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Executives

Daniel R. DiMicco - Chairman, President and CEO

Terry S. Lisenby - CFO, EVP and Treasurer

Hamilton Lott Jr. - EVP of Fabricated Products

John J. Ferriola - COO

D. Michael Parrish - EVP, Bar Products

P. Joseph Stratman - Executive Vice-President, Beam and Plate Products

Ladd Hall - Executive Vice President, Flat Rolled Products

Analysts

Michelle Applebaum - Applebaum Research

Timna Tanners - UBS

Evan Burke - Morgan Stanley

John Hill - Citigroup

Mark Parr - KeyBanc Capital Markets

Charles Bradford - Soleil Bradford Research

David Gagliano - Credit Suisse

Sam Martini - Cobalt Capital

Bob Richard - Longbow Research

Aldo Mazzaferro - Goldman Sachs

Michael Williamse - CIBC World Markets

Nucor Corporation (NUE) Q4 FY07 Earnings Call January 24, 2008 2:00 PM ET

Operator

Good day, everyone, and welcome to the Nucor Corporation Fourth Quarter and Year-End Earnings Release Conference Call. As a reminder, today's call is being recorded. Later, we will conduct a question-and-answer session and instructions will come at that time.

Certain statements made in this conference call are forward-looking statements that involve risks and uncertainties. Although Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. Some of the important factors that may cause actual results to differ from our predictions are listed in Nucor's SEC filings. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them.

For opening remarks and introductions, I would like to turn the call over to Mr. Dan DiMicco, Chairman, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Good afternoon. This is Dan DiMicco. And thank you for joining us for Nucor's conference call. We appreciate your interest in Nucor. Our team will review Nucor's 2007 performance and update you on ongoing implementation of Nucor's growth strategy.

I will lead off with some overview thoughts. First, and most importantly, as I always do, I would like to say thank you on a job well done to all 18,000 plus members of the Nucor team for delivering our fourth consecutive year of exceptionally strong earnings in 2007. As always, you are working safe, working smart and working hard. And, working together to take care of our customers. You have proven again that Nucor’s most significant competitive advantage remains our employees. The right people working together as a team. Thank you all very much.

I also want to extend a warm welcome to our newest additions to our Nucor family. In October, Nelson Steel, now Nucor Wire Products, Pennsylvania joined our bar mill group team. And in November, Barker Steel became part of Nucor’s Harris Steel Rebar Fabrication team. We are proud to have you join the Nucor family, and together we look forward to a very bright future of profitable growth in the wire mesh and rebar fabrication businesses.

Now I will share with you my thoughts on our 2007 earnings report, and most importantly, our exciting plans for 2007 and beyond… excuse me… 2008 and beyond. In 2007, the Nucor team achieved the second best earnings year in our history. Our 2007 performance was highlighted by pre-tax profit per ton shipped at $104 per ton, net income of $1.5 billion and return on stockholders equity of 30%, and these strong results came while working against a several headwind from a depressed US lateral market. 2007 once again proved tremendous value of Nucor’s position as North America’s most diversified steel producer.

Weaker sheet mill profits were cushioned by earnings growth at our bar, beam and downstream businesses. The composition of sales for 2007 was 36% sheet, 27% bars, 14% beams, 11% plate and 12% downstream steel products. This product line diversity goes a long way in explaining Nucor’s long-term record of profitable growth and attractive returns on our shareholders’ valuable capital.

I mentioned earlier here that 2007 was Nucor’s fourth consecutive year of exceptionally strong earnings. From 2004 through 2007 time period, net income totaled $5.7 billion. That represents average annual net income of approximately $1.4 billion. For perspective, at the last cyclical peak in the US economy, Nucor reported what was then record net income of $311 million. Nucor’s return on stockholders equity averaged 35% over the past four years. And from 2004 to 2007, Nucor generated total cash flow from operations of more than $7 billion, an average of approximately $1.8 billion per year.

It is very easy to explain our performance for both 2007 and the past four years. Our team’s disciplined execution of Nucor’s multi-pronged growth strategy has dramatically expanded our company’s long-term earnings power. Over the past seven years you have heard us set forth the four prongs of our growth strategy, They remain the same. The strategy works. Here are the four prongs. Nucor will optimize existing operations. Nucor will pursue its strategic acquisitions. We will continue Greenfield growth where we can capitalize on significant cost advantages from new technologies and unique market niches. And four, Nucor will grow internationally with an emphasis on opportunities to leverage technologies and strategic partnerships.

Included in these four core strategic strategies is growth within our steel space, downstream and upstream and raw materials. While we are pleased in the current by the initial pay off from our hard work, our team is not satisfied and we are extremely excited about our growth prospects for 2008 and beyond. In fact, our confidence has never been greater that Nucor’s best years are ahead of us.

Here are some recent achievements by the Nucor team that will play key roles in driving continued growth in our company’s long-term earnings power. Nucor’s downstream value added product’s annual capacity has more than doubled over the past year to just under 4 million tons. We have done this with our very successful acquisitions of Verco in steel decking, Harris Steel in rebar Fabrication, cold finished bars and metal grating, LMP Steel in cold finished bars, Magnatrax in metal buildings and Nelson into wire mesh. We are looking forward to growing the already highly attractive returns generated by these businesses.

For many years, Nucor’s vertical integration into steel products has been a critical underpinning to our proven ability to earn attractive returns in our shareholders’ value for capital throughout the cycle. And our vertical integration strategy has been expanded into upstream control of raw materials. Implementation of Nucor’s raw material strategy is off to an excellent start with 2007’s very successful start up of Nu-Iron, a DRI plant in Trinidad. In this start up year Nu-Iron has already established itself as one of the world’s most productive DRI facilities, a facility that produces the highest level quality anywhere in the world. We will continue our disciplined execution of our raw material strategy. The strategy will help us maximize the profitability of our sheet and SBQ product lines.

Our cast strip technology is building strong at an exciting momentum in productivity and quality. Highlighting this progress was a new sequence casting record in December by the team at our casting facility in Crawfordsville, Indiana. At the same time, we continue to discover unique product applications, not offered by other steels. And construction continues on schedule, on budget at our second casting facility in Arkansas. Nucor’s disciplined long term approach, developing this exciting technology has established a significant growth platform that will pay substantial dividends in the years ahead.

Earlier this month, Nucor took a major step forward in pursuing international growth opportunities with the signing of our Memorandum of Understanding with the Duferco group. We are excited about this potential joint venture with the leading producer of beams in Italy and Southern Europe. As North America’s largest producer of beams and most profitable, Nucor would bring considerable technical and commercial expertise to the partnership. This is a business that we understand well. One in which we have earned very attractive profits for two decades.

The Nucor approach is focused on profitable growth and continued improvement. Our team is better positioned than ever to continue our disciplined execution of our strategic plan for taking care of our shareholders.

At this time, I would like to ask our Chief Financial Officer, Terry Lisenby to discuss our 2007 results. Terry.

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Thanks, Dan. Nucor’s fourth quarter 2007 earnings of $1.26 per diluted share were ahead of our quarterly earnings guidance range of $1.10 to $1.20 per share. The better than expected earnings can be explained by several factors. December results for bars, sheet, plate and rebar fabrication were substantially ahead of our forecast. And the fourth quarter effective tax rate of 33.2% was below our typical effective tax rate of about 35%.

