US steelmakers flag recession concerns, energy costs could impact demand

Nucor Corp., the largest US steelmaker, warned shareholders that recession concerns could impact demand as it looks ahead into the new year. 
 

The Charlotte, North Carolina-based producer said its steel mills business will report “considerably” lower earnings in the fourth quarter due to lower shipments, also noting that average selling prices are down. Nucor, which has typically issued upbeat guidance, is the first of the major steelmakers to flag recession concerns.

“While we believe these trends are mainly seasonal effects, economic uncertainty and recession concerns could impact future demand,” Nucor said Thursday in a statement. The company said it expects earnings of $4.25 to $4.35 a share in the fourth quarter, below the average analyst estimate of $4.38 before the latest guidance. Nucor shares fell more than 9% Thursday, the second-worst performer in the S&P 500 Index.

Benchmark steel prices are down more than 50% this year as surging inflation has crimped appetite for longer-term projects. Nucor’s warning is the most bearish comment from any producer in the steel sector since the summer of 2020, when an executive warned the largest annual North American industry conference that demand would remain below pre-Covid levels for “some time.” 

US Steel Corp. and Steel Dynamics Inc. after the market close reported a more upbeat outlook for the markets, despite headwinds. US Steel said demand in December improved, customer inquiries accelerated and steel prices rose. Steel Dynamics said steel prices have bottomed, and will increase into next year amid support from automotive and non-residential construction.

US Steel said fourth quarter adjusted earnings before items would be $375 million, below the $416.5 million average estimate of six analysts and the lowest since the fourth quarter of 2020. The Pittsburgh-based company warned that higher energy and raw materials costs and lower demand in Europe are causing headwinds to the business.

“As discussed during our October earnings call, we continue to work through higher priced metallics in our Mini Mill segment and pressure on our European segment continues from lower demand in the region and higher raw material and energy costs,” Chief Executive David Burritt said in a statement.

Steel Dynamics said profit in its steel business would be “significantly” lower from the prior quarter based on seasonally lower shipments.