New Headwinds For Nucor, But Still Some Value
Stephen Simpson, CFA
Stephen Simpson, CFA
Tue, Dec. 6, 9:34 AM
- Nucor (NUE +0.1%) agrees to acquire Southland Tube, a Birmingham, Ala.-based manufacturer of hollow structural section steel tubing, for $130M.
- Southland Tube has the third largest U.S. market share in HSS steel tubing, with annual shipments of ~240K tons.
- Following its acquisitions of Independence Tube and Southland Tube, NUE now sees ~20% of total steel mill shipments going to downstream businesses vs. 8% in 2006.
Wed, Nov. 30, 11:47 AM
Wed, Nov. 30, 10:24 AM
- Noting that ArcelorMittal (MT +1.8%) has raised its hot-rolled sheet pricing by $40/ton to $600/ton, J.P. Morgan's Michael Gambardella raises his price targets on several stocks in the U.S. steel industry (SLX +1.5%).
- He increases his target for AK Steel (AKS +3.1%) to $11 from $8.50, on Nucor (NUE +0.6%) to $70 from $59, on Steel Dynamics (STLD +0.9%) to $41 from $31, on U.S. Steel (X +3.3%) to $37 from $29, and on Cliffs Natural Resources (CLF +1.2%) to $10 from $7, while keeping Overweight ratings on all five stocks.
- Gambardella says supply cuts in the U.S. from both capacity curtailments and lower imports should support higher U.S. steel prices, and thinks the Trump administration's impact on trade could be "much quicker and more meaningful" than its infrastructure plans.
Tue, Nov. 29, 12:41 PM
- Steel stocks (SLX -2.4%) look expensive following their post-election rally, but the strong U.S. dollar could keep a lid on prices while slowing growth in China could derail the steel price rally, Macquarie analysts say as they downgrade several names in the sector.
- U.S. steel prices have risen to $550-$560/ton, driven partly by tight domestic supply and a lack of imports, but at current levels steel stocks reflect steel prices of more than $600/ton, increasing the risk posed by the shares, the firm says.
- Macquarie downgrades Nucor (NUE -0.5%), TimkenSteel (TMST -1.9%) and Worthington (WOR -3.5%) to Underperform from Neutral, and cuts Steel Dynamics (STLD -0.3%), AK Steel (AKS +0.1%) and Reliance Steel (RS -0.1%) to Neutral from Outperform; U.S. Steel (X -2%) is maintained at Underperform, while Argus analysts downgraded X, saying the shares are overbought.
Wed, Nov. 23, 4:56 PM
- The top U.S. steelmakers' trade group says it has been in contact with Pres.-elect Trump's transition team since his election on Nov. 8, and will seek tougher trade defenses under the new administration.
- The American Iron and Steel Institute - whose members include ArcelorMittal USA (NYSE:MT), Nucor (NYSE:NUE), U.S. Steel (NYSE:X) and AK Steel (NYSE:AKS) -is particularly excited by the presence in Trump's inner circle of Dan DiMicco, a former Nucor CEO who is a top contender for U.S. trade representative in the new administration.
- U.S. steel company stocks have surged 25% since the election, fueled by bets for stronger trade defenses, tax cuts and infrastructure spending, but auto manufacturers have begun to push back; Ford said last week that Trump's plan to slap 35% tariffs on cars and trucks imported from Mexico would hurt the auto industry and the U.S. economy.
Tue, Nov. 22, 3:45 PM
- U.S. Steel (X +11.4%), AK Steel (AKS +10.7%), Steel Dynamics (STLD +4.1%), Nucor (NUE +4.4%) and Commercial Metals (CMC +4.7%) all surge to 52-week highs, extending their Trump-fueled rally as trade protectionist talk suggests that higher than usual premiums can be achieved for steel mills.
- BofA Merrill Lynch raises its 2017 average price estimate for U.S. hot-rolled coil to $650/short ton vs. its prior view of $535, as rising global prices and more protectionism should fuel strong steel prices into 2017 (SLX +5.8%).
- Bloomberg reports BofA boosted its stock price targets for Buy-rated AKS to $12 from $7, STLD to $37 from $30, CMC to $24 from $20, NUE to $65 from $57, and Allegheny Tech (ATI +7.5%) to $20 from $19; the firm remains Neutral on X and Reliant Steel (RS +6.1%).
- Also sharply higher today: MT +8.3%, CLF +13.8%, WOR +5.3%, RIO +4.1%, BHP +5.2%, VALE +7.8%.
Wed, Nov. 16, 2:43 PM
- Despite a sector-wide rally in the steel sector (SLX -1.6%) following Trump's election win, some players will be left out of an infrastructure-driven growth spurt and may take big hits under Trump's promised protectionism, J.P. Morgan's Michael Gambardella warns.
- Carbon steel makers such as Commercial Metals (CMC -0.5%), U.S. Steel (X -0.2%), AK Steel (AKS -1.9%), Steel Dynamics (STLD -0.1%) and Nucor (NUE -0.8%) should benefit from infrastructure spending and potential supply cuts brought on by a harsher trade environment, according to Gambardella.
- But specialty steel companies including Allegheny Tech (ATI -5.9%), Carpenter Tech (CRS -2.6%) and Haynes (HAYN -12.2%) have little exposure to infrastructure applications as well as significant export businesses, whose 30%-plus revenue contribution would decline under a stronger dollar and retaliatory trade policies, the analyst says.