Partially offsetting this strong operating performance and the somewhat lower tax rate, our fourth quarter LIFO charge was over $92 million. This was well above an estimated LIFO charge of about $33 million that was incorporated in our fourth quarter guidance.

Our full year 2007 results, net income of $1.5 billion and the diluted earnings per share of $4.94 benefited from Nucor’s diversified product portfolio. That diversification has been enhanced by the very successful acquisitions we have completed over the past seven years. In 2007, our team continued to build upon Nucor's long-term record of being an effective steward of our shareholders’ investment. Our focus on the careful allocation of capital is evidenced by our disciplined approach to organic growth projects, acquisitions, dividends and share repurchases. Our decision-making process is very simple. We allocate capital to opportunities that offer the owners of Nucor the highest return on their investment.

Capital expenditures for 2007 were $520 million. Approximately $200 million of the 2007 capital spending was at our greenfield projects. The Memphis SBQ bar mill, Decatur’s Sheet Mills Galvanizing facility, the Arkansas Cast Strip plant and the Utah Building Systems facility. And we continue to invest capital in our existing operations to keep them state of the art and globally competitive.

2008 capital expenditures are expected to be approximately $800 million. Over $300 million of that amount is for greenfield projects.

Nucor invested $1.5 billion in acquisitions in 2007. This included our largest ever acquisition, the purchase of Harris Steel Group for slightly more than $1 billion. Over the past seven years, the nearly $3 billion invested in acquisitions has generated very attractive returns for our shareholders.

Our disciplined approach to capital allocation is demonstrated by our returning cash to shareholders through both dividends and share repurchases. Nucor returned $1.5 billion of capital to shareholders in 2007. And since the beginning of 2005 Nucor has returned $3.2 billion of capital to our shareholders. Cash dividends paid in 2007 totaled $726 million, up 26% from 2006 dividends and a more than tenfold increase from 2004. Consistent with Nucor’s pay for performance philosophy, the upcoming February the 11th dividend payment will be our 12th consecutive quarter supplemental dividends. And with this payment our quarterly base dividend increase is 173% to $0.30 per share. In addition to reflecting our success in building long-term earnings power, the higher base dividend is evidence of Nucor's belief that the business cycle for steel will see both higher highs and higher lows, going forward.

Share repurchases in 2007 totaled 14.1 million shares at a cost of $754 million, or about $53 million per share. Since reactivating our share repurchase program in the second quarter of 2005, we have bought back approximately 37 million shares, at a cost of $1.6 billion or about $43 per share. We have remaining share repurchase authorization of 30 million shares.

Nucor’s strong balance sheet remains an extremely important competitive advantage. At the close of 2007, our debt to capital ratio was 30%. Cash and short term investments totaled $1.6 billion. And Nucor holds the highest credit ratings awarded to any North American metals and mining company by Moody’s and Standard & Poor’s.

Our financial strength enables Nucor to take a long term perspective in managing and growing our businesses. In fact, Nucor has a long history of emerging from economic downturns stronger than when we entered them. Current turmoil in credit market highlights the importance of this competitive advantage. In November, our superior financial flexibility allowed us to issue $1.3 billion of long term debt at very attractive rates. As always, Nucor will be both disciplined and opportunistic in seeking profitable growth for our shareholders. Our team has never been more excited about the opportunities ahead of us.

Our outlook for the first quarter is positive with earnings expected to be in the range of $1.20 to $1.30 per diluted share. Our bar, beam, plate and downstream businesses, particularly rebar fabrication should see continued strength. Market conditions for sheet have improved in recent months due to a much better balance between customer inventories and demand. Risk to our forecast include scrap price volatility and the actual scrap usage cost, any further weakening in the economy and any significant reversal of the lower import levels experienced in recent months. Dan.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Terry. At this time I would like to ask Ham Lott to update us on Nucor’s downstream steel products businesses. Ham.

Hamilton Lott Jr. - Executive Vice President of Fabricated Products

Thank you, Dan. Good afternoon to everyone. First, I want to extend congratulations and thanks to all of our steel products teams for a very successful year in 2007 in delivering attractive returns and for positioning Nucor for continued attractive growth in fabricated products. Our longstanding operations, Vulcraft in steel joists and decking and Nucor Building Systems in pre-engineered buildings had solid years. We are also very pleased by the impressive 2007 profit performance of our recent acquisitions, Verco in steel decking, Harris in rebar fabrication and Magnatrax in metal buildings.

Vertical integration has been a highly successful strategy for Nucor for four decades. Our ability to build market leadership positions in downstream steel products is a critical factor driving Nucor’s long term profitability. These businesses have consistently generated attractive returns through economic cycles. And they enhance our steel mills performance by providing them with a profitable base load of volume. In short, our value added steel products enhanced Nucor’s overall margin and growth opportunities.

In November, Harris Steel completed its joint venture with Barker Steel merging the two companies’ rebar fabrication operations in northeast US markets. Harris contributed two facilities in cash for a 90% equity interest and Barker contributed 8 facilities for a 10% interest in the joint venture. The Barker facilities had total rebar fabrication annual capacity of approximately 218,000 tons. Just as we expected, Harris is proving to be a very powerful platform for powerful growth in rebar fabrication. With the completion of the Barker joint venture, our rebar fabrication annual capacity now exceeds 1 million tons. That is an increase of more than 37% from Harris Steel’s total capacity at the time of our acquisition in March of 2007. And we see more profitable growth ahead.

The fourth quarter of 2007 also marked the first full quarter with former Magnatrax metal building businesses aboard. The integration of their core brands with our Nucor Building Systems brand is going well. We expect to start up production this quarter at our new Nucor building systems plant in Brigham City, Utah. We will then have 11 plans, nationwide coverage and a total capacity of approximately 470,000 tons. We are looking forward to a bright future in metal buildings. Dan.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Ham. I will now like to ask John Ferriola and his team to update us on Nucor’s steel making operations at our bar, beam, plate and sheet metals. John.

John Ferriola – Chief Operating Officer

Thanks, Dan. Good afternoon, and thank you for your interest in Nucor. 2007 was a very strong year for Nucor’s steel mills. As Dan discussed in his remarks, our product diversification remains one of our most significant strengths. Despite extremely difficult market conditions in the flat rolled business, our steel mills overall generated very attractive profits. Our bar and beam mills generated record earnings, and our plate mills contributed very strong earnings.

Our 2007 performance also highlights the ability of our team to profitably manage our business in highly volatile scrap and raw material markets. Despite a number of dramatic up and downs in monthly scrap market pricing during 2007, Nucor’s quarterly pretax profits fluctuated within a range of just $11 per ton. And most importantly, our profitability throughout the year was at very robust levels.

I have three thoughts to share with you on raw materials. First, Nucor is strategically well positioned as North America’s largest scrap buyer. And that position continues to be well served by a long term partnership with our scrap broker, the David J. Joseph Company

Second, Nucor’s raw materials strategy is working. New lines, extremely successful start up in 2007 has gunned us off to a great start, with their first year’s production of 1.4 million metric tons of DRI.

