Nucor shut downs Louisiana manufacturing operations, lowers 4Q earnings guidance

Nucor Corp., which operates three large steel mills in northeastern Arkansas, said in its recent quarter guidance that it plans to shut down its entire Louisiana operations in the fourth quarter and beyond until market conditions improve.

“During the fourth quarter of 2015, we will complete a planned maintenance outage at Nucor Steel Louisiana. The Louisiana direct reduced iron (DRI) facility will not resume operations after completion of the planned maintenance outage until market prices of alternative raw materials improve from current depressed levels,” the Charlotte, N.C.-based steel giant said in its recent fourth quarter guidance.

Although the policy will not end the Nucor’s highly-admired practice of never laying off any of its 20,000 employees due to lack of work since 1966, the Louisiana workforce will still face a difficult holiday season as the company’s “pay for production” policy kicks in.

In St. James Parish just west of New Orleans, Nucor operates a recently built $750 million direct reduced iron (DRI) facility at a site in Convent, La. That 4,000-acre site was completed in March 2014, and now has more than 170 workers who earn an average annual salary of $75,000, plus benefits, according to Nucor securities filings.

The St. James facility is the first phase of a larger $3.5 billion construction project that was first announced about five years ago. With the current market conditions and the mothballing of the still new St. James facility, industry analysts have raised questions about the future of the multibillion dollar project.

According to its recent fourth quarter forecast, Nucor now expects year-end profits in the range of $0.15 to $0.20 per diluted share, down 69% from earlier expectations of $0.65 per diluted share and the third quarter of 2015 earnings of $0.71 per diluted share.

Companywide, Nucor said operating performance at the steel mills segment in the fourth quarter of 2015 is also expected to decrease from the third quarter of 2015. In Arkansas, Nucor operates three steel mill plants in Blytheville, Hickman and Armorel.

“Our sheet and bar steel mills in particular have experienced decreased margins as selling prices have eroded more than the decline in raw material pricing. This performance is due to continued deterioration in global steel markets amplified by global excess capacity and historically high import levels,” company officials said.

Despite the continued deterioration in global steel markets amplified by global excess capacity and historically high import levels, Nucor officials are hopeful that industry conditions will turn around sometime in 2016.

“Although the trade remedy process has not moved as quickly as we would like, we believe that preliminary antidumping and countervailing duties and affirmative critical circumstances findings in the steel sheet cases should have a positive impact on domestic sheet mills in the first half of 2016,” the North Carolina steelmaker said. “Nonresidential construction markets, although improved from 2014, are beginning to slow mainly due to seasonal factors. Energy, heavy equipment and agricultural markets remain weak. The automotive market remains strong.”

In Tuesday’s pre-Christmas trading session, Nucor shares were up $1.30, or 3.3% at $41.03 in light trading on the New York Stock Exchange.