Nucor Corporation (NUE - Free Report) recently announced plans to build a hot band galvanizing and pickling line at its sheet mill in Ghent, Kentucky, that will serve its objective of growing share in the automotive market. The $176 million project is likely to expand the annual production capabilities of Nucor Steel Gallatin products by almost 500,000 tons.
The project will build a 72-inch galvanizing line, widest hot-rolled galvanizing line in North America. It will also create synergies with the company’s other sheet mills. The new line is expected to increase Nucor’s market share of coated steel in the Midwest.
According to the company, the project is important to provide customers with value-added products, which is an integral part of its long-term strategy for profitable growth. Per the company sources, about 430 people are presently working at the mill. The hot band galvanizing project will create about 75 full-time jobs. The project is expected to be completed in two years, subject to necessary approvals.
Nucor is focusing on capitalizing the continued momentum in the automotive market. Demand in the automotive market remains healthy and is likely to improve over the long run and boost the company’s top line. The company remains focused on achieving greater penetration in this market.
The addition of hot band galvanizing line is in sync with Nucor’s automotive growth strategy. It will help the company to foray into new markets. The new line will also address the key needs of the marketplace for high quality, hot-rolled galvanized steel.
In line with this, Nucor had earlier entered into a joint venture with JFE Steel Corporation of Japan to build and operate a plant in Mexico that will supply sheet steel to the country’s growing automotive market.
In addition, the company’s cost structure is highly variable, lending it the flexibility to adjust costs when needed. This also enables Nucor to continue its operations without closing down facilities, even if the conditions in the steel industry lack luster.
Nucor’s shares have declined 6.8% in the last three months, underperforming the Zacks categorized Steel-Producers industry’s gain of 27.7%.
Nucor currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked companies in the basic materials space include Huntsman Corporation (HUN - Free Report) , ArcelorMittal (MT - Free Report) and The Chemours Company (CC - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Huntsman has an expected long-term earnings growth of 7%.
ArcelorMittal has an expected long-term earnings growth of 11.4%.
Chemours Company has an expected long-term earnings growth of 15.5%.
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