And third, the Nucor team will continue our disciplined execution of our raw materials strategy. We are very excited about the opportunities ahead of us for more profitable growth.

Mike Parrish will now update us on Nucor’s bar mill group.

D. Michael Parrish - Executive Vice President, Bar Products

Thanks, John. Good afternoon. Congratulations and thank you to everyone on our bar mill group team for the record earnings performance in 2007. This is the fourth consecutive year that the bar mill group has set annual and fourth quarter earnings records. 2007 bar mill shipments were also at record levels and performance further benefited from year-over-year improvement in metal margin spreads. The bar mill team did an excellent job managing our business in an environment of higher raw material and scrap costs in 2007.

Our growth record in the bar market is the initial payoff from our team’s hard work. We have completed a number of highly successful acquisitions. We have implemented capital projects to optimize the existing operations. We have intensified our drive to improve both our cost position and the value we provide to our customers. And best of all, we are continuing to build upon our powerful growth platform.

Our Memphis special bar quality or SBQ mill project is moving ahead very well. The facility will have an estimated annual capacity of 850,000 tons. Complementing our mills in South Carolina and Nebraska, the Memphis mill positions Nucor to provide the most diverse, highest quality and lowest cost SBQ offering in North America. We are encouraged by the strong level of marketplace interest in what Memphis will be able to provide to our customers. Production start up is on schedule for the second quarter of this year.

The first quarter outlook for the Bar Mill group remains positive. Demand is solid from the non-residential construction, energy and agricultural segments. We also expect imports to remain at low levels in the first quarter. And with a good balance between supply and demand, we are optimistic that our margins will remain stable in spite of higher raw material costs.

Finally, I want to thank again all the members of Nucor’s Bar Mill team for your success in 2007. In 2008, our team is focused on working safe, hard and smart, continuing to improve and most importantly, taking care of our customers. John?

John J. Ferriola - Chief Operating Officer

Thank you, Mike. Joe Stratman will now report on Nucor’s structural and plate mills.

P. Joseph Stratman - Executive Vice-President, Beam and Plate Products

Thank you, John. I want to start by saying good afternoon and thank you to our plate and structural team members at Hertford County, Tuscaloosa, Berkeley County and Nucor-Yamato. Our teams have worked hard this year and their collective efforts have been rewarded with record setting performances in all key areas for the combined plate and structural group.

Starting with our plate business, our mills set new annual records for production and shipments, both individually by mill and for the product group as a whole. These tonnage records were set in robust market conditions and led to a strong earnings performance for the plate group. In addition, both plate mills achieved these records while earning the Nucor President’s Safety Award. In fact, both plants have earned that award every year since they began operations as Nucor facilities. That is seven straight years for Hertford County and three straight years for Tuscaloosa. That is a tremendous accomplishment and I want to thank everyone for their efforts in working safely. In our ongoing efforts toward continual improvement, Tuscaloosa is on track with its construction of a temper mill on its cut-to-length line. The temper mill is expected to begin operations in the second quarter of this year. We are very excited about the growth opportunities this will provide our Tuscaloosa team in the plate market. As we look at the market for the first quarter of 2008, we see continued strong demand in most plate consuming sectors, including railcar, barge, wind towers, energy, and bridge fabrication. Plate market conditions are also being favorably impacted by low service center inventories and low import levels. Therefore, we are looking forward to another strong year in 2008 for Nucor's plate mills. Congratulations again and thank you to our teams at Hertford County and Tuscaloosa for your excellent work in 2007.

Now turning our attention to our structural business. I also want to congratulate our teams at the Nucor Yamato Steel and Berkeley beam mills for their success this past year. In fact, both teams achieved record annual earnings in 2007. For Nucor Yamato, it was their second consecutive record earnings year, and for Berkeley, it was their fourth consecutive record earnings year. Thank you for a job well done.

The Beam market remains very strong in the first quarter of 2008. Some fabricators have reported to us that their backlogs already extend into the first quarter of 2009. In addition to these strong fabricator backlogs, service center inventories are low by historical measures and are below year ago levels. Fewer imports are also contributing to a good balance between supply and demand, particularly robust demand is seen such sectors as power, educational facilities, healthcare facilities, industrial complexes, office buildings, and the amusement and entertainment industry.

We are also encouraged by substantial foundation piling volumes in early 2008. That product is a good leading indicator of future structural steel market conditions. As for growth opportunities in the structural business, our Nucor Yamato team is especially excited about our expanded offering of jumbo beams that start production later this year. Nucor Yamato will be introducing to the marketplace a heavy column section up to 730 pounds per foot in the 14 inch by 16 inch section group as well as offering a new 44 inch section group to compete in the bridge and other fabrication markets. We will be the only North American manufacturer of these larger jumbo beams.

In conclusion, we see a very bright future for Nucor's plate and structural businesses. As always our success will continue to be driven by our unrelenting focus on taking care of our customers.

John?

John J. Ferriola - Chief Operating Officer

Thanks, Joe. Ladd Hall will now update us on Nucor’s Sheet Mill Group.

Ladd R. Hall - Executive Vice President

Thanks, John. I want to thank everyone on our Nucor sheet mill team for their hard work in taking care of our customers and our shareholders in a very challenging 2000 flat roll market.

Our team is succeeding by one, developing a new value added product, producing outstanding quality, providing exceptional service, and delivering on time to our customers the products they want at a competitive price. End-use demand in the sheet market remained soft, but stable. The same time, supply side remains tight, with low service center inventories and reduced level of import. Reflecting both increased order activity and higher raw material cost, we have announced increases in our sheet transaction prices, totaling about $140 per ton over the January through March period.

The sheet mill group entered 2008 with a solid book of contract business at approximately 40% of the book. Our contract strategy remains focused on building mutually beneficial, long-term relationship with value appreciative customer. With healthy overseas demand, the sheet mill group is also pursuing attractive export opportunities. We announced earlier this month the appointment of a veteran Nucor flat rolled sales professional to the new position of International Sales Manager. He will be relocating to our Nova Steel subsidiary in Switzerland. Our International Sales Manager will coordinator sales efforts between Nova Steel and Nucor agreements to market… excuse me… to market our products in Europe, North Africa, and the Middle East, and other areas outside of the NAFTA.

We are also looking forward to the third quarter start up of our Decatur, Alabama sheet mill new galvanizing facility. It will have annual capacity of over 500,000 tons and the ability to galvanize 72 inch wide sheet. This will be Nucor’s fourth galvanizing plant and increase the sheet mill’s group total galvanizing annual capacity by one-third to over 2 million tons. Decatur’s galvanizing facility expands our value added product offering in an attractive growth region for coated steel.

Speaking of this strategy to expand Nucor’s participation in the higher value sheet steel, our Berkeley mill enjoyed a number of commercial successes in 2007 with this new complex phase deal for the automotive market. In fact, Berkeley became the first domestic steel supplier to develop, qualify, and supply this unique grade of ultra-high strength steel to several global automotive manufacturers.

