Nucor says steel industry bottomed in 2nd qtr '09

* Sees April as bottom for steel industry

* Pick up in steel orders mostly for inventories

* July orders, production continue to show small upturn.

* Expects only slight demand improvement in Q3, Q4

By Carole Vaporean

NEW YORK, July 23 (Reuters) - Nucor Corp (NUE.N), one of the top U.S. steelmakers, expects only slightly better orders and capacity utilization in the third and fourth quarters, but thinks the steel industry bottom was hit in April and will push through its second price increase in as many months.

Speaking after the Charlotte, North Carolina-based company reported a narrower second-quarter loss than Wall Street expected [nN23383339], Daniel DiMicco, chief executive officer said, "Business conditions bottomed in April."

"Our better-than-expected second-quarter earnings resulted from stronger orders, production, and shipments as the quarter progressed," he told analysts on a conference call.

Calling the current economic recession, "the most challenging steelmaking conditions we have seen in our lifetime," he said average weekly steel mill shipments rose 21 percent in May over April and 8 percent in June over May.

"The upturn in shipments was led by volume gains in our sheet, plate and beam mills," he said.

Along with a seasonal demand pick up, inventory destocking among Nucor customers seemed to have run its course, he said.

"Our customers are now ordering at the rate their customers are ordering from them. The uptick we are seeing is because apparent demand is moving closer to real demand," he said.

DiMicco added, however, that Nucor does not believe there has been significant improvement in end-use demand, but along with price increases, the slight pick up should lead to a better third quarter, with the fourth quarter showing even greater improvement from lower raw materials costs.

"We continue to believe that real demand in the steel market is in for a long, slow recovery and there will likely be some bumps along the path to recovery," the executive said.

John Ferriola, chief operating officer, said Nucor's second-quarter steel shipments of 3 million (short) tons were about half the year ago quarter of more than 6 million tons.

Second-quarter steel mill capacity use was 46 percent, slightly more than the first-quarter rate of 45 percent. And Nucor's steel mills' average selling price was down 39 percent in the second quarter from the year earlier level.

"We are encouraged by improving trends in orders, shipments and production that began during the second quarter. These stronger business conditions continued into July," he said.

Because demand improved, he said, Nucor was implementing price increases in each of its product segments for the first time in about nine months, with the first price hike in June, and subsequent increases in either July or August.

While second-quarter capacity use was up only modestly from the first quarter, monthly mill utilization rates improved significantly for each product throughout the second quarter.

"Across our steel mill products, we believe the catalyst for this demand upturn is the result of service centers completing their inventory destocking cycle," the COO said.

In June, service center inventories were 6 million tonnes, their lowest level since August 1983, and have been reduced by 46 percent from peak levels in August last year.

Months of supply across all products were 2.4 months worth, and as a result, service centers have increased their buying.

"At the same time, we see little indication that end-use demand has improved and expect no significant improvement for the rest of 2009," said Ferriola.

While first-half mill shipments were down by more than 50 percent across product lines compared with last year, second quarter shipments improved over first quarter.

While demand pick-up came mainly from inventory restocking, some school, hospital, power plant, and government building activity helped beam mills, export markets lifted bar mill shipments, higher energy related volumes boosted plate mill shipments, and incremental demand from the automotive sector added to sheet mill shipments, Ferriola said.

But with only minor demand increases, the COO said, Nucor continues "to expect difficult conditions for rest of 2009." (Editing by Christian Wiessner)