Q1 2023 Nucor Corp Earnings Call
The appendix of today's presentation includes supplemental information and disclosures along with a reconciliation of non-GAAP financial measures.
With that let's turn the call over to Leon Thanks.
Thanks, Jack and welcome everyone.
I'd like to begin by thanking our 31000 team members for delivering another strong quarter for our shareholders, while continuing to deliver on our most important value the health safety and well being of the entire Nucor family.
Coming off our fourth consecutive year setting new safety records and the team is off to a strong start again in 2023 ahead of last year's record performance through the first quarter.
Turning to our financial results in the first quarter nuclear generated EBITDA of approximately $1 9 billion and net earnings of $1 1 billion or $4 45 per diluted share.
This strong performance was due in large part to the ongoing profitability of our steel products segments.
Along with increased volumes and margins at our steel mills segment compared to Q4.
In our steel products segment net earnings were down 10% from Q4 levels, but remained 42% ahead of prior year quarter and significantly above historical averages.
Shipments out of our steel mills, where it was 18% taking utilization to approximately 80% during Q1 compared to 70% in the prior quarter.
And finally, the performance of our raw materials segment improved in the first quarter due to higher volumes.
Nucor has created significant long term value over many years in cycles by executing on its strategy and today, we continue to position the company for further value creation. We are advancing several large capital projects to drive continued earnings growth market share gains and margin expansion in our core steelmaking business.
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And our sheet Mill group Nucor steel Gallatin continues to ramp up production, we've invested in Gallatin mill to completely modernize its operations and more than double its capacity and we're pleased with the progress. The team has made to date during the second quarter. We expect Gallatin will continue ramping up to its full run rate of $2 8 million.
Tons and returned to profitability.
We remain confident <unk> will be a strong contributor to nucor's bottom line in the second half of 2023 and for many years to come.
Shifting to West Virginia progress continues with our new sheet mill. The team has received all Preconstruction state permits and is awaiting final federal permits, which we anticipate being finalized in the next few months, we expect to complete construction approximately two years after the receipt of all permits and as previously announced <unk>.
<unk> Board of directors approved an updated budget for the West Virginia project, which is now estimated at a net cost of $3 1 billion. Once completed the new mill will have an annual capacity of 3 million tons per year and advanced capabilities that will enhance our ability to provide customers with high quality.
Low embodied carbon steel products, particularly for the demanding automotive and construction applications.
Turning to our plate operations the team at Nucor Brandenburg has had a productive quarter focused on continued commissioning of the mill and beginning shipments to customers throughout Q1. The team has made significant headway dialing in the rolling mill in Castor as we bring online and mill with a broadest offering of plate products in the <unk>.
Western Hemisphere.
Every month, we continue increasing casting rates and the range of production capabilities.
Over the balance of 2023, we expect the Brandenburg mill will produce up to 500000 tonnes of steel and turn profitable by year's end. This game changing plate mill gives us a unique capability and will play a pivotal role in building out our nation's infrastructure across multiple growth sectors moves.
Two our expand beyond strategy, we're pleased with the success of our new platforms, especially the diversification and accelerated growth they bring to nucor's, earning profile.
As we've shared before we look for efficient manufacturers of steel related products when evaluating candidates to expand beyond our traditional steelmaking operations. The most attractive opportunities are those where we can create incremental value through operating synergies supply chain efficiencies and revenue enhancements.
We also see companies, whose values match nucor's, especially when it comes to taking care of their team.
As part of our expand beyond strategy Nucor established four new platforms, helping to grow the size and diversity of our steel products segment in the past three quarters in which we've owned these platforms they've generated combined EBITDA of roughly $350 million or annualized EBITDA of approximately 465.
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This puts them on track to reach the $700 million through cycle annual EBITDA goal. We described at our Investor Day in November .
In the first quarter steel products represented approximately 52% of our segment earnings mix, we plan to keep growing the earnings potential of our steel products segment over time through both organic growth and acquisitions. In fact, just last month, we announced the location of our first of two new production facilities.
For Nucor towers, and structures, which will help meet the growing demands of our nation's transmission infrastructure.