Finally, special congratulations to our team at the Crawfordsville cast group facility. Due to their talent and perseverance in ‘07, ‘07 was a breakthrough year for these men and women and their work to develop strip casting technology into a significant growth platform for Nucor. As Dan mentioned in his earlier comment, they recently established a new record for sequence casting with a technology. In fact, they have broken record after record after record in recent weeks. Over a 38 hour period in late December, 24 ladles or 2,467 tons of steel were cast continuously with a prime yield of 97%. The previous record of a sequence of nine ladles and 12 hours of continuous casting had stood until early December. Over a roughly three week period in December, the sequence casting record was pushed to 14 ladles, then to 18 ladles, next the current record of 24 ladles. This progress reinforces our high covenants regarding captive future.

The Nucor sheet mill group team is looking forward with excitement to 2008 and beyond. As we continue to grow long-term value for our customers and Nucor’s shareholders.

John?

John J. Ferriola - Chief Operating Officer

Thank you, Ladd. I will now turn it back over to Dan.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thanks, John, Mike, Ladd, and Joe. I appreciate it.

One other news item from Nucor this week is really noteworthy. It is more tangible evidence in Nucor’s commitment to developing both people and new technologies. We announced the donation of $1 million to create the Nucor endowment professorship for metallurgical and steel making technologies at the South Dakota school of mines and technology. This is the second such endowment in Nucor’s history. In 2006, we endowed the F. Kenneth Iverson chair in the materials and metallurgical engineering department at the University of Missouri, Rolla. And we will continue to see the Nucor team support higher education and engineering and steel making research in the years ahead.

Finally, a lot of the very current… excuse me… a lot of the current varied uncertain outlook for the U.S. economy, I would like to reiterate an important observation made by Terry Lisenby and his comments. Nucor has a long history of emerging from economic downturns stronger than when we entered into that. Not only do we have the balance sheet and the financial flexibility to do this, we have the right people to the Nucor team, and we are always adding more. As you can see our team is focused on the future, a future with our best years still ahead of us.

At this time, we would be glad to take questions.

Question and Answer

Operator

[Operator Instructions].

Our first question is from Michelle Applebaum of Applebaum Research. Please proceed with your question.

Michelle Applebaum - Applebaum Research

Hi, congratulations.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Hi, Michelle.

Michelle Applebaum - Applebaum Research

Hi.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Congratulations, I should say.

Michelle Applebaum - Applebaum Research

Good afternoon. Congratulations on a great quarter in a tough environment.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you.

Michelle Applebaum - Applebaum Research

I have a lot of questions. I am going to try to ask a broad question, so that I don’t ask a couple of small detailed questions, that’s become a few. Which is, I am very excited about what you are doing in with the Duferco. And I think it’s a critical and brand new chapter that Nova Steel thing as well. I was hoping you could just give us the big picture on what the opportunity is in Europe for you, something about that business? If you can give us a little bit more about maybe how much money it might be, that kind of stuff?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Mr. Joe Rutkowski who was very instrumental in the initiation of this development over the past year or two will answer any questions he can and give you some additional information. Joe?

Joseph A. Rutkowski - Executive Vice President

Hi, Michelle. First of all, we won’t talk about the dollars until we ultimately finish the transaction and announce it. But just in general, from a broader view, we have been working for a number of years developing relationships with companies that we think are culturally compatible with Nucor, primarily EAF phased, especially in places in the world where we believe… we feel comfortable doing business. We have been in discussions with the Duferco Group for several years, on a number of different ideas. And after they bought back Pallanzeno, which is a beam mill, which was owned by Mittal until February of 2007 and the other 49% of San Zeno, which was a melt shop, that wasn’t in joint venture with Arcelor, both of which got divested by ArcelorMittal once the acquisition took place. We started talking about them bringing all of their electric art furnace based and long products based facilities into a group, which they called Duferdofin and then seeing whether Nucor wanted to participate in that as well as in the potential expansion of that. So, we… because of some rumors that were going on Europe about our discussions with them, after we signed an MOU, we decided to come out with the announcement. Generally, we would not have done that. We are in those types of discussions with several people in places in the world where we feel comfortable and we feel we have compatibility.

Michelle Applebaum - Applebaum Research

Okay. I guess, I was trying to get a little bit more about what the opportunity was like, what regions do you think, you would be able to sell into with the market looks like. Is that going to all wait until the venture is finalized?

Joseph A. Rutkowski - Executive Vice President

Well, they are already an established company there. They have an expansion going on in their mill in Milazzo, which is Sicily, of a MBQ plant. But generally, they sell in Southern Europe. There’s a very healthy beam market there. They also are looking to sell in Northern Africa and basically maybe over towards the Balkans a little bit. But primarily Southern Europe and it’s… as it is here, it’s a very healthy marketplace.

Michelle Applebaum - Applebaum Research

That helps. Okay. So, it gives you expansion to all these other regions from that place. They are there already.

Joseph A. Rutkowski - Executive Vice President

They are there, yes.

Michelle Applebaum - Applebaum Research

Okay.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

There are also a couple of… I think there are two distribution centers at are part of this as well. Is that correct, Joe?

Joseph A. Rutkowski - Executive Vice President

Yes. That’s correct. Yes.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

And there also is the opportunity to grow that distribution together in partnership, so that we can service Turkey and the Middle East as well. The new bar mill that Joe was talking about would be about 700,000 metric ton mill in Milazzo as Joe mentioned that’s in Sicily. It currently is a beam mill there as well. There is three other locations in Italy and San Zeno, San Giovanni, and Pallanzeno that are included in this joint venture in this joint venture. About 1 million tons of MI finished production. And actually on the beam side in those locations is on the order of…

Joseph A. Rutkowski - Executive Vice President

51.2 million tons.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

So, to give you an idea of the…

Joseph A. Rutkowski - Executive Vice President

And then the San Zeno melt shop has a lot of capability for expansion. So, that’s what we're looking at today

Michelle Applebaum - Applebaum Research

Okay. So, something that currently has a meaningful increment that it has pretty significant growth as well.

Joseph A. Rutkowski - Executive Vice President

We believe so.

Michelle Applebaum - Applebaum Research

Got it. Okay. Just one related question. You are emphasizing that you have had these discussions going on for a long time and kind of typically you don’t announce things till they are more fully baked. But you alluded to the places where you are comfortable culturally, which I think is an important point. Can you just tell us what are the regions you are comfortable culturally?

Joseph A. Rutkowski - Executive Vice President

We certainly are comfortable… we appear to be comfortable in Europe. We get, we can be comfortable in certainly in other parts of North America, we can be comfortable probably in some parts of South America. We have some experience in Brazil, and it has its challenges but it has some great things in it as well. And there are a few other regions where we are still investigating and trying to see if we can get comfortable, I suppose.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Michelle, our original focus as you remember was on taking cast strip and new technologies and foreign partnerships internationally. And so a lot of these discussions that are still going on or about to be concluded, really got their start talking to people about their interest in cast strip. And as we go forward, there will be more of that. And so, Europe has been an area where we definitely are very comfortable and so we look forward to doing some more things in that direction.

