Nucor Warns of First-Quarter Miss Due to Imports

By Angela Chen 

Nucor Corp. warned Thursday that it would post lower-than-expected earnings for the first quarter, pointing to higher import numbers pressuring margins and low steel prices.

Shares recently fell 3.8% to $47.37.

The North Carolina-based steel company now expects per-share earnings in the range of 10 cents to 15 cents a share, down from 35 cents in the year-earlier period. Previously, Nucor had said it expected its first-quarter earnings to slightly exceed year-earlier numbers. Analysts had expected earnings of 40 cents, according to Thomson Reuters.

Lower selling prices and margins resulting from a high number of imports, which increased 35% last year, have led to lower performance at the steel mills. The main source is China, whose steel mills have remained humming despite slack global demand.

"Global overcapacity built by state-owned enterprises is the biggest risk factor to our business," the company said in a new release. Though imports are expected to subside in the second quarter, Nucor expects them to "remain at excessively high levels."

Import levels in the second half of 2014 were 10% higher than in the first half, and the trend has continued into this year.

In January, total imports accounted for 39% of total January domestic shipments, a 37% increase from a year earlier. That month, Nucor said that it planned to cut back on production to hold up prices, which were at their lowest levels in five years.

The sheet market has experienced the biggest impact from low steel prices, with pricing falling 19% from the beginning of the year until mid-March.

Nucor expects that steel-mill margins should improve in the second quarter as selling prices stabilize and the company realizes the benefit of lower raw-material costs.

Finally, the collapse in oil prices has caused an inventory glut in the pipe and tube sector. However, the automotive market is improving and there is growing demand in the nonresidential construction market, the company said.

Write to Angela Chen at [e-mail]

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