As we execute our expand beyond strategy, we're maintaining a selective and disciplined approach seeking those that enhance our service offerings for customers and generate superior returns for our investors.
Our competitive advantage lies not only in the breadth and quality of the products, we produce but in how we make them as more customers look to reduce emissions across their supply chains, the low embodied carbon and nucor steel is a real differentiator for us.
Over the past few years, we've developed numerous supplier partnerships with the likes of general Motors and train.
And this week, we're adding to that with the supplier partnership with Johnson controls Nucor will recycled nearly all of the scrap from Jonson control facilities and repurpose it as low embodied carbon steel to be sold back to Johnson controls for future use this closed loop recycling partnership helps both come.
<unk> pursue our de carbonization goals.
In May we will publish our updated sustainability report, which speaks to the commitment of our teammates have in living our culture and protecting our environment.
Carriage you to take the time to review it as it describes what makes <unk>. So special things like our industry, leading safety record and are proud of our teammates have and working for Nucor.
Now being the largest recycler of any product in the western hemisphere allows us to make steel with a fraction of the carbon footprint compared to the global average.
And the various ways, we support and invest in our communities.
This is what makes nucor a world class manufacturer as recognized by Fortune magazine, where we were ranked number one among steel companies for the second consecutive year as one of the world's most admired companies.
Before turning it over to Steve Let me wrap up by sharing some perspectives on the U S economy. Despite the economic uncertainty, we see a constructive long term outlook for nucor and the broader U S steel industry.
And when economic conditions do change our highly variable cost structure and flexible operating model allows nucor to toggle our production and efficiently match demand.
<unk> has a track record of operating profitably through downturns and emerging from them even stronger the long term investments we make in our conservative capital structures are designed to withstand all economic cycles and this time is no different but for now the fundamentals driving nonresidential construction.
And infrastructure projects appear to be quite healthy.
Three pieces of legislation the infrastructure investment Act the inflation reduction act and the chipset provide a combined $975 billion of funding or tax incentives, which will have a multiplier effect on the actual amount of capital deployed taken together, we believe that these three programs have the <unk>.
<unk> to generate up to 8 million tons of incremental steel demand per year over the balance of this decade.
According to the American Iron and Steel Institute, an estimated 5 million tons of steel is needed for every $100 billion in infrastructure spending on top of that we expect IRA will drive significant investment in clean energy, adding approximately two to 3 million tons of annual steel demand for wind solar and transmission.
Projects.
There also have been more than 30 announced semiconductor plants or expansions in response to the chips Act. These are massive steel intensive factories that take billions of dollars in the years to build.
And nucor's unrivalled domestic production capabilities and low carbon footprint position us favorably to provide the steel for these projects.
As I've said in the past the green and digital economies are being built with steel and the steel that they get bill with matters the future looks bright for Nucor and we're excited to continue building on our company's long track record of driving profitable growth and delivering outstanding returns to our shareholders.
With that let me turn it over to Steve <unk>, who will share additional details about our Q1 performance and outlook for Q2, Steve.
Thank you Leon our net earnings of $4 45 per diluted share for the first quarter.
Is the product of another strong performance by our team and in fact with total earnings of just over $1 $1 billion. Our first quarter marks the eighth consecutive quarter, where nucor has exceeded $1 billion in earnings.
Measure on attained prior to 2021, despite our long and profitable history as a company.
These results highlight the advancement of our strategy and the growing earnings power of Nucor's diversified portfolio and industry leading capabilities.
During the first quarter steel mill earnings of $838 million represented 62% increase in the prior quarter driven predominantly by higher shipments.
We also saw efficiency gains from Q1 is higher utilization rate, allowing us to achieve lower conversion cost improving cost for energy alloys and consumables were also a factor.
Shifting to our steel products segment, we again saw excellent quarterly performance with segment earnings of $971 million.
While this is a slight moderation from the prior period. It remains a historically strong results during the quarter, we realized attractive pricing for margins across many of our product lines.
This performance is further evidence of the strong nonresidential construction market.
Comment it on by Leon.
Our raw materials segment produced earnings of $58 million for the quarter, we realized higher pricing in our recycling businesses and shipped higher volumes out of both D. J J scrap operations and our DRA facilities, you may recall DIY volumes in Q4 were lower than normal in large part due to planned maintenance.