Michelle Applebaum - Applebaum Research

Including… I mean this could turn it… I thought Joe quoted in AMM about this potentially turning into something with cast strip as well?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

That’s a possibility, Michelle. At this point in time, I do need to move on to other questions.

Michelle Applebaum - Applebaum Research

Thank you. I said I would be done.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Timna Tanners with UBS. Please proceed with your question.

Timna Tanners - UBS

Yes hi. Good afternoon.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Good afternoon, Timna.

Timna Tanners - UBS

I wanted to ask if you wouldn’t mind giving a little bit more detail, in your written statements and your comments, you talk about how certain areas in the economy are soft, particularly on the flat rolled side. I know you did highlight nicely areas that are stronger. Could you give a little bit more detail where you are seeing weakness? And then in line with that question, if you could also give a little more detail on your export opportunities?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well. I turn to John and Ladd to get into the details of the flat rolled side but there is nothing that’s really changed from the standpoint of where the softness is in terms of demand. What has changed is dramatically is that the supply side of the equation is that the customer’s inventories aren’t. And the export opportunities are growing, not shrinking. As we indicated, we’ve actually formed a team now to, through our Nova group to focus more on that in an organized, structured way.

I would like to highlight one thing that I’ve talked about probably and basically put it in the press release, and that is that we believe that 2008 opportunities are going to be just a direct opposite of what we saw in our market in the late ‘90s. That was the market in late ‘90s where we had very strong demand for flat rolled products and products of all types. But the excessive imports that came in, many of them illegally because we could just buy out successful 201-Ks, had basically put so much supply into the marketplace that even at these record levels of demand, the steel industry had a very difficult time making a profit. Many folks didn’t, many went into bankruptcy in the early part of the century.

And today what we see is, we see a situation where we have demand that is good. It has softened from where it has been, the story remains good. The difference is that supply is very much in balance, maybe a little bit on the tight side with some of the outages being experienced in North America, and particularly because of the considerable fall off in imports.

So today, in 2008 we see just the opposite type of situation we saw in the late ‘90s. One that frustrated us in the late ‘90s because demand was there but there was too much supply. Today we have just the opposite and so that’s why we have a very positive outlook for certainly the first six months of this year and quite possibly the entire year.

John, would you like to get into that a little more please?

John J. Ferriola - Chief Executive Officer

Maybe to mention a few of the specific issues. I do want to say, we said very specifically, it is soft, but stable. And that’s the big difference from what we have seen in the past also. Some of the areas that were particularly challenged, everyone knows what they are, automotive, appliance with the housing situation. But we see some challenges on the demand side in those areas. Conversely, and as Dan mentioned, on the supply side, we see inventories down at our service centers substantially year-over-year, imports are down significantly and there has been a number of production issues from some of our competition that have all added to the supply. So it’s always an issue of supply and demand. And although demand is soft but stable, we see some real opportunities due to the supply issues.

Timna Tanners - UBS

But let me clarify, if I could then. We know that you have historically been a big supplier to service centers and also to the non-residential construction sector and those are two areas where I think people are starting to get concerned and some service centers are talking, already talking about a bit of weakness. Are you seeing anything incrementally in areas of non-res construction maybe in your joists business or anything where you could comment on specifically?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well. The first comment I will make is that we see our order book remaining strong with our… we just recently opened up our books the sheet on, for March and we see service center order entry stable, very stable. So I am not sure where that’s coming from. In all other products, service center demand is extremely strong. So I don’t see any change there. In terms of areas where we have grown, as you know, we have really expanded our product line and into the higher valued, more stable markets particularly in sheet… and Ladd, you might want to make a few comments about some of the things we are doing at Berkeley and Crawfordsville in the higher valued products.

Ladd Hall - Executive Vice President, Flat Rolled Products

Thanks John. A couple of things. One, you got to remember we mentioned exports. Our export market has in ‘07 been very strong and in ’08 we anticipate that being as strong or stronger. You asked where that was going. We have a good export market into Europe. Latin and Central America is growing. South America has some opportunities. So not only are we solid in the States because of low supply or, the demand is definitely stable but soft, but we are absolutely seeing increases in our export business which is taking tons from the Mill to those areas.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Timna, one of the areas you may be getting this discussion of some softness is really tied to residential and light commercial. In that you are talking about steel framing. And because of the massive slowdown in residential construction and building of associated strip malls and what have you, small office parks associated with those in some parts of the country, in fact, the lots of parts in the country, the steel framing business has softened quite a bit. Lumber prices have really crashed. So the competition price wise for steel framing versus wood framing is heightened. And I know that some folks in the processing and service center business who sell to those areas, also produce in those areas for their own divisions in steel framing are seeing the negative impacts of that.

Timna Tanners - UBS

Okay, great. Can you quantify your export business, and I will go after that.

Unidentified Company Representative

I can give some detail on that. in 2007, outside of the United States, we sold about 2 million tons across all of our product lines, about a million tons of that went outside of the NAFTA region.

Timna Tanners - UBS

Expectations for ’08.

Unidentified Company Representative

We expect that to grow, we have got a great organization in place, working with the Nova Steel group and now we have got some people in place to coordinate that. I see it growing in 2008, both because of that organization, and what we see with the dollar today.

Timna Tanners - UBS

Thank you.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Timna. One last point I will make on that is on the 2 million tons, this is fairly equally split between long products and flat products. Next question, please.

Operator

Thank you the next question comes from Evan Burke of Morgan Stanley. Please proceed with your question.

Evan Burke – Morgan Stanley

Hi. Congratulations on the strong fourth quarter.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Evan.

Evan Burke – Morgan Stanley

A question on, something in your press release actually on a scrap. I know a lot of us have seen the charts out there that show Nucor’s profits versus spikes in swap prices. And generally with an exception here or there, we have seen profits actually improve in periods of rising scrap. Why is that written up as a risk? Do you see that more as an opportunity?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well we would strongly agree with you. That history shows and recent history reconfirms that higher raw material costs are usually, tag right along and lead into higher profitability and better margins. Obviously, the reason for that is, the reason why raw materials are up because the demand is up. It’s very simple, very straightforward, and usually works to our advantage, it works to our advantage in particular over down periods where our variable costs of scrap goes down significantly and our margins stay relatively strong. The issue that we talked about in the conference call was in particular related to the first quarter and our guidance. It’s more of a timing issue. Depending upon what happens with scrap in our February buy, and March buys, last year we saw strong drop off in scrap prices, after a sharp uptick, and they still remain at higher levels and they started but there was a more than a 50% drop off. I am not saying we are going to see that again, but we do believe we will see the current scrap pricing be at or near the peak of scrap pricing and we do expect to see some softening.

The timing issue comes in as to when to scrap, it depends on the time when scrap is purchased, it’s shipped, it arrives, it goes into our heaps, it gets blended in with the scrap on the ground, and how the actual costs vary throughout the quarter as the scrap comes in that was purchased in December and then again in January at higher prices. So it’s more of a timing issue, it’s got nothing to do with the fact that we strongly agree with you that upward scrap prices usually translate into upward margin increases.

Evan Burke – Morgan Stanley

Given that we are already a little bit into the first quarter here, is the timing starting to work out in such a manner that we are starting to see margins compress a little bit, maybe in January.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Now we are way to early into the first quarter to make that kind of a projection. We will know more as we get through the middle of February.

