Charlotte, North Carolina-based Nucor Corporation announced Thursday net earnings of $181.5 million in Q3 2011, down 39 percent from Q2 earnings of $299.8 million but up eight-fold from the $23.5 million in Q3 2010. Earnings also surged 340 percent year-to-date through Q3 to $641.1 million compared to the same period in 2010.
Sales were up for Nucor in Q3, rising 3 percent from Q2 and 27 percent over Q3 2010. Average sales prices per ton decreased less than 1 percent from Q2, and surged 24 percent over Q3 2010, but prices declined much more substantially in the flat rolled sector. John Frias, CFO of Nucor explained that the "deterioration from the second quarter reflects lower steel prices and significantly lower metal margins for sheet mill products due to increases in the supply/demand imbalances both from new domestic supply and increased imports."
Looking forward to Q4, Nucor anticipates lower earnings as compared to Q3, and expects further "margin compression in the sheet market" and "a smaller compression in plate margins due to imports."
Sheet mill average selling prices fell $95/ton from Q2 to Q3 according to Nucor CFO John Ferriola, while overall average steel mill selling prices dropped $44/ton, indicating that the dramatic sheet price erosion "was cushioned by other products."
During the question-and-answer portion of the conference call, Dan DiMicco, Chairman and CEO of Nucor said that the "raw material push-pull isn't driving the [sheet] market," but rather flat rolled prices are being driven by massive overcapacity, increased imports and demand not growing in any measurable rate. DiMicco also added that the industry is oversupplying the market, but when asked if Nucor would take the leadership position of reducing production if needed, he explained that he won't comment "on what should or shouldn't be done." However, Nucor's operating capacity is directly correlated to the numbers of orders the company receives on a largely week-to-week and month-to-month (but mostly week-to-week right now) basis, adjusting production levels accordingly if orders decline.