Activities.
Our corporate and eliminations expenses increased for the quarter in line with the outlook, we shared during our fourth quarter earnings call in January as a reminder, this segment includes several key activities, including our teammate incentive compensation programs for all segments interest expenses, selling general and administrative expenses.
And the elimination of intercompany profits.
Included in this is the elimination of profits or losses on intersegment sales when one segment supplies product to another segment, but the final sale to an external customer has not yet been recognized.
With roughly 20% of Nucor steel shipments going to downstream businesses and the vast majority of nucor's raw material shipments going to our Nucor steel segment, our intercompany eliminations can increase or decrease meaningfully, particularly during periods of rapid price change.
In addition to producing strong earnings in the first quarter Nucor's efficient manufacturing business model was on display again generating cash from operations of $1 2 billion.
This allowed the company to continue its long established and balanced approach toward capital allocation investing $532 million in capex, while maintaining its commitment to making meaningful direct returns to shareholders.
During the quarter, we repurchased two 7 million shares valued at approximately $426 million and made dividend payments of $131 million for a total of $557 million return directly to shareholders or 49% of our net earnings.
Over the last three fiscal years, we've returned $7 6 billion to shareholders, representing approximately half of the net earnings for the period.
It's worth noting our dividend payment in Q1 was <unk> 200th consecutive quarterly dividend.
That's a half a century of pain and raising our dividend and a long track record of creating shareholder returns that very few companies in any industry can point to.
Nucor's balance sheet continues to be a fundamental underpinning for nucor's capital allocation framework and an enabler of our value creating strategy at quarter end Nucor had more than $4 7 billion in cash and short term investments and our $1 75 billion revolving credit facility remains undrawn.
Given the potential economic uncertainty, we've been intentional about fostering a resilient and flexible liquidity position.
This position of strength gives us confidence we can continue our balanced approach of executing nucor's growth strategy, while also providing meaningful direct returns to shareholders.
As we look ahead to the second quarter, we expect earnings from our steel Mills segment to increase compared to the first quarter results on modestly higher shipments and improved margins with better results from our sheet business being the biggest driver.
In our steel products segment, we expect performance will moderate slightly from the historically high earnings level of recent quarters as.
As the impact of lower pricing offsets the benefit we expect to see from seasonally higher volumes.
Our raw materials segment is expected to continue to improve on higher shipment volumes overall, we expect the second quarter consolidated earnings to be higher than the first quarter.
And we remain optimistic that 2023 will be another strong year of earnings for Nucor.
As Leon mentioned federal support for infrastructure projects clean energy investments in advanced manufacturing facilities will begin to impact demand in 2023. In addition, nonresidential construction remains elevated and positive trends in both the automotive and energy sector will impact demand.
In short, we believe medium and long term fundamentals of our industry and key demand drivers remain relatively positive.
This coupled with our strategy to grow our core and expand beyond positioning nucor for strength well into the future.
With that we'd like to hear from you and answering any questions you might have operator. Please open the line for Q&A.
Thank you we will now begin the question and answer session.
I ask a question you May press Star then one on your Touchtone phone.
If you are using a speaker phone we ask you. Please pickup your handset before pressing the keys.
So the charter a question. Please press Star then two.
Today's first question comes from Emily Chang with Goldman Sachs. Please go ahead.
Good afternoon, Leon Steve and team. Thank you for taking my question my.
My first one is just around the state of the steel market outlooks as you see it I guess could you help us provide.
Some color around what level of confidence you have on what's sort of the extent of your visibility around the outlook for steel demand in this current macro environment.
How that perhaps.
<unk> has two other economic down cycles that we've seen in the past.
Yes. Good morning, Thanks for the question I'll kick it off.
For the last three years, we have been focused on executing on our mission, which is to grow our core expand beyond and live our culture, ultimately generating higher highs and higher lows and providing a capability set to our customers.
Provides them a differentiated value proposition and so while there is an awful lot of talk about recessions and headwinds, we're facing and whatnot.
That's the objective measures as we look into Q2, we think Q2 is going to be a stronger quarter and when you look at our our backlogs our steel segment backlogs Emily has increased 30% from the lows in the fourth quarter of last year.