Evan Burke – Morgan Stanley

Okay. Fair enough. Just quickly, do you have any LIFO guidance or a delta on planned outages in 1Q?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I don’t think we have much in the way of outages maybe, some in March, at some of our bar mills, but in terms of LIFO, we are forecasting. Terry?

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

We are forecasting more than $20 million, say $20… between $20 million and $25 million.

Evan Burke – Morgan Stanley

Great. Thank you.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Charge, LIFO charge.

Evan Burke – Morgan Stanley

Charge. Yes, that helps.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Okay. Next question.

Operator

Our next question comes from John Hill of Citi. Please proceed with your question.

John Hill - Citigroup

Great, and thank you very much for the presentation.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, John.

John Hill - Citigroup

Yes. Just following-up on the LIFO question, the $92 million charge in the fourth quarter. Was that all just for material in the fourth quarter or was there any sort of catch up or adjustments related to prior periods?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Not so much a catch up, but our LIFO is driven by the last purchase. So, there’s really no way to know the index until the end of the year. So, there’s no way to accurately calculate the reserve until year-end. So, I don’t know if that answers the question or not. But that’s how it’s done.

John Hill - Citigroup

Will that relate to volumes of scrap or commensurate volumes of scrap used in the quarter, does it relate to much higher volumes of scrap than will be used in the period?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

It relates to the inventory on hand at year-end.

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

And the value of that inventory. I’ll just add a couple of things here John, that might help you. At the beginning or the year, you take your best shot at forecasting where you see things at the end of the year. And without exception the month… fourth quarter will be your correction month. It could be the correction in the way of a charge or correction in the way of a credit, based upon how well we guesstimate where we see scrap pricing at year-end and as you can well imagine with the kind of ups and downs we have seen over the last five years, that’s a pretty tough thing to do. So, you take your best shot knowing that there will be an adjustment in the fourth quarter one way or the other. And this time, it happened to be the serious charge.

John Hill - Citigroup

Yes. I guess that was the nature of the question with this large adjustment in the fourth quarter, does it not suggest perhaps that underlying operating results for even stronger than they appear was really where it’s going with that.

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

You could make that conclusion. Yes.

John Hill - Citigroup

Yes. And another kind of on a small issue. I guess, just from the third quarter or the fourth quarter, we saw realized prices go up roughly $8. We saw realized scrap costs go up about $8. We saw EBIT per ton go down by $9, and that’s worth an additional contribution from acquired downstream volumes. So, is this just energy cost and other consumables or what’s driving that? Prices of scrap are moving together, how come we took that step down on EBIT per ton?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well, the biggest issue on that is the LIFO charge.

John Hill - Citigroup

Yes. That’s what I thought. Okay. Good. Thank you.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You are welcome. Next question.

Operator

Thank you. Our next question comes from Mark Parr of KeyBanc Capital Markets. Please proceed with your question.

Mark Parr - KeyBanc Capital Markets

Hey, thanks very much. Hey, good afternoon.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Good afternoon Mark.

Mark Parr - KeyBanc Capital Markets

Yes. I was… I had a couple of follow-up questions on the first quarter, while we are talking about it. Could Dan, what sort of price realization assumptions and scrap costs assumptions are in say $1.25 first quarter result?

John J. Ferriola - Chief Operating Officer

What time?

Mark Parr - KeyBanc Capital Markets

How much… how much do you think realized prices will be going up and how much are you assuming scrap is going to go up?

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

Well, Mark, this is Terry. We really…

Mark Parr - KeyBanc Capital Markets

Hi, Terry.

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

We build our forecast actually in the other direction. We get each operating unit to give us their best estimate for the quarter.

Mark Parr - KeyBanc Capital Markets

Okay.

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

And we go from there. So, we don’t give them a price realization or a scrap number to use in that guidance. It’s all sort of market driven.

Mark Parr - KeyBanc Capital Markets

Okay. I guess I am just not asking the question right. I guess, you take with all the grounds up information that you have from the operating segment. What’s the implied increase in realized prices 1Q versus 4Q?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

We don’t know. I don’t think we have ever given out that type of information before in various… across the country and by division. So, you are asking, okay. What numbers might you have back there and some formal incorporate that tells you what it is going to be is. As Terry mentioned, each division looks at what it sees in it’s market, product mix, it’s geography, scrap costs can vary, selling price can vary based upon product mix quite significantly in regions of the country and product type. We ask them for what we state, see their EBIT is going to be for the quarter, month-by-month and we put all that together and we come up with a total for the Company and that’s how we give guidance.

Mark Parr - KeyBanc Capital Markets

Okay.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

There is no one page, that’s just there, saying here is what our scrap assumption is, here what is our steel selling price assumption is on average. That’s not the way we go about it.

Mark Parr - KeyBanc Capital Markets

Right. If I could just ask one other question. This maybe too much detail, but I will ask it. Do you look for--?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You can ask Mark. You can always ask.

Mark Parr - KeyBanc Capital Markets

All right, sir. Do you look for spreads in the flat rolled business to widen in the first quarter in terms of EBIT per ton?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Again that will depend upon how scrap actually flows from purchase through the inventory into the usage in the first quarter. And it is certainly a possibility and as we move through the quarter, that should, that should be more of that rather than less of that, beginning of the quarter, that may not be the case. So, we will just have to see how it depends on shipments, how many times have we actually shipped and everybody thinks we should know that, but you have talked the railroads and the trucking companies about guaranteeing so many railcars we'll have every month and then we can give you a good forecast on that.

Mark Parr - KeyBanc Capital Markets

Okay. All right. Terrific. All right. Look, you guys are doing a great job. Keep up the good work and thanks for the input.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Mark. Sorry, I couldn’t give you more detailed information.

Mark Parr - KeyBanc Capital Markets

All right.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Next question.

Operator

Our next question comes from Charles Bradford of Bradford Research. Please proceed with your question.

Charles Bradford - Soleil Bradford Research

Good afternoon.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Good afternoon Charles.

Charles Bradford - Soleil Bradford Research

You guys are talking about $800 million of CapEx. You are sitting with $2.2 billion of cash, $1.3 billion which you recently raised. Now, I am not asking you for any names of any acquisition targets, but they seem to be inconsistent. I am assuming that this money is going for something along that line. Is that--?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I am sorry, Charles, do you have…?

Charles Bradford - Soleil Bradford Research

I am assuming that the large cash position way in excess of your CapEx is geared to something you maybe wanting to buy. I am not asking you for any names. But is that basically the target?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Not trying to be elusive, Chuck, but we don't really get into talking about whether we are about to do an acquisition or not. Actually, we are thinking could this belong maybe to some of the banks and some of the insurance companies that are backing the banks, these days if we can help them out a little bit.

Charles Bradford - Soleil Bradford Research

That might hurt the multiple.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

We are always looking for opportunities. And one is liable to pop at any point in time. We have seen… well, we have done throughout the course of 2007. We have a number of opportunities in front of us that may or may not occur during 2008. So, it wouldn’t be out of the realm of possibility for you to see us conclude some acquisitions during the course of 2008. But whether there is anything specific depending or not and how quickly that money might be put to use is not something that we will comment on.

