SJF's Material Handling Blog
Entering the fourth quarter, the global economy has been negatively impacted by the crisis in the financial markets. What started out as a seasonal slowdown (due to temporary global market disruptions such as the six-month China Olympics effect and the Middle Eastern religious holidays)
has now been overwhelmed by a worldwide financial crisis that is unique in both size and scope in our lifetime. The business environment has obviously become significantly more challenging for everyone including Nucor. There is little forward visibility on either the economy or our industry, even for the fourth quarter. These conditions are such that financial projections are not practical. Therefore, we will not be providing numerical or qualitative guidance at this time. We will give an update of our business at the normal time midway between our quarterly earnings releases.
What we can say is that 2008 will be another record year for Nucor and today our competitive position is stronger than ever, both here and globally. If recent initiatives by the world’s governments to stabilize financial markets are successful, then businesses should see significantly improved access to credit and resulting improved business conditions beginning early in 2009. We are still strong believers in the long-term strength of the global infrastructure build and the associated bull market for steel. It is this global growth in steel demand that will help drive Nucor’s growth and profitability.
Headquartered in Charlotte, N.C., Nucor makes more steel in America than any other company. Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel — in bars, beams, sheet and plate; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; light gauge steel framing; steel grating and expanded metal; and wire and wire mesh. Nucor also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America’s largest recycler.
Certain statements contained in this news release are “forward-looking statements” that involve risks and uncertainties. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to prevailing steel prices and the changes in the supply and cost of raw materials, including scrap steel; (2) market demand for steel products; (3) energy costs and availability; (4) competitive pressure on sales and pricing, including pressure from imports and substitute materials; and (5) capital investments and their impact on our performance. These and other factors are outlined in Nucor’s regulatory filings with the Securities and Exchange Commission, including those in Nucor’s December 31, 2007 Annual Report on Form 10-K. The forward-looking statements contained in this news release speak only as of this date, and Nucor does not assume any obligation to update them.
SOURCE Nucor Corporation – excerpt courtesy of Google Financial
Related links: http://www.nucor.com
With the worldwide financial crisis showing no signs of abating and the US headed into what many analysts predict will be a long recession, there is not a great deal of hope that the global steel markets will see a speedy recovery. However, the outcome of the historic US presidential election underway Tuesday will certainly have at least some effect on the direction of the US economy and, directly or indirectly, on the steel markets. As a major rebar distributor in the US told SteelOrbis this week, “The presidential election will definitely have an impact on the market, but how much of an impact is unclear.”
With US shredded scrap prices falling below Nucor’s $162/nt scrap surcharge baseline, the domestic rebar leader has a tricky decision to make about how they want to handle their next pricing move.
Nucor’s raw material surcharge (RMS) for long products, first instituted several years ago to reflect the then-rising scrap costs, has a Program Baseline of $162/nt, which was the price of shredded scrap when the surcharge was first put into place.
The RMS, which is usually adjusted on a monthly basis when scrap prices are rising or adjusted more frequently when scrap prices are dropping, is based on the difference between current scrap prices and the program baseline. Although scrap prices have risen and fallen numerous times in recent years, they have remained well above the $162/nt ($179/mt or $8.10 cwt.) baseline – until now. In the last month, shredded scrap has lost almost half of its value, tumbling down to the current level of $125/long ton.
An announcement from Nucor is expected in the coming days, and since there is no precedent for this situation, it is not clear yet what the industry leader will do. Rather than applying a negative surcharge, however, (based on the current formula, the RMS would be minus $37/nt) it is more likely that Nucor will eliminate the RMS, at least for the time being, and lower its base prices instead. Scrap surcharges, once put in place to help producers recover their high raw material costs, are now doing the companies more harm than good as scrap prices have plummeted. If the company does indeed get rid of the RMS, for the first time in a long time the base price will be the same as the transaction price.
Currently, domestic rebar mills are offering at a range of $37.50 cwt. to $38.00 cwt. ($827 /mt to $838 /mt or $750 /nt to $760 /nt) ex-mill. Based on the additional $75/long ton that scrap prices have fallen this month, Nucor and other domestic rebar producers are expected to lower transaction prices (whether it be by lowering base prices or applying a negative RMS) by a total of $75/nt ($83 /mt or $3.75 cwt.), bringing most offers down to around $34.00 cwt. ($750 /mt or $680 /nt) ex-mill.
On the import side, offers are still substantially lower-priced than the offers from domestic mills. Import offers from Turkey have dropped by about $2.00 cwt. in the last week to a range of $27.00 cwt. to $28.00 cwt. ($595 /mt to $617 /mt or $540 /nt to $560 /nt) duty-paid, FOB loaded truck, in US Gulf ports. Although there are some indications that scrap prices in Turkey are finally bottoming out, the pricing trend is still down due to the weak demand. Import offers from Mexico are slightly above the Turkish price, with most offers ranging from $29.00 cwt. to $30.00 cwt. ($639 /mt to $661 /mt or $580 /nt to $600 /nt), delivered to Houston.
I thought regular readers of this blog might enjoy this article. MMH has recently performed a customer satisfaction survey of lift trucks. They compiled the results into several categories such as overall satisfaction, product quality, value, etc. The results were recently tabulated and briefly listed on their site. The full report will be available in November.
Just quick heads up –
The new world material handling equipment market report has been released and is now available. The good news is that it’s predicting a growth in demand of 5% or more by 2012.
From the report:
The world market for material handling equipment and systems is projected to increase more than five percent per year through 2012 and exceed $120 billion (including price increases). Generally healthy economic conditions will support gains in global material handling demand, especially in rapidly developing areas such as China and India, where rising manufacturing output and fixed investment will fuel growth. The advanced nations of North America, Western Europe and the Asia/Pacific region (i.e., Australia and Japan) comprise relatively mature markets for material handling. A healthy economic outlook coupled with a pickup in fixed investment will support material handling demand in the US, while expanding manufacturing output will support gains in Japan and Western Europe.
I’d like to take a minute to introduce readers of this blog to a friend of mine in the blogosphere and a fellow Minnesota material handling company. DJ Products is a Minnesota based ergonomic material handling products company whose line of motorized carts is well known in many industries. They offer a full line of push carts, a power mover, a tugger, a trailer mover and other ergonomic powered carts to fit a variety of needs within a number of specialized industries.
Their products range from pulling and pushing industrial carts, hospitality & hospital carts and shopping carts all the way to pulling, pushing and moving cars, trucks & trailers. Needless to say, these carts have some serious power.
In addition to their product line, Jeff authors an industry material handling and ergonomics blog that is full of great tips, industry specific information, case studies and more. I can highly recommend this blog as an excellent resource for material handling and logistics information.
So do yourself a favor and add this one to your reading list. You wont regret it.