Looking at economic fundamentals, expect a bit of a slowdown in U.S. steel demand over the next six months, Daniel DiMicco Chairman, CEO and President of Nucor Corp. (NUE.N), said on Wednesday.
Speaking with Reuters on the sidelines of the American Metal Market''s 25th Steel Success Strategies conference about the outlook for Nucor''s orders in the 2010 second half, DiMicco said, "Nucor goes with its customer orders."
He added, however, that many of its customers remain wary of third-quarter economic growth and end user demand.
"People are pausing and taking a breath to see how things play out from here," the executive of one of the largest U.S. steel producers said, echoing comments from competitors.
Some industry sectors are faring better than others. Noting that auto shipments have been stronger than construction and energy has shown some improvement, he said, they remain about half of peak demand in 2007 and 2008.
"Construction is still bouncing off the bottom," he said, citing a more than 10 percent decline in May U.S. housing starts and a record 32.7 percent decline in May home sales to their lowest level in four decades [ID:nLDE65M1WY]. (Graphic: link.reuters.com/max63m)
DiMicco pointed to its earnings guidance announcement out last week, in which Nucor said its most challenging markets remain residential and nonresidential construction.
The company said its beam mills and plate mills had seen some improvement, primarily due to increased margins.
Asked for his outlook on North American operating rates, DiMicco said he expects them to fluctuate with demand.
"But we have already gotten the bang for our buck. In order to see higher rates, we will need to see an increase in real demand," he said.
The United States'' steel industry operating rate has risen to 73 percent of capacity currently from about 60 percent at the beginning of the year as pockets of demand have picked up.
DiMicco said Nucor is currently operating at a 75 percent rate that, at best, may inch up during the rest of the year.
"It all depends on what happens in the economy," he said.
One constraining factor remains tight credit. Though bank lending has loosened slightly, a Nucor spokesman said some smaller customers were still unable to gain access to credit and this was hampering their ability to build inventory.
DiMicco also called on the U.S. federal government to release more money from its economic stimulus package for infrastructure building and on state and local governments to raise spending on roads and public buildings like hospitals.
Despite improvement over year ago operating rates and steel demand, DiMicco pointed to historically high U.S. unemployment and said, "We are still in the worst recession since the great depression in the 1930s. There is still a lot of work to do."
Instead of cutting jobs, he said, more people could work for fewer hours, as has been the case at Nucor during the economic downturn.
Discussing Nucor''s acquisition plans, DiMicco said, "We are never not active in talking to people. But in terms of things happening, it''s just a matter of timing."
Charlotte, N.C.-based Nucor was looking domestically and internationally, outside China, for potential targets, he said. (Reporting by Carole Vaporean; Editing by Walter Bagley)