Shares of Nucor Corporation (NUE - Analyst Report) declined as much as 1.3% on Sep 26 after announcing that one of the its three storage domes located at Nucor Steel Louisiana in St. James Parish collapsed, thereby delaying the opening of the plant being constructed at the site. The market reacted negatively to the news and the company's shares skid as much as roughly 2% in regular trading last Friday.
Nucor‘s new Direct Reduced Iron (DRI) plant has been under construction for two years. Construction activity was about to finish within few weeks and start production. However now, operations are expected to be delayed till the end of the year.
Good news for Nucor is that the collapse has not resulted in any injuries or any environmental damage. An investigation for the damage and the damage assessment is underway. In the meantime, construction and hot commissioning of the plant are continuing.
Direct reduced iron is one of the ingredients used in the making of steel and it is produced by using natural gas to convert iron ore pellets into DRI. The storage domes stockpiled the iron ore pellets.
The $750 million DRI plant is expected to produce 2.5 million tons of DRI per year when the operations are in full swing, making it the largest DRI plant across the globe and the first one operating in the U.S. in several years. Nucor Steel Louisiana planned to hire 150 employees to work at the plant, out of which 140 workers are already employed.
Nucor issued its guidance for third quarter 2013 on Sep 17. The company expects earnings to be in the range of 35 cents to 40 cents, an increase from 35 cents it reported in the year-ago quarter and 27 cents logged in the previous quarter. The projected earnings include LIFO credit of 3 cents per share.
Nucor stated that performance in its steel mills has shown improvement sequentially as a result of competitor supply disruptions, customer inventory restocking and some market demand improvement. Structural steel results also improved due to higher production at Yamato Steel following its 17 day planned outage during the second quarter and customer inventory restocking.
Nucor also expects its fabricated construction products businesses to report increased profitability compared with the second quarter. The company expects its raw materials business to report weak results in the third quarter due to higher start up costs at its new DRI plant in Louisiana.
While Nucor stated that non-residential construction market may remain weak in 2013, the company expects it to slowly improve from historically low levels. Manufactured goods including energy and automotive are showing strength.
Nucor is expected to release its third quarter results on Oct 14. The company currently retains a Zacks Rank #3 (Hold).
Other companies in the steel industry with favorable Zacks Rank are Companhia Siderurgica Nacional (SID - Analyst Report), Shiloh Industries Inc. and Nippon Steel & Sumitomo Metal Corp. (NSSMY). All of them hold a Zacks Rank #1 (Strong Buy).