Nucor: 3Q earnings will be ‘down significantly’ from 2nd qtr on higher costs, price push back

Nucor sees 3Q earnings down from 2nd quarter

NEW YORK — Steelmaker Nucor Corp. said Tuesday that third-quarter earnings will be down significantly from the second quarter due to higher scrap costs and the company’s inability to pass price increases to customers.

Nucor’s forecast highlights a tight spot for U.S. steelmakers. Prices for scrap metal are rising because of demand from steel producers in China and other emerging markets. But demand for steel products remains weak in the U.S. Oversupply gives customers the upper hand, making them reluctant to pay price increases.

Nucor has become one of the country’s biggest steelmakers by operating minimills that use scrap steel, rather than iron ore, to make flat roll and other finished steel products.

For the third quarter ending on Oct. 2, Nucor expects earnings of 5 to 10 cents per share. That’s far below the earnings prediction of analysts polled by Thomson Reuters. The analysts, on average, expect 30 cents per share. It’s also down significantly from the 29 cents per share Nucor earned in the second quarter.

Nucor posted a loss of 10 cents per share in the third quarter of last year.

The company said in late July that there was “a general slowdown taking place across all product lines as the overall economy has entered into a new period of uncertainty.”

“Our third-quarter results will unfortunately confirm these concerns,” Nucor added Tuesday. The company said conditions have particularly slowed from the second quarter in its flat-rolled business. Flat-rolled, or sheet steel, is used in autos and appliances.

The worst markets for steel continue to be those associated with housing and construction markets, “which continue to show little, if any, strength,” Nucor said.

“I think most investors recognize that North American demand is weaker than it was two or three years ago, but this outlook suggests it might be worse,” than they thought, CIBC World Markets analyst Michael Willemse said.

Credit Suisse analyst David Gagliano said he thinks the margin squeeze should reverse itself in the fourth quarter because of a potential decline in scrap prices.

Nucor’s stock fell $1.25, or 3.1 percent to close at $39.41. The stock has traded between $35.71 and $51.08 in the past year. Trading was halted briefly Tuesday after a large trade on the CBSX exchange, owned by CBOE Stock Exchange, triggered a circuit breaker when the share price dropped to a penny as the trade was moved between exchanges for execution.

The circuit breakers, which briefly halt trading of stocks with big price swings, were instituted in mid-June after the so-called “flash crash” in May, when the Dow Jones Industrial Average lost 600 points in a matter of minutes.