- New processes make steel from scrap more useable by carmakers
- Nucor sees need to expand to new products, CEO Ferriola says
Nucor Corp. is looking to supply more metal products to carmakers outside the U.S. as the country’s biggest steelmaker anticipates a cooling domestic auto market.
“There’s no rule at Nucor that says we have to keep making what we’re making and we have to keep making it where we’re making it,” Chief Executive Officer John Ferriola said in an interview this week in New York.
The Charlotte, North Carolina-based steelmaker recycles scrap in relatively small electric furnaces nicknamed mini mills. Until recently, that process has not been able to create the blemish-free flexible steel used by automakers for external car parts.
But Nucor has replaced some scrap with a type of iron refined with natural gas and removed contaminants from steel made from scrap, enabling it to compete in the market that’s been dominated by integrated steelmakers like U.S. Steel Corp. that start with iron ore and coke made from coal.
Last week, Nucor unveiled a $270 million joint venture with Japan’s JFE Holdings Inc. to produce steel for carmakers at a plant in Mexico.
Nucor’s investment in boosting capacity destined to become car parts reflects greater interest by automakers in buying steel from recyclers of the metal, according to David Gagliano, a metals and mining analyst at Bank of Montreal.
“It’s potentially step one in a meaningful longer-term shift away from the traditional integrated steel producer supplier toward the mini mill,” Gagliano said Thursday in an interview.
Part of the push beyond national borders comes from Nucor’s own view about its growing heft in the U.S. market: There are fewer domestic opportunities left to exploit without bumping into antitrust laws.
“We might be running out of opportunities in some of our core products because we’ve grown in terms of market share,” Ferriola said on the sidelines of the American Metal Market’s Steel Success Strategies conference. “There’s a world of things we can do in new products we can bring to the market.”
Nucor’s venture with JFE Holdings was the second steelmaking expansion outside of the U.S. announced this year. In May, Nucor said it will open a new facility near Hamilton, Ontario, to make construction products, with fabrication beginning this year. Nucor also has operations in Italy and Trinidad and Tobago, with sales offices in Canada, Colombia and Mexico and trading businesses in Switzerland and the United Arab Emirates.
The company said on Wednesday that it expects second-quarter earnings to grow by as much as 79 percent as U.S. prices rally in anticipation of anti-dumping measures taking effect this year.
The company also said its downstream-products performance is expected to improve from the first quarter because of a gradual improvement in non-residential construction markets.