

Nucor shipped 6.443 million tons of materials to outside customers in the first quarter of the year, an increase of 12 percent compared with the fourth quarter of 2022 and a 1 percent increase compared with the first quarter of 2022. Quarterly total steel mill shipments increased by 18 percent compared with the fourth quarter of 2022 and by 4 percent compared with the first quarter of 2022. The company says steel mill shipments to internal customers represented 20 percent of total steel mill shipments in the first quarter. Downstream steel product shipments to outside customers decreased by 3 percent in the first quarter of the year compared with the fourth quarter of 2022 and by 8 percent compared with the first quarter of 2022.

In addition, Nucor says average scrap and scrap substitute cost per gross ton used in the first quarter of the year was $414, a 3 percent decrease compared with $427 in the fourth quarter of 2022 and a 16 percent decrease compared with $495 in the first quarter of 2022.

Overall, operating rates at Nucor steel mills increased to 79 percent in the first quarter of the year compared with 70 percent in the fourth quarter of 2022 and 77 percent in the first quarter of 2022.

According to Nucor’s first-quarter earnings presentation April 20, the company’s new electric arc furnace (EAF) mill in Brandenburg, Kentucky, which began operations in October 2022, continued to ramp up production of caster and rolling mill throughout the first quarter of the year. That location is targeted to produce 500,000 tons of plate and structural material this year and is expected to turn a profit in the fourth quarter of the year.

RELATED: Nucor begins operations at Kentucky EAF mill

Looking ahead to the second quarter of the year, the company says it expects earnings to increase compared with the first quarter of the year. It also expects earnings for its steel mill segment to improve in the second quarter of the year compared with the first quarter, primarily from margin expansion at its sheet mills. Nucor says its steel products segment is expected to deliver strong results in the second quarter of the year but will moderate from the first quarter of the year because of expected lower average selling prices offsetting higher volumes. Additionally, Nucor says its raw materials segment is expected to improve in the second quarter as compared with the first quarter in light of improved profitability of its DRI facilities.

New steel recycling partnership

Nucor also has entered into a recycling partnership with Johnson Controls, a producer of fire, security and heating, ventilating and air conditioning equipment with North American headquarters in Milwaukee.

According to a news release from Johnson Controls, 70 percent of its steel purchases are from the U.S. and 45 percent are manufactured from recycled scrap materials. The program with Nucor will recycle almost 100 percent of Johnson Controls’ secondary scrap steel at the company's manufacturing sites in the U.S. Nucor will remelt the scrap steel using electric arc furnace technology, and the remelted steel will be sold back to Johnson Controls for use in manufacturing.

“With our smart building technology trifecta—energy-efficient equipment, clean electrification and systemic digitalization—we have already reached the point of being able to help customers reduce building operational emissions to net zero,” says Katie McGinty, vice president and chief sustainability and external affairs officer at Johnson Controls. “However, embodied carbon emissions in hard-to-abate sectors like steel are much more challenging. We are unraveling the complexities of embodied carbon by addressing the challenge from different angles: from low-carbon steel purchases to steel recycling, material recycling and overall product footprint reduction.

“This partnership with Nucor will allow us to accelerate upstream decarbonization significantly through the further recycling of thousands of tons of steel every year. We are excited not only about the immediate resource and emissions reductions but also about the long-term ripple effect this closed-loop recycling partnership will have for resource, energy and emissions savings.”

Noah Hanners, executive vice president of raw materials for Nucor, adds, “We formed Nucor Industrial Recycling to work with our steel customers to find new and better ways to return steel scrap directly from manufacturing facilities to our steel mills for remelting to make new steel products. This closed-loop recycling program is a great example of how we work with our customers to improve resource efficiency in the steel supply chain.”