The demand extra should we think about automotive.
Approaching 15 million units in 2023 remains early bright and then some of the other things that I mentioned in the opening script like the IRA and chips Act and.
The infrastructure Bill are already having meaningful.
Impacts on our business segments today, but if we just taken unpack just for a second the chips Act of <unk> 5 billion.
<unk> signed into law at 55 billion and the investment in Ashburn 34 projects that are on the books. Today. There is 34 projects represent $374 billion of semiconductor factories that are going to be built in the United States and as our customers continue to shift to higher.
Demand in what Theyre looking for and lower embodied carbon it sets up incredibly well for Nucor has the most diversified product offering everywhere to help them build those facilities.
And the full cycle of that is as they build those facilities, they're going to provide the chips to our end use.
Tier one automotive customers our HVAC customers.
In our heavy equipment customers that are all waiting for those and we're ready to grow if that demand. So again, we look forward to and I think the brightest days for Nucor are still in front of us.
And that's really where I would point to and again non risk construction continues to be incredibly resilient and we think strong going forward.
Great. That's really helpful. Leon and a follow up if I may around non resi construction demand that you're suddenly position yourself quite well with the garage door business.
Our house racking piece that but as you think about the mix shift in project within this segment.
Where are you seeing a lot of pent up demand for certain non resi construction product types and what are the projects that youre seeing new Clos, specifically benefit the most from.
Yes look I appreciate that question.
We're excited we're incredibly excited about the expand beyond piece of our business is the warehouse systems. The racking the CACI overhead doors and what those teams have been able to already generate in their earnings power and we're just getting warmed up I'm going to ask Chad to you Tomorrow Couche over.
That product group as well as the new markets and innovation change to give you some more flavor, but I would just remind you all that and that's a.
Segment and the construction in non res it represents over half of Nucor's overall mix. It's a market, we know incredibly well a customer base that we've had for going on six decades, now and one that we continue to partner with to provide a differentiated value proposition our investment strategies or two thirds of the way through a 14 billion.
Capital campaign, that's going to double Nucor's earnings powers from pre pandemic levels. So Chad wanting to provide just a little more detail on what we're seeing in the <unk> sector.
Some of the optimism we have yes, thank you Leon and Hello, Emily Thanks for the question as.
As Leon stated we are very excited about the demand picture that we see in non res I would categorize it as healthy and resilient as we move into Q2 and Q3.
Some datasets I'd like to give you would be when you look at our backlogs most of our downstream construction product backlogs are still at historically strong levels.
An example, two of our largest businesses that serve the non res business their combined backlogs or 56% higher than their average during the time period of 2017 in 2019. So you can see the health of these backlogs as we go through the year, we're not seeing a lot of cancellations at this time as well so we feel.
Strong about our backlog Dodge construction forecast. The recent numbers are positive both in dollars and square footage. When you look at the non Reg space and again, it's obvious that the activity have come off the 2022 peaks.
We remain above pre pandemic levels.
Data set I was looking at the 2023 Dodge projected non res building starts when you look at square footage is up 15% compared to that 2017, 2019 average which was some good year. So we feel really good about what we're seeing and then we always base. These datasets compared to what we're hearing from our customers and.
Customer feedback is still positive in the non res space part of your question was about new markets or new channels and we all know that warehouse, obviously was extremely strong in 'twenty, one and 'twenty two and it has come off those peaks in its level steady and find recalibrating and finding its place.
But I would remind you that even even with that level setting its still forecast in the warehouse space to exceed the 2018 in 2019 demand levels for warehouses, which wasn't historically prior to COVID-19. So one of those areas that Leon touched on I don't want just mentioned would be the excitement we have around the.
Onshoring of manufacturing, it's strong and it keeps pushing forward projects such as the semiconductor chip plants data centers EV facilities, both the assembly facilities as well as the battery plant.
Our backlog and we're quoting even more of them.
Again, I'll say it the manufacturing sector is very strong and.
Let me share this data set with the construction spending in this segment alone has nearly tripled since 2018 in 2019 levels, we're talking about close to $100 billion of <unk>.
