Nucor: Soaring On Wings Of Steel

After snapping up 10 mills during the downturn, it's now reaping the benefits from high steel prices
The BusinessWeek 50

Daniel R. DiMicco began snapping up vintage 1960s Corvettes a few years ago. But his wife balked when his collection, seven cars strong, began to outgrow their garage. "The deal with my wife now is that if I get a new one, I have to get rid of another," he laments. DiMicco has no such restrictions at work. And in recent years, the 54-year-old CEO of Nucor Corp. (NUE ) -- the Charlotte (N.C.) pioneer of the minimill approach to steelmaking -- exploited the downturn in steel earlier this decade with a whirl of deals.

While his predecessors at Nucor had long taken a go-it-alone strategy, DiMicco has spent more than $1.1 billion since 2001 to snatch up 10 steel plants on the cheap -- even scooping up Birmingham Steel Corp. and Trico Steel Co. out of bankruptcy. DiMicco's timing may have been shrewd: The buyer's market in steel enabled Nucor, the only U.S. steelmaker to remain profitable during the downturn, to snap up more than 5 million tons of annual production capacity for an average of 17 cents on the dollar.

Up from Scrap

The result: When global steel prices began to rebound last year -- the result of tight supply and a construction boom in China -- DiMicco's acquisition spree paid off big. Nucor's profits soared seventeenfold, from the $62.8 million earned in 2003 to $1.1 billion last year -- a dramatic surge that earned Nucor the top spot in this year's BusinessWeek 50. While soaring steel prices helped, analysts give DiMicco credit for positioning his company to benefit from the consolidation of the steel industry. "Nucor has done a better job of navigating through an extraordinarily difficult time than any other cyclical company I've ever seen," says Lewis Johnson, an analyst at T. Rowe Price Associates (TROW ), which holds 8.7 million Nucor shares.

For Nucor, the rise to become the world's 10th-largest steelmaker was an improbable journey. Once a maker of nuclear testing equipment, Nucor expanded into making steel joists in the 1960s. Frustrated over the chronic steel shortages of the time, then-CEO F. Kenneth Iverson built his own minimill, adopting an experimental technology that used electric arc furnaces to melt scrap metal -- a much cheaper raw material than iron ore -- into finished steel. As Nucor expanded its steel operations, using nonunion workers, to produce for other customers, the company gradually gained ground on the big integrated mills that were saddled with expensive union contracts.

Today, DiMicco is rolling the dice again on technology to help Nucor leapfrog the competition. After nearly three years of testing, Nucor recently began round-the-clock production at its Indiana plant using a radical new process known as "strip casting," in which steel is extruded through a nozzle into thin strips of metal that are practically ready for market. If that bet pays off, it could give Nucor a huge cost advantage over traditional steelmakers, who produce thick metal slabs that must be painstakingly rolled into sheets. "Nucor is going to revolutionize the way steel is made again," boasts DiMicco.

Until then, some wonder if Nucor will stay hot. Christopher D. Olin of Longbow Research in Independence, Ohio, expects steel prices -- which have already fallen as much as 15% in some categories since last fall -- to dip further as the panic buying that sent prices up wanes. DiMicco says Nucor has been able to preserve margins thanks to an even-greater dip in scrap metal.

DiMicco has been vocal in his calls for Washington to protect U.S. steelmakers better from illegal dumping by foreign competitors. At the same time, he believes resolutely that because of his acquisition spree, Nucor now has the bulk to compete on the global stage. "Our best years are still ahead of us," he says. And DiMicco does have an eye for value.

By Dean Foust in Charlotte, N.C.

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