Charles Bradford - Soleil Bradford Research

I was just looking towards a more general guidance that you are not borrowing money, let’s say, to buyback shares which was something you hadn’t done in the past, but something of that ilk. It is to expand the business, basically.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

It is. Could be though we are might be planning on new Greenfield project and could be that we… also that we are also looking at… concluding some acquisitions successfully during the course of the year. We thought it was a good time to go out into the market and borrow. And I would agree with you, though, Chuck, it is definitely not, because we are planning on using that, so you buyback stock.

Charles Bradford - Soleil Bradford Research

Okay. One other small item. Terry have an estimation for depreciation for ’08.

Terry S. Lisenby - Executive Vice President, Chief Financial Officer and Treasurer

Yes, our current estimate is $400 million for all of ’08.

Charles Bradford - Soleil Bradford Research

Okay. Thank you.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You are welcome. Next question.

Operator

Our next question is from David Gagliano of Credit Suisse. Please proceed with your question.

David Gagliano - Credit Suisse

Great. Thanks. Just a quick question. It’s a bit of a longer term question on the raw material side. Obviously, a lot of folks on the scrap market these days and you have somewhat quietly produced 1.4 million tons of DRI and I was wondering… are you re-thinking your strategy in terms of DRI expansion opportunities and where would you like to be in say two years on the DRI side?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well, I would think we mentioned before David, our strategy there is going to be the increased production at Nu-Iron facility at Trinidad. John, what do you think, Ladd, what do you think we will be able to get to?

John J. Ferriola - Chief Operating Officer

2 million tons. 2 million metric tons

Ladd R. Hall - Executive Vice President

Initially, we can get up to 2 million metric tons. We ultimately think that with the expansion of the plant we can go up to about 2.4 million tons... metric tons.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

So, that’s pretty much the limit David of that facility. As we stated all along, our goal is to be 6 million to 7 million tons of scrap replacement units, high quality ones, which could include more DRI, could include pig iron and the scraps base. We already have two acquisitions of mostly steel companies, about 500,000 plus tons of scrap processing in the Company today. And we haven’t ruled out that might be something we would do in the future. We just haven’t specifically targeted that our scarp segment, because of our strong relationship with the David J Joseph Company and the fact that we are buying 20 plus million tons of scrap a year.

David Gagliano - Credit Suisse

As of today, is your preference to go forward with the organic or would you prefer to go with the acquisition route on the scrap side?

Ladd R. Hall - Executive Vice President

On the scrap side?

David Gagliano - Credit Suisse

Sorry, on the replacement… on the replacement unit side?

Ladd R. Hall - Executive Vice President

Probably through Greenfield. We have explored a couple of partnerships, but nothing as we move forward to-date.

David Gagliano - Credit Suisse

Okay. Fair enough. Thank you very much.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You are welcome.

Operator

Our next question comes from Sam Martini of Cobalt Capital. Please proceed with your question.

Sam Martini - Cobalt Capital

Hi. Just had two questions. One… and I guess first to see if we could get any further clarity on Timna’s question on the export market. If you are write in imports continue to stay muted or structurally under supplied market in the U.S., can you just talk about the economic preference to… I mean is it as simple as pure dollars and cents or do you have customer relationships you are getting pressure to keep your product within the United States. I mean, it seems like you have huge umbrella pricing effect going on. And I am just trying to understand some of the… it can’t be that simple, I am trying to understand how you think about… to export or not to export. Is there other export capacity constraints at the ports, or is there anything else that would constrain that and then I have one follow-up.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well, you should take most of what you just said and flush it out. I am not giving any further consideration. There are no constraints except what we organizationally are able to do in terms of exporting steel as John mentioned we are putting together within the Company to focus on increased exports. We have increased our exports considerably, both in flat and long products. We will continue to look at those opportunities, part of it is building relationships, part of it is still dealing with situations around the world where there may have been over supply. The fundamental issue in this country today is not want to undersupply by any means. What we have been saying is not that we are being undersupplied, except maybe for short-term, whether it’s been a couple of hours, believe it there. i think, if the U.S. market is going to be undersupplied, there still will be even at these levels 20 million to 24 million tons of imports coming in, just not the 35 million to 45 million tons. And we have seen in the past that have built up the excess of inventories that created the imbalance between supply and demand. And today, we see in this marketplace that we are more imbalance not that we are in a situation where we are seeing long-term shortages. John?

John J. Ferriola - Chief Operating Officer

I just… one point you mentioned early on saying our customers might want us to stay in the United States and not export as much, and it’s actually just the opposite. A lot of our OEM customers who are moving within NAFTA to other regions are encouraging us to follow them because of our service and our quality and our delivery performance with those customers. So, part of this move out of the United States with our product is being driven by our customers’ requests.

Sam Martini - Cobalt Capital

And then just to elaborate a little bit more again. If you were to just… if you were paint a theoretical picture of the umbrella continues to go higher--

John J. Ferriola - Chief Operating Officer

What do you mean higher?

Sam Martini - Cobalt Capital

The delivered price of the competition coming in is growing more, rather than staying flat. So, let’s say delivered… a delivered hot bands coming in at $7.50 a ton or something. Do you believe that you can just re-price and capture that or are you hearing from folks that the squeeze is just too much, to Timna’s question, and they want to lay off a little bit, and not take that whole spread.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Well, listen, there are good times and bad. The name of the game is the price to the market. Right. And that’s what you’ll see us do, you’ll see what the competition do, you’ll see our customers do it and you'll see their customers' customers do it. The idea of laying off or not laying off, really doesn't enter into it. What we'd be looking at is where do we stand in relation to the market. And so pricing internationally is $100 a ton above us, $50 a ton above us. But we will look to optimize our business, in particular, what or how we can in the marketplace. Just as we will, pricing internationally is $50 or $100 below us, we will respond accordingly to be competitive.

Sam Martini - Cobalt Capital

Can I ask you what you think Shanghai delivered to Houston is today?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I have no idea because the pricing is getting more expensive not cheaper.

Sam Martini - Cobalt Capital

Thank you.

Operator

Our next question comes from Bob Richard of Longbow Research. Please proceed with your question.

Bob Richard - Longbow Research

Good afternoon, and thanks for taking my call.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You're welcome, Bob. Thanks for calling.

Bob Richard - Longbow Research

Yes, Sir. Real quick, could you comment on the pricing outlook for your steel building products? I would presume it’s going to go up just because of the spot increases on cold rolled. But is there going to be much traction there for vigorous price increases there?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Ham, do you want to take that question please?

Hamilton Lott Jr. - Executive Vice President of Fabricated Products

Yes. We're raising prices. I mean, the mills have raised prices to us and therefore, we're going to raise prices going out into the market. Obviously we’ll have to see how the market accepts that. But, we have done in 2008 exactly what we'd done in 2004. We'd gone around and informed our customers that the price of raw materials has gone up, the price of steel is going up and that we're going to give them guaranteed prices if they give us an order by one day and if they shift the building by another day. We did that in 2004 and did not renege on a single contract. Frankly we were probably the only nationwide builder that didn’t renege on a contract in 2004. We’re going to use the same strategy this year.

