Nucor and Arkansas: Magnet and Steel

MaryEmily Slate, vice president and general manager of Nucor Steel Arkansas, says the plant is investing almost half a billion dollars into its expansion.

Nucor Corp.’s new cold mill in Mississippi County could be opening right as the company is experiencing record earnings.

Nucor, the country’s largest steelmaker, announced in 2016 it would expand its operations in northeast Arkansas with a $230 million cold mill facility that it expects to employ about 200 workers when it opens in early 2019.

The steelmaker announced this year that it would also add a $240 million galvanizing line facility by 2021.

In November, Nucor, based in Charlotte, North Carolina, released its third-quarter earnings report that showed the company had revenue of $6.7 billion in the quarter and $18.7 billion for the first nine months. Those were both significant improvements from 2017, when quarterly revenue was $5.2 billion and nine-month revenue was $15.2 billion.

Company CFO James Frias pointed out in a conference call that Nucor’s highest annual profit was $1.8 billion back in 2008. During the first three quarters of 2018, Nucor had reported income of $1.7 billion, just $100 million shy of the high-water mark with three months to go.

A strong economy is the tailwind, executives said. The rising tide aspect in the construction sector and the automotive industry, along with agriculture and energy, has spurred demand for steel products.

Nucor’s sales have jumped 24 percent from 2017 to 2018, and third-quarter sales were up 30 percent compared with the same quarter a year ago. Average price per ton was also up approximately 16 percent.

The company strength is good news for Arkansas, which should soon benefit from the expansion of the two Nucor facilities within the state’s borders.

“We are so excited to be expanding in Arkansas,” said MaryEmily Slate, vice president and general manager of Nucor Steel Arkansas. “We are investing almost half a billion dollars. We’re adding a specialty cold mill and a galvanizing line, and it will really increase our presence here in Hickman in the automotive market. It will help us have the capability to produce advanced high-strength steels and high-strength low alloy steels and increase our motor lamination products. It is a great time for us in Arkansas.”

‘Great Business Environment’
Slate credited Gov. Asa Hutchinson for creating a business environment conducive to Nucor’s expansion.

Nucor isn’t the only steel company that has started or enlarged its presence in eastern Arkansas. Big River Steel opened up a $1.3 billion plant in 2017 near Osceola in south Mississippi County and announced earlier this year a $1.2 billion expansion (see Big River, Big Gift: Osceola Steel Mill ‘Keeps On Giving’).

“Gov. Hutchinson has been amazing for this area, not just for Nucor and not just for the steel industry,” said Slate, who also praised U.S. Rep. Rick Crawford, the Republican who represents the 1st Congressional District. “He has set up a great business environment; he’s very open to considering bringing new business in. He has been very aggressive in helping us and helping the state attract investment. I think the business environment under the governor has been very, very good.”

For Big River Steel, the Arkansas Legislature and Gov. Mike Beebe approved a multimillion-dollar package of incentives in 2013. The Arkansas Economic Development Commission said Nucor’s cold mill expansion would receive tax credits.

“Nucor has had a tremendous economic impact in Arkansas over the last three decades,” said AEDC Executive Director Mike Preston. “The company took a cotton field in a tiny county in northeast Arkansas and turned it into the largest structural steel mill in the Western Hemisphere. Employing almost a thousand Arkansans, the company has created a high-tech, well-paid team environment that attracts some of the best talent in the industry.”

Slate said the Arkansas cold mill plant has already hired approximately 100-110 of the 200 employees it will need when operations begin in 2019. The galvanizing line should employ about 150, Slate said.

The company has known for some time it would need additional workers in what has become a tight labor market.

For that reason, Nucor has worked with local colleges and training centers to prepare for its labor needs and is confident that Arkansas will be able to provide for all its requirements, Slate said.

“The challenge that Arkansas faces is the same one that every state faces with maintaining a qualified workforce, especially in the manufacturing sector,” Slate said.

“For many years, Nucor has built great relationships with local colleges in the area. We helped develop programs to train our workers, workers for the industry. We have done a lot of worker training and retraining. That’s a place that government and the private sector can work together and keep Arkansas competitive. That is a challenge that all businesses have.”

In Praise of Tariffs
The tariffs imposed by President Donald Trump have caused controversy in economic circles but not among steel executives.

Slate said while the growing strong economy has helped the steel industry, so too has the 25 percent tariff Trump slapped on steel imports.

Steel imports to the United States are down 11 percent this year, and Slate said that is a sign that Trump’s tariffs are working to keep cheap steel from being dumped in the country to undermine the United States’ steel industry.

Slate added that the corporate tax cut passed late in 2017 and the Trump administration’s easing of regulations have contributed to the steel industry’s upswing.

Slate said 3.4 million fewer tons of steel have been imported to the U.S. this year, and 3 million of those missing tons have been eliminated since the tariffs began.

That shows the tariffs are having their intended effect, she said.

“There is so much misinformation regarding how the tariffs are impacting the economy; the steel tariffs aren’t about protectionism,” Slate said. “I don’t think any of us wants protectionism. It’s really about establishing a fair and level playing field to compete on. We believe the steel tariffs are having their intended impact by removing unfairly traded imports from the U.S. market. It’s not about keeping trade from happening; it’s about keeping it a fair, level playing field.”

Slate said media reports that the tariffs are having a negative economic impact aren’t true for the steel industry. Steel use is up 2 percent this year, which means more of the supply for U.S. consumption is coming from U.S. producers.

Nucor’s record earnings year in 2008, which was followed by the recession and layoffs across many industries.

Slate said the strong economy of 2018 looks to hold for a while as Nucor is seeing stable or rising demand in 23 of its 24 markets.

“The steel market is really strong right now,” Slate said. “It’s probably the best market conditions we have experienced in about a decade. It gives us a lot of confidence for 2019 that we will see continued strength.”