NEW YORK Oct 22 U.S. steelmaker Nucor Corp. (NUE.N) said on Thursday, demand from service centers improved somewhat along with output in the third quarter, but it did not see increased end use demand, and operating rates could fall in the fourth quarter as plants shut for the holidays.
"Apparent demand did increase in the third quarter due to the end of customer de-stocking. However, there's been no meaningful real improvement in end use demand," said Chairman, President and Chief Executive Dan DiMicco.
"