Spin projected in this segment alone. So all warehouse has come off its level setting we're really excited about the manufacturing sector.
Fantastic that's very helpful.
Thank you and then I'm wondering next question comes from Lawson Winder Bofa Securities. Please go ahead.
Hello, gentlemen, good morning, Thank you for your presentation and congratulations on a great quarter.
I wanted to ask about.
Again about the ramp up of Brandenburg the cadence you see there in terms of the quarterly ramp.
Thank you.
Yes, Thanks Allison.
Let out there kind of give you some details back row.
Our Brandenburg ramp up yes.
Awesome. Thanks for the question.
Brandenburg ramp up continues to go really well.
We sure there in the slide deck, a couple of milestones again, the strategy has always been about capabilities in that capacity and so we continue to develop and explore the capabilities of this terrific machine and we've rolled plate that is over six inches thick, which is a new milestone for us. We've rolled finished played out of ingots, which is a significant milestone.
We're producing our own slabs now out of the caster and this is one of the most capable caster as the most capable in the western hemisphere and so.
The wrap up is just go on the way, we'd like to see it we still feel good about our commitment about 50 excuse me 500000 tons by the end of the year, obviously that is heavily weighted to the back end of the year, because we're focused on capabilities, but.
We're excited about what this.
The project is going to offer our customers and ready to serve them.
Okay.
Okay. That's fantastic and then if I could follow up just on the.
The plate Mark market and get your views.
And get an idea for what Youre seeing in terms of tightness in the market looking out.
Q3 and into the end of the year.
Yes.
Scott you started talking end of the year, you're beyond my Crystal ball, but I will share some thoughts on what we see now and it is a fairly tight market demand is pretty good for plate. Our backlogs are up 100% year over year, even more than that quarter over quarter. So we issued a price increase we published our prices and played as you probably are aware, we published an increase last night.
$40 a tonne.
Inventories are low there's not a lot of slack in the supply chain. So we see continued strength in the plate market. It remains one of our more resilient markets and.
I would highlight within that things like railcar manufacturing non res bridge work as a result of some of the legislative successes that Leon highlighted so overall a pretty positive.
Okay fantastic. Thank you very much thanks.
Thanks, a lot.
Our next question today comes from Carlos de Alba with Morgan Stanley . Please go ahead.
Thank you very much gentlemen, so question is.
Given the positive comments that you have on non res and all the things that you mentioned, how can we reconcile the year on year growth in your in your bars and structure a structure all the steel mill shipments.
<unk> declined 2% in the bar so as you know in 60% of the stroke trial. So I don't know if you could provide some color to help us understand.
These numbers and then maybe a follow up on this.
On slide eight of your presentation. The Dodge construction forecast is very clear that infrastructure.
<unk> continues to increase.
In the coming years, there is a little bit off.
Plethora or flatness in the <unk>.
Non resi and then increases but that is in terms of dollars.
There is aligned there in that chart that is.
Nonresidential building his thoughts.
Square feet and that is that comes down from 2003 to 234, and then it increases 102004 to $2 27, but it's only a gradual moderate the increase what drives your shipments that you see more of the dollar amount or the square footage of the projects put in place.
Hi, Carlos its a bunch of questions.
I'll take it off and maybe John Hollister.
That are seem to jump in.
Wanted to step back, though the broader.
Sort of a global environment as you think about re borrowing and borrowing Walsh.
To begin with the humanitarian crisis in Turkey, and the travesty that has befallen.
Nation, obviously with zero imports coming out of Turkey in the last couple of months.
Assuming a lot of that our long product businesses in general.
Incredible returns through a very very long cycle for nucor to debt.
Remaining incredibly robust and so as we think about.
In Q2 were positive we look forward to again, a stronger quarter in the second quarter.
<unk>.
As you mentioned the structural side of things as well, maybe just very quickly touch on what youre seeing in the.
The coming months and the structural side.
I'm wondering as we finish up on the <unk>.
Yes, some structural things I would say the structural market is not as strong as the plate market. It remains <unk>.
Resilient and we see some activities in non res construction, but it is not as strong as what we've seen in some other products but.
The strength is resurging in these areas of re shoring of manufacturing and the chips plants those are areas, where we're particularly strong both on the mill side and the downstream products side. So.
