Nucor Steel, which has a major presence in Northeast Arkansas’ “steel corridor,” has announced a major multibillion-dollar steel mill investment in an unknown location in the Midwest part of the country. The announcement comes as the Charlotte, N.C.-based company continues to see record profits as a result of trade tariffs set up by President Donald Trump’s administration.
Nucor officials revealed the plans Monday (Jan. 7), saying the company expected the factory to be fully operational in 2022 and capable of producing 1.2 million tons per year of steel plate products. Company officials said the project, which has already been approved by the Nucor board of directors, will create approximately 400 full-time jobs.
“This investment is consistent with our drive to continue delivering sustainable, profitable growth and superior returns for shareholders,” Nucor Chairman and CEO John Ferriola said in a statement. “Together with the significant share repurchases completed in 2018, the Board’s decision to fund this high-return opportunity demonstrates our commitment to balanced capital allocation. We have a strong foundation to build upon as we advance our goal of leading in every market in which we compete.”
Leon Topalian, Nucor’s executive vice president of beam and plant products, said the state-of-the-art facility will enhance the U.S. steel producer’s ability to serve its largest customers in the largest plant-consuming market in the U.S., and further meet the needs of the company across the U.S.
“Our team is poised and ready to take the next step in advancing our position in steel plate products,” said Topalian, adding Nucor expects to select a site for the new mill in early 2020.
In December, Nucor announced that it expects to close out fiscal 2018 with net earnings of $7.25 to $7.30 per diluted share, which would be a new annual record for Nucor and a 22% spike over the previous record earnings of $5.98 per diluted share reported a decade ago.
In the second quarter, Nucor booked its highest quarterly profits in the company’s history at $683 million, which more than doubled the $323 million in the previous year. Nucor followed up that record performance with third quarter profits of nearly $677 million, up from $255 million a year ago.
In the fourth quarter guidance, company officials said the steel giant benefitted from nation’s strong economy throughout 2018 that was positively impacted by tax and regulatory reform implemented by the Trump administration last summer.
Citing U.S. national security interest under Section 232 of the Trade Expansion Act of 1962, the U.S. Commerce Department in June imposed a 25% and 10% levy, respectively, on steel and aluminum imports from Canada, Mexico, and EU countries after those three trading partners failed to come to terms on tariffs first announced on March 8.
Although the U.S. Chamber of Commerce has said the retaliatory tariffs by U.S. trading partners and rivals after the Section 232 levies were imposed will ultimately hurt the U.S. and Arkansas economies, Ferriola said the Trump administration’s trade tariffs on steel and aluminum exports “has been a tailwind contributing to our expected record 2018 earnings.”
“This administration is taking the decisive and meaningful actions that American manufacturers need to compete on a level playing field,” Ferriola said. “Tax reform, continued improvements to our regulatory approach and strong trade enforcement are giving businesses like ours the confidence to make long-term capital investments here in the U.S. that create jobs and ensure our success for decades to come.”
The yet unknown Midwest mill will produce cut-to-length coiled, heat-treated and discrete steel plates ranging from 60 to 160 inches wide, and in gauges from 3/16-inch to 14 inches in thickness, company officials said, enabling Nucor to supply plate products that the company does not currently offer. Nucor currently operates similar plate mills in North Carolina, Alabama and Texas.
In May 2018, Nucor Arkansas said it will invest $240 million in a new galvanizing line at its Hickman-based sheet mill. The new line will employ about 100 workers and will produce 500,000 tons each year. Nucor jobs at the planned Arkansas mill will pay around $80,000 per year, company officials have said. That expansion is expected to be completed in the first half of 2021. That announcement came right after the company opened a $230 million specialty cold mill in April 2018 at the same site, adding 100 jobs.
But Nucor is not the lone steel operator with Arkansas ties that have benefitted from the Trump administration’s trade policy. Last summer, Big River Steel LLC in Osceola made the surprise announcement that it planned to double Big River Steel’s hot-rolled steel production capacity to 3.3 million tons annually. That $1.2 billion expansion project would nearly double the company’s employee payroll to well over 1,000 workers.
A few months later in November, Big River Steel LLC said it would remain as a standalone company after fielding potential buyout offers and reviewing “strategic alternatives.” One of those proposals came from Nucor Corp., according to Talk Business & Politics sources, along with offers from rival Steel Dynamics Inc. of Fort Wayne, Ind., and other top auction bidders that included a consortium of domestic and international steel producers and top Wall Street investment firms.
Big River officials also had earlier signed an option in the spring of 2018 with economic development officials in Brownsville, Texas, to build a $1.6 billion steel mill in south Texas, which will be modeled after the Arkansas plant. The partnership behind the Osceola mill, which includes the Arkansas Teacher Retirement System, closed on a $1.225 billion debt-financing package consisting of a $600 million senior note due by 2025, a six-year $400 million secured term loan and a five-year asset-back lending arrangement.
In a conference call with investors and Wall Street analysts on the new steel mill project, Nucor officials did not provide additional details concerning the ongoing process to select the Midwest location for its new steel plate facility. Arkansas Economic Development Commission officials did not immediately respond concerning a possible bid by the state on the $1.35 billion project.
As an aside to Nucor’s announcement, the American Iron and Steel Institute also responded Monday to statements this weekend on the ongoing U.S. government shutdown by President Trump that any potential barrier at the U.S. southern border should be made of steel.
“Steel is readily available and is an innovative material that lends itself to a number of creative design solutions like the steel barrier. Steel’s strength and durability make it the preferred material of choice — whether it be for construction, like a barrier, or for cars, cans, transportation infrastructure, national security…the list is endless,” said AISI President and CEO Thomas Gibson. “There are several applications and technologies which could be used to produce an all-steel solution for a potential barrier, which could consume as much as three million tons of steel according to our assessment.”