Bob Richard - Longbow Research

Okay. Thank you very much. That’s helpful. And just a quick follow-up. Any concern of any integrated mills increasing their spot exposure?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

No. Not at all.

Bob Richard - Longbow Research

Band box is big enough for everyone to play in, I guess. Okay..

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

If they increased their spot exposure, they would decrease something else. And I don’t know that, that necessarily means that there’s less to go around.

Bob Richard - Longbow Research

Okay. Thanks very much.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Aldo Mazzaferro of Goldman Sachs. Please proceed with your question.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Hi, Aldo.

Aldo Mazzaferro - Goldman Sachs

Hi Dan. How are you?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Good, and yourself?

Aldo Mazzaferro - Goldman Sachs

Thanks for taking the call. There was a long queue, I guess, in questions. Pretty much all my questions have been answered. I had one kind of just general question for you though. When we went away and came back, it seemed like the buying patterns had really increased where the mills were able to raise price out three months in a row, January, February, March. I am wondering has that persisted for the last say, three or four weeks. Are you still seeing service centers aggressively looking for material or do you think they are a little shell-shocked with the March pricing?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I think that John has already addressed that issue and said that business continues to be strong.

Aldo Mazzaferro - Goldman Sachs

And in terms of your export business, Dan, isn’t that something that’s likely to quiet down as you get more domestic opportunity? Or would you think there is… I don’t know…

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I think we are running at… have been running at full capacity in flat rolled for a number of years. So we’ve got plenty of opportunities to do both.

Unidentified Company Representative

As long as there’s room for a little more.

Aldo Mazzaferro - Goldman Sachs

What do you think you could… I mean I know you did 22 million tons of production… what do you think you could do total production if you ran full out, really full out for a year?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Our published capacity is about 25 million tons to 26 million tons total on all products, plates, sheets and we said before sheet’s about 10 million tons.

Aldo Mazzaferro - Goldman Sachs

All right. Okay Dan, looks good to me. Thank you.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Aldo.

Operator

Thank you. Our next question comes from Michael Williamse of CIBC World Markets. Please proceed with your question.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Good afternoon, Michael.

Michael Williamse - CIBC World Markets

Great, thank you. Yes, most of my questions have been answered as well. Just sort of one more to follow up on the scrap market and kind of following all those questions, was there anything that happened in December that drove the scrap price in such a fast manner? Last year scrap prices didn’t really jump until February once your manufacturing came at the seasonal shut down. It was just surprising that it happened, let’s say last week of December which is pretty slow period. Was there anything you can point towards or is that just the nature of the scrap market?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

My recollection is scrap started going up at the end of the year and kept going up through January, February last year, didn’t come down until April. And pretty much seeing the same thing this year. I mean, part of it is, certain segments of the manufacturing sector have been seeing less demand, so they took a little extra time off, less product was produced, so it meant less prime scrap is produced and there was an uptick in demand from export particularly Turkey. And right now Turkey is a little bit quiet and things look quite a bit softer than they were say in the last fall round [ph].

Michael Williamse - CIBC World Markets

So would your best guess right now be that the scrap prices fall off a bit in February or March?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I wouldn’t have predicted scrap would have gone up the way it did in January. So I am not going to get into scrap prediction game. But I can just tell you that our sense is that scrap has peaked, if not, very close to peaking.

Michael Williamse - CIBC World Markets

Okay. That’s fair, thanks very much.

Operator

Our next question comes from Michelle Applebaum from Applebaum research. Please proceed with your question.

Michelle Applebaum – Applebaum Research

Hi.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Welcome, Michelle.

Michelle Applebaum – Applebaum Research

Hi, I didn’t expect to get a second chance. With regard to the LIFO question, John was asking a good question earlier, about the prior quarter’s impact. You typically take a LIFO credit for over-accruing the first nine months, and so your LIFO charge being $60 million higher than you had thought. How much of that is related to the prior nine months?

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Well we typically don’t take accredit for over-accruing. We look at LIFO every quarter, update our projection on what year end is and then adjust the charge in that quarter and try to be on track for year end.

Michelle Applebaum – Applebaum Research

Okay.

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

So, I mean, it’s an estimation but at the end of each quarter, it’s our best estimate of what it will be for the year.

Michelle Applebaum – Applebaum Research

Can you tell me what there might have been in the fourth or the prior quarters, if there was anything?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

I think the first nine…

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Well, there is really no way to separate it by quarter, the charges for the year, because it is based on the last purchases.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Yes. But the first three quarters are go and look, taking our best estimate on where it’s going to end up. We don’t know where it ends up until last purchase of scrap are made and come in. So we are just taking our best shot, and as Terry said, updating it every quarter as we give our guidance. I mean the first quarter last year, I think…

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

We went… we did $24.5 million, $66.5 million, $11 million and then $92.3 million, that was the quarterly charges. So you can see what was happening to our estimations of year-end scrap, and LIFO value, and there is really no way to put that back in the quarters.

Michelle Applebaum – Applebaum Research

So you really can’t separate what happened in the fourth?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

No. It’s a year end adjustment Michelle.

Michelle Applebaum – Applebaum Research

If you had to do it again with perfect knowledge, would that number be total divided by 4 for each quarter?

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Yes, pretty much.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

We had a $194 million thereabouts for the year charged. So we divide it by 4 and spread it out like. When you get that crystal ball, let me know, we will go to Vegas.

Michelle Applebaum – Applebaum Research

Yes. I think there is one in Fort Wayne. Can I ask another question?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Nope, you are done. Next question.

Operator

Thank you. Our next question comes from Timna Tanners of UBS. Please proceed with your question.

Timna Tanners – UBS

Thanks for taking another, I just had one question really, it’s on CapEx, it’s a big increase. If you look two years ago, it’s more than double, and it has doubled your depreciation forecast. Can you give us any color about the kind of projects that seems like a lot of the projects in 2007 are completed in the first half or the third quarter? So, can you give us any color on your CapEx guidance?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

For the first quarter or for the year?

Timna Tanners – UBS

No, you gave annual CapEx guidance of $800 million--?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Yes, we gave.

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Yes, about $800 million.

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Timna, I think in there Greenfield expansions are about… all $350 million of it.

Timna Tanners – UBS

And those are the previously stated ones.

Terry S. Lisenby - Chief Financial Officer, Executive Vice President and Treasurer

Yes, Cast Strip, Arkansas, Building Systems, Utah, Galvanizing, Decatur and the Bar Mill in Memphis. And then the rest of that would be CapEx for existing operations.

Timna Tanners – UBS

Okay, great.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

You are welcome.

Operator

This does conclude the question-and-answer session. I would now like to turn the call back over.

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you very much. Again, I would like to thank everybody who participated on the call, all our customers for helping us have another successful quarter and year and most of all, the Nucor teammates who make it happen everyday in a tough environment. We are going to keep getting better, mostly through their efforts. Thank you all very much.

Operator

This concludes the conference call. Thank you everyone for joining. You may now disconnect.

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Source: Nucor Corp. Q4 2007 Earnings Call Transcript
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