I may have missed your specific question about reconciling shipments al but I'm, giving you some color that's helpful, but John anything else on the bar side that you can share.
Say I think part of your question Carlos is what drives the steel intensity or the overall demand for steel, it's more going to be on square footage and dollars. Obviously there is some inflationary impact on the dollar side, what we're seeing with these chip facilities as they are very steel intensive.
The enormous foundations.
Under a facility like this which gives us a lot of optimism that demand is going to remain strong not just through 2023, but for the lifecycle of this government spending so we see a lot of resilience in the market moving forward.
Okay.
Great. Thank you very much.
Thank you and our next question today comes from Curt Woodworth with Credit Suisse. Please go ahead.
Ahead.
Yes. Thank you good afternoon.
Hey, Kurt.
Just wanted to get your thoughts on the sheet market right. So.
If we look at the second half of last year. The economy is still reasonably strong nonresident doing well.
Although admittedly weaker.
And the pricing averaged around 750, a ton more or less and here. We are today the pricing is 1200.
And arguably maybe there's a little bit more supply from some of the new EIA ethanol in the market, but lead times are out.
And I'm not sure that the real economy is that much stronger today than it would've been.
Back half of last year. So I'm just curious how what would you explain kind of the.
How would you characterize the move in the market. This year, if you could kind of parse out.
Some of the key moving pieces and then the second question just pertains to the steel products Division.
That business is I think it was a little bit more complicated for investors to parse out. So could you kind of maybe plus size that the joist and deck business versus the pure rebar fab business and then within the context of Iras semiconductors and post structure.
Where do you really play in some of those markets as some of that more joist and deck that specific versus pure rebar fab or other areas, obviously like towers.
For energy infrastructure. Thank you guys.
Okay Kurt.
Kick us off and again.
Bunch of different questions in there I'll try to make sure we cover them off we don't just just ask again, but let me begin with the tail end of your question as we think about the IRA chips Act and infrastructure.
In the macro we see about it.
About 8 million tons of annualized capacity for the next 10 years. So if you think about 8 million tonnes, that's roughly 7% of the overall ADC of this country. It is not an inconsequential inconsequential number and so how does that flow through and then how does that break down in the steel intensity within.
Those three well number one it marries up incredibly well have the most diversified steel.
Industry leader and Nucor, it matches up really well with the lowest embodied carbon footprint of any steelmaker in the world.
That that our customers are demanding these days, but it's coming in the form of plate structural longs rebar sheet.
Joist and deck fasteners buildings warehouse systems racking. It really is the breadth of our portfolio that is on display today. So it's it's.
It's touching every segment of nucor's businesses and again.
With what Chad described and again we.
We've worked really hard commercially and Dan Edens group with how we provide solutions and looking not to sell products, but how do we provide and partner with our customer to take care of their entire needs of building envelope from the foundation all the way through to completion.
As we shifting a little bit to your question on sheet I'll ask Rex to touch on this as well, but I would tell you on the macro no. We do see Q1, showing more favorable demand in the back half of 2022, and so there is strength there and again ultimately drives that as our customers. It's a supply and demand market. That's why we're seeing pricing go.
And stick because.
<unk>.
The demand is up the drivers are up our sheet business alone Q over Q is up about 20% backlogs are up about 25% Q over Q. So there is real strength there.
And there is some optimism there and how we see that moving forward, so maybe provide a little bit more.
Extra within the <unk> group, and what Youre seeing through the back half of or the rest of 2023.
Yes, Kurt Thanks for the question actually I'll step back for a moment from a big picture standpoint, looking at 'twenty two as you recall.
With Russia's invasion, Ukraine, and some uncertainty going on.
Good things going on in the marketplace where customers.
<unk> began.
I will say, placing orders.
And accumulated some inventory due to that uncertainty so with the uncertainty in the pipeline supply chain from that standpoint. So you saw the back half of 'twenty, two where some of that was being worked through so we saw some softness occurring as people working through inventory. So then you didn't see the.
I will say the demand pull through on the production side. They are working through some inventory. So we saw that softness.
But.