Wed, Nov. 9, 11:19 AM
- Copper surges to a 15-month high, now +2.9% at $2.45/lb. after rising as much as 3.4% to its highest since July 2015, also boosting other metals as some investors speculate that a Trump presidency could launch significant fiscal stimulus and boost demand for metals.
- In his victory speech last night, Trump said he would prioritize the rebuilding of American infrastructure with hopes of doubling U.S. economic growth.
- Among related tickers: FCX +7.7%, RIO +5.9%, BHP +3.4%, VALE +4.2%, MT +10.6%, X +17.1%, STLD +8.2%, AKS +11%, NUE +11.6%, CLF +12%, RS +8.5%, WOR +3.8%.
- ETFs: JJC, CPER, CUPM
Wed, Nov. 9, 2:44 AM
- With Donald Trump elected as the 45th President of the United States, one of the biggest beneficiaries might be Mexican cement company Cemex (NYSE:CX).
- Trump has campaigned to build a wall on the Mexican border and immediately begin the process of deporting illegal immigrants with criminal records.
- Other beneficiaries: MLM, VMC, GVA, TTEK, X, NUE, STLD, DE, CAT, FLR, KBR
Mon, Nov. 7, 4:42 PM
- The Commerce Department formally opens an investigation into allegations that Chinese steel producers are shipping steel (NYSEARCA:SLX) through Vietnam to avoid U.S. import tariffs.
- A petition filed in September by ArcelorMittal USA (NYSE:MT), Nucor (NYSE:NUE), AK Steel (NYSE:AKS) and U.S. Steel (NYSE:X) alleged that Chinese steelmakers have shipped metal to Vietnam, made enough changes to it that they could then classify it as Vietnamese, and then shipped it to the U.S. under the lower tariffs charged on Vietnamese steel.
- The Vietnamese corrosion resistance processing was "simple" and added only a small amount of value to the finished product imported into the U.S., with up to 90% of the value produced in China, the DoC says.
Sun, Nov. 6, 4:19 PM
- The Department of Commerce is expected to launch a formal investigation Monday into whether Chinese steel companies are shipping steel through Vietnam to avoid U.S. import tariffs, a source tells WSJ.
- The decision to investigate follows complaints from U.S. steelmakers (X, NUE, AKS, MT), and is an escalation of U.S. efforts to stop a glut of China-made metal from flooding U.S. markets.
- Independent trade data supports what the steelmakers are alleging: In H1, shipments of steel from Vietnam to the U.S. increased to 312K tons from 26K tons; over the same period, Chinese exports of steel to Vietnam rose 46% to 6.3M tons from 4.3M tons.
Tue, Oct. 25, 1:14 PM
- U.S. steelmakers are higher after AK Steel (AKS +6.2%) and Schnitzer Steel (SCHN +2.3%) both reported stronger quarterly earnings, as the companies benefited from cost-cutting measures.
- AKS reported better than expected Q3 earnings as total operating expenses fell 19% Y/Y; revenues fell 15% Y/Y to $1.45B as shipments fell 24%, partly related to a decision to focus less on less profitable commoditized products, but the selling price per ton rose 11% to $1,016, due to a better product mix and a more favorable selling environment.
- SCHN posted above consensus FQ4 earnings and revenues as overhead costs declined 20% Y/Y; ferrous sales volumes of 914K tons and nonferrous sales volumes of 153M lbs. were 2% and 13% lower Y/Y, respectively.
- Also: X +2%, STLD +0.8%, WOR -0.1%, RS -0.6%, NUE -0.7%.
Thu, Oct. 20, 12:36 PM
- Three steel companies - Steel Dynamics , Reliance Steel and Nucor - have reported earnings since yesterday’s close, with three sharply different results.
- Steel Dynamics (STLD +2.7%) is higher after reporting Q3 earnings that more than doubled as revenues rose 7.7% Y/Y to $2.1B, and gross profit margin improved to 19.4% from 11.7% a year ago, driven by a market rebound and a drop in Chinese imports.
- Reliance Steel (RS -6%) is sinking after Q3 results missed analyst estimates and guided Q4 EPS below consensus, now seeing EPS of $0.65-$0.75 vs. $0.99 analyst consensus estimate, and expecting Q4 tons sold to fall 5%-7% Q/Q and average selling prices to drop by 1%-3% Q/Q.
- Nucor (NUE +0.2%) has recovered from earlier losses to edge into the green after Q3 results missed expectations and warning that Q4 earnings likely will decrease "notably" from Q3 because of lower margins in the steel mills segment, partly due to typical Q4 seasonality.
- U.S. Steel (X +4.9%), which reports earnings on Nov. 2, and AK Steel (AKS +4.3%), which reports on Oct. 25, are higher.
Thu, Oct. 20, 9:03 AM
Wed, Oct. 19, 5:30 PM
Tue, Oct. 4, 5:56 PM
- Nucor (NYSE:NUE) says it is ending a four-year deal with Encana (NYSE:ECA) to jointly develop natural gas wells in Colorado, and instead purchases 49% of ECA’s natural gas rights in the region.
- NUE says the restructuring of its gas hedging operation will ensure access to long-term supplies of natural gas, which it needs to produce direct reduced iron in plants in Louisiana and Trinidad and to run its steel mills.
- Under the new deal, NUE is no longer required to participate in a minimum amount of well drilling annually with ECA.
- NUE also sells its 50% stake in Hunter Ridge Energy Services to ECA for an undisclosed sum; the two companies formed Hunter Ridge in 2012 to perform gas and water gathering operations associated with their joint wells.