Nucor Executives See Much Potential in Texas Plate Mill Acquisition
07/21/2016 - Nucor executives are upbeat about the company’s US$29 million investment in a Texas plate mill, saying it is a well-run, well-equipped facility that will give Nucor access to new value-added niche markets.
And at a price amounting to US$161 per ton of capacity, Nucor is getting a good deal, chairman and chief executive John Ferriola told analysts during Nucor’s quarterly earnings call on Thursday.
Nucor is acquiring the Longview, Texas, mill from mining equipment maker Joy Global, which is divesting ancillary assets to cut costs and raise cash as it slogs through the commodities downturn. A day after the deal was was announced, Joy revealed that it itself was being sold to a subsidiary of Japan's Komatsu Ltd. in a deal valued at US$3.7 bilion.
Ferriola said the acquisition will allow Nucor to expand its range of plate sizes to 12 inches in thickness and 138 inches in width. Moreover, he said, it will give Nucor access to some high-end specialty markets.
He explained that the mill makes extremely clean steel by way of bottom-poured ingots, and that steel has wound up in maritime, defense and aviation applications. In aviation, he said, the mill’s plate has been fashioned into brackets for aircraft landing gear.
However, the mill primarily was focused on serving Joy Global and will continue to supply the company. But under Nucor ownership, its sales are likely to benefit from newfound access to Nucor’s network of plate customers, Ferriola said.
He said the mill is well-equipped and won’t require any significant, near-term capital upgrades, although Nucor may look at a project further down the road. He also said the mill has an excellent workforce and, culturally, meshes well with Nucor.
“I’m really excited to have them join the Nucor team,” he said.
The acquisition was but one of several expansions that were discussed during the call. Ferriola also said:
Nucor is acquiring the Longview, Texas, mill from mining equipment maker Joy Global, which is divesting ancillary assets to cut costs and raise cash as it slogs through the commodities downturn. A day after the deal was was announced, Joy revealed that it itself was being sold to a subsidiary of Japan's Komatsu Ltd. in a deal valued at US$3.7 bilion.
Ferriola said the acquisition will allow Nucor to expand its range of plate sizes to 12 inches in thickness and 138 inches in width. Moreover, he said, it will give Nucor access to some high-end specialty markets.
He explained that the mill makes extremely clean steel by way of bottom-poured ingots, and that steel has wound up in maritime, defense and aviation applications. In aviation, he said, the mill’s plate has been fashioned into brackets for aircraft landing gear.
However, the mill primarily was focused on serving Joy Global and will continue to supply the company. But under Nucor ownership, its sales are likely to benefit from newfound access to Nucor’s network of plate customers, Ferriola said.
He said the mill is well-equipped and won’t require any significant, near-term capital upgrades, although Nucor may look at a project further down the road. He also said the mill has an excellent workforce and, culturally, meshes well with Nucor.
“I’m really excited to have them join the Nucor team,” he said.
The acquisition was but one of several expansions that were discussed during the call. Ferriola also said:
• Nucor’s wide-flange beam joint venture, Nucor-Yamato Steel Co., is nearing completion of US$75 million expansion project. Through that project, the company is adding quench-and self-temper capabilities, which will allow it to make high-strength, low-alloy beams. Production trials are to begin in September and are to conclude early next year. The goal is to produce 50,000 tons annually, Ferriola said.
• Production trials on new heat-treatment equipment have begun at its Memphis, Tenn., special bar quality mill. The upgrade will allow the mill quench and temper and anneal bars in diameters of between 2.5 and 12 inches.
• Demand is growing for the wide and light sheet products now being produced at Nucor’s Berkeley, S.C., mill. In fact, the mill expects to ship 270,000 tons this year, exceeding its prior forecast of 240,000 tons, he said. The mill shipped 160,000 tons last year. “This wide-light product capability is allowing us to produce more grades of advanced high-strength steels for the automotive market,” Ferriola said, adding that the product is giving Nucor new market share in other areas, such as appliances, motor lamination and welding wire.
Ferriola said that as the company shifts its product catalog toward higher-end steels, which often take more time to produce, the company is thinking about revising its stated overall capacity.
• Production trials on new heat-treatment equipment have begun at its Memphis, Tenn., special bar quality mill. The upgrade will allow the mill quench and temper and anneal bars in diameters of between 2.5 and 12 inches.
• Demand is growing for the wide and light sheet products now being produced at Nucor’s Berkeley, S.C., mill. In fact, the mill expects to ship 270,000 tons this year, exceeding its prior forecast of 240,000 tons, he said. The mill shipped 160,000 tons last year. “This wide-light product capability is allowing us to produce more grades of advanced high-strength steels for the automotive market,” Ferriola said, adding that the product is giving Nucor new market share in other areas, such as appliances, motor lamination and welding wire.
Ferriola said that as the company shifts its product catalog toward higher-end steels, which often take more time to produce, the company is thinking about revising its stated overall capacity.