And I would say overall uncertainty from an economy standpoint, but now as we've entered 2023 I would tell you we see a much more stable market, we see more confidence.
In a marketplace and underlying demand and we've seen that on the sheet side. So you've now seen us stabilizing and some pricing at a higher level and we see that demand stabilizing our backlogs at this point.
Are on par with where we were.
At the end of first quarter and 22, so we see that strength and as we move forward Q2, and even into Q3, we see that continuing and more confidence in the underlying demand hopefully that's helpful. Thanks.
Okay on the joist and deck.
This is Steve just real quickly on your on your second question, there about joist and deck and rebar fab to give you a sense for size joist and deck is typically about 25% of our.
Product groups volume, it's a little bit higher than that in the first quarter, it's around 27%.
In rebar fab is in that same ballpark, usually a little bit under 25% of the.
Of the volume we do on products that fits in in the low twenties right now, but those are those are typical for those businesses about what they represent for the products group.
Great. Thank you very much guys.
Thanks sure.
Thank you and our next question today comes from Timna Tanners with Wolfe Research. Please go ahead.
Hey, good afternoon team.
Wanted to probe a little bit more the gallatin ramp up and I know in the past couple of years, you've talked about pulling back production if market conditions warranted, but it's also been some talk of you've got this asset and you want to run it. So I'm just kind of wondering about the cadence of first off when does it run full out and then would you.
Spect it to continue to run at a pretty full clip once it started up.
Yes, Timna. This is Rex I appreciate the question I'll go ahead, and just pick that up.
First of all I'll just comment at Gallatin at this point, we're now over 190 days.
Our recordable at that team and going through this ramp up process has just really been impressive to watch the focus there.
And.
At this point I would tell you for all intents and purposes are commissioning is basically complete.
We've had the opportunity I would tell you will have the luxury as a company.
Breadth of capabilities, we have at other plants to support.
The work Thats been done at Gallatin, we utilize that fully and supplying our customers from other plants or substrate into Gallatin, where we utilize the pickle Galvo line, which has continued to run in a tremendous fashion. So we utilize that as a group and we approached it as group. So we didn't have to get.
Times through Gallatin per ton sake, I think al mentioned this about Brandenburg and a focus on capabilities.
At this point, we've commissioned full capabilities at Gallatin.
And so youll begin to see us now.
Focusing on quality and ramp up of the tonnage subject to market conditions as we get into second quarter I would tell you we expect to be at full run rate capability.
By the end of second quarter, and then we'll gauge that based on the market.
It's Ben.
A great ramp up we've done it as a team as a group excited.
The new capabilities thicker slab that we have will be higher quality capabilities I won't be able to get into market. So we have not previously been into and of course, the wider with we have there at Gallatin.
Okay interesting thanks, and my second question is.
Obviously, you have a huge position with service centers and they are an important.
Counterparty for you and our channel checks are suggesting that there is some challenges there as you can imagine with higher interest rates and also access to capital in light of market conditions. So just wondering if you have any observations about any impact on service center buying habits right now.
Yeah, looking inventories Timna as you know and Youre looking at the MSCI data Lake, we are remain pretty pretty flat and so as you've seen particularly in sheet pricing coming through in the stability of that it's a good indicator.
Noting that we're not pulling orders forward from Q2 early because of those moves so I would tell you while.
While there remain pretty flat and low numbers.
Well theyre going to be cautious as well interest rates are having a big effect on them, but many of our end market.
Customers as well, we're watching and evaluating projects and expansion is based on what we're going to see from the fed here next.
Next month and throughout the rest of the year so.
Is touching obviously, a big swath of our customers and like you. We're watching all of those indicators in trying to analyze how does that shape out, but we've been partners with.
Our major service center customers for a long time, we're taking care of their needs and.
To do so well into the future.
Okay, great. Thanks very much.
Thanks, Tim.
And our next question today comes from Chris Congrats for with BNP. Please go ahead.
Yes, hi, Thank you for taking my questions. The first one.
In your comments, you said that you're already seeing an impact on infrastructure manufacturing.
I thought it would be more of a team for the next quarter and maybe later in the year. So can you discuss related the timing have you seen things accelerate a bit one of your competitor mentioned, a very strong month of March on the non <unk> side.
