US mills highlight long-term goals in Q2 earnings calls

The United States’ largest steel mills stressed the importance of their long-term growth and diversification strategies as they reported near-term financial weakness in their quarter two financial results.

While the revenue, earnings and shipment volumes of Cleveland-Cliffs, Nucor, Steel Dynamics (SDI) and US Steel all declined on both a quarter-on-quarter and year-on-year basis, each company was positive as they communicated their capital expenditure (CAPEX) plans.  

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Each company attributed the weaker financial performance to reduced average steel selling prices during the reported period. Nucor, Steel Dynamics and US Steel had issued lower quarter two profit guidance in June. Their reported earnings were stronger than these revised estimates, however.  

Growth strategies target diversification 

Despite a generally downbeat report on their quarter two performance, US steelmakers have stressed the benefits of their long-term diversification strategies through CAPEX and acquisitions.  

SDI highlighted the positive influence of its four new value-added flat rolled steel coating lines in Sinton, Texas, which have added “1.1 million tons of higher margin product diversification”. SDI is also hitting construction milestones on its aluminum rolling mill, targeting a mid-2026 start for production.  

US Steel discussed the upcoming start-up of its Big River 2 project in Q4 which will add up to three million short tons of flat rolled steel. Nucor, meanwhile, highlighted its recent acquisitions of door manufacturer Rytec and data centre supplier Southwest Data Products. It also has two mills under construction; a bar mill in North Carolina and a sheet mill in West Virginia.  

Finally, Cleveland-Cliffs announced the conversion of its Half Moon Warehouse in Weirton, West Virginia, into a distribution transformer manufacturing facility. The Weirton tinplate facility was recently idled due to what the steelmaker described as “unfairly traded tin plate imports”. Under the new plans, this repurposed manufacturing facility will be operational in 2026 and will use grain-oriented electrical steel (GOES) produced at its nearby facility in Butler, Pennsylvania. This investment is in addition to the Stelco acquisition announced in July. Cleveland-Cliffs claims Stelco is “the lowest-cost flat-rolled producer on the North American continent”. 

In its quarter two earnings statement, US Steel continued to communicate its strong support of Nippon Steel’s acquisition of the business. However, two hurdles remain for approval of the takeover. The acquisition still needs a green light from both the Department of Justice’s antitrust review and the Committee on Foreign Investment. Nippon Steel recently hired Mike Pompeo, the former Secretary of State under President Trump, to help push the purchase over the finish line.  

US mills’ earnings outlook 

Not all US mills expect their financial performance to improve in quarter three. Both Nucor and US Steel expect lower earnings in the period due to lower realised prices. Cleveland-Cliffs lowered its CAPEX targets and is “on track” to realise a USD30 per tonne unit cost reduction this year. SDI expects “steel pricing to firm” along with “solid” market conditions. 

Recent data aligns with a cautious near-term assessment. JP Morgan’s global manufacturing Purchasing Managers’ Index dropped under 50 in July for the first time this year, led by a decline in new orders. US labour markets are also slowing, reducing the confidence of US consumers. The unemployment rate has jumped to 4.3% in July, a 0.8% increase over the past 12 months.  

The pending results in November’s US election is also causing uncertainty for businesses. Nonetheless, further government-led action to address US import levels were among the subjects discussed in the earnings calls of both Cleveland-Cliffs and Nucor. Leon Topalian, the president of Nucor, said: “In our view, this (recent tariff increases) was an important first step to stop the surge of steel imports from Mexico and address the problem of circumvention. However, more stringent efforts are needed and any exceptions to this new requirement, including through the exclusion process, will largely negate the benefits of the agreement.”  

Topalian said that Nucor still had concerns about trade practices involving rebar, electrical conduit, and the rise in fabricated steel products coming in from Mexico and went on to “urge Congress to pass the Leveling the Playing Field Act 2.0”. The proposed act aims to address unfair trade practices and strengthen the antidumping and countervailing duties laws.