Analysis: Nucor makes another vertical investment

Nucor Corp. announced in late February that its Towers & Structures business unit will build a new transmission tower production plant in Decatur, Alabama.

Nucor, based in Charlotte, North Carolina, says the new plant will be situated adjacent to the Nucor Steel Decatur 500,000-ton-per-year electric arc furnace (EAF) sheet steel mill and is the first of two new tower production factories the company plans to build.

“As America’s most diverse industrial manufacturer of steel products, we will be able to efficiently supply this new plant, helping to ensure that our nation’s critical energy and digital infrastructure is built with the cleanest, most sustainable steel in the world,” Nucor President and CEO Leon Topalian says.

Nucor’s steel-centric history (away from its mid-20^th century nuclear device testing activities) traces back to 1962, when the Nuclear Corp. of America acquired steel fabrication firm Vulcraft and hired a young executive named Ken Iverson to run it.

Seven years later, Iverson helped usher in Nucor’s steelmaking era when it opened its first EAF mill in Darlington, South Carolina. It was the first step down a path that saw Nucor bolster its EAF capacity not only so the descriptor “steelmaker” applied to the firm but until it became the largest steel producer in the United States.

In the ensuing half-century, Nucor built its EAF capacity from the initial Darlington melt shop to its current status of having shipped about 23 million tons of steel in 2022.

While Iverson, the executive team he assembled and succeeding CEOs have created an EAF steelmaking juggernaut (that continues to add capacity), the company never abandoned its steel fabrication roots. In the 21^st century in particular, Nucor has added to its fabrication business and invested in other vertical sectors, including raw materials and even energy.

In its 2022 results presentation to investors, Nucor refers to its EAF portfolio as its “core.” In the final quarter of last year, those mills shipped out more than 5.1 million tons of product. That compares with less than 1.6 million tons of raw materials (scrap and direct-reduced iron, or DRI) and nearly 1.2 million tons of steel products (such as joists and towers).

On the raw materials front, Nucor made its biggest splash for Recycling Today readers in 2008, when it purchased the Cincinnati-based David J. Joseph Co. (DJJ), which has processing facilities in several regions of the U.S. Nucor since has added to DJJ’s heft with several subsequent acquisitions.

Nucor’s additional presence in raw materials involves investments made in DRI production in Trinidad and Louisiana.

Nucor has been remarkably profitable at EAF steelmaking and, thus far, with its strategy to expand vertically. By championing EAF technology, Nucor was able to surpass the integrated, blast furnace/basic oxygen furnace steelmakers that dominated the sector in its early years.

However, Nucor’s assembly of assets—raw materials management, melt shops and galvanizing lines through to the production of towers or overhead doors—seemingly has brought it closer in appearance to those large integrated steel producers of late 19^th and early-to-mid 20^th century America.

With that comparison comes a note of caution from none other than Iverson, who died in 2002. In a 1999 interview with the University of North Carolina, he said, “I never had a lot of respect for the big integrated steel industries. They were inflexible. They certainly weren’t a cultural pack that I wanted Nucor to follow.”

Iverson did not identify vertical integration or scale as a criticism; rather, he mentioned complacency. “Our steel industry became very complacent,” he said. “They had had great success during World War II. They were not acceptable to new ideas. They were reluctant to adopt any new ideas.”

By that measure, Nucor may appear to be heading down a path that in some ways mirrors those of the integrated steelmakers of the mid-20^th century, yet could be very different.

Per its recent balance sheets, Nucor has little to worry about. Any concern it has may come with the territory when a former David becomes Goliath. Recalling the landscape in the 1960s—when David was ready to strike—Iverson said in his 1999 interview, “There were just all sorts of opportunities for new companies to develop [and] to accept new ideas in the steel industries.”

Gauged by the number and variety of its recent investments, Nucor does not seem ready to relinquish the battle of new ideas to its competitors.