So just some questions around the timing there and if youre seeing maybe there is.
Those orders coming in faster than expected.
Yes, Im not sure there are.
Faster tryst and what I would tell you is it's nice to see them actually materialize and so through February March.
<unk> businesses are rebar businesses.
Again, the long product businesses Youre seeing.
The order activities increase the quota increase and actual orders and production increase so thats, taking shape as we speak but we expect that to ramp up in the back half of 'twenty three even further and again.
Somewhere in that five to 8 million tons annually of production increase throughout the next eight to 10 years as well.
We built out all of these major major projects so.
Miss anything there anything you'd add.
Thank you.
And maybe a follow up on that and thank you for the presentation. That's truly helpful. The three pools of demand you flagged the infrastructure.
Clean energy.
Manufacturing would you be able to breakdown for each of the street pools of demand split between let's say low flat and plate is that something you could do.
Yes, we can do that I'm not sure we'll do it on the call but.
Tristan it's something we can have our IR team follow up with you and then gave you some more details, but again one of the things to keep in mind as we think about those three projects the breath of nucor's capabilities positions us incredibly well, it's going to touch every major product group that we have.
And we're really excited about the expand beyond capabilities. When you think about the overhead door business and <unk> businesses combined with the joist and deck in the building systems group going.
Going to market together as one we are providing a solution said no one in the industry has today so.
We'll give you some more information here Jack can follow up with you in the coming days.
Maybe provide a little bit more of that breakdown.
Alright I appreciate it thank you.
Kristin.
And our final question today comes from Alex hacking with Citi. Please go ahead.
Hi, Thanks, I just have a couple of quick follow ups firstly.
On joist and deck the weakness there is that just purely the slowdown we've seen in the warehousing build out.
And then secondly on sheet just to clarify there I think some of your comments, obviously cheat sheet shipments that were extremely strong and I think we've seen that across the industry.
You mentioned that.
Comparing it to <unk> you saw a lot of Destocking is your view that the current level of shipments of <unk>.
Reflective of underlying demand or is there a restocking.
Element, that's fabricating those shipment thank you very much.
Yes.
Maybe kick it off and then Steve or Rex.
I would tell you no I don't think its a <unk>.
Restocking if you look at the MSCI numbers are hovering around the two months on hand, which again historically has been low I don't know and I don't we don't anticipate though is jumping to three or four.
Anytime soon I think thats going to be a balanced approach for Tim.
Timna asked about interest rates and then again availability. So what I would tell you is yes, you saw a large increase in our sheet group that is real demand.
Does that stick in that continue well look we think second quarter is going to be strong, but as we play out the rest of the year, we'll have to sort of wait and see but the increase within that if you broke out that increase in shipments some of that is.
The loss of imports, we've seen imports drop off significantly Q over Q and some of that is also establishing different partnerships with our commercial teams and how we're going to market. We mentioned in my opening remarks, the relationships and partnerships, we have with train and general Motors and Johnson controls in there.
Another 20 customers like that that we're partnering with different to provide them something.
Something unique and again, a very differentiated value proposition.
Yes, I'll just jump in on the on the non res part of your question Alex.
As we mentioned manufacturing is.
Robust and I would say get ready infrastructure is going to be coming.
Where we're going but you asked about the drop off and it really has I believe led by warehousing.
Has dropped off significantly from these peaks I would just remind everyone.
How high that peak, when and where we're at today compared to historic levels is still pretty pretty healthy on the warehousing side. Your question was what drove that drop off and I would say warehousing was the big the big market.
Thank you.
Thanks, Alex.
This concludes the question and answer session I would like to turn it back over to the management team for any final remarks.
Well, thank you and in closing I want to thank our Nucor team, where they are incredibly strong start to 2023 and your continued focus on our most important value that health safety and wellbeing of our team I want to thank our shareholders for your investment and your trust, we take our stewardship incredibly seriously we appreciate.
The opportunity to share our view and our customer base. Thank you all for your interest in Nucor and have a great day.
Thank you, Sir ladies and gentlemen. This concludes today's conference call. We thank you all for attending today's presentation.
Now disconnect your lines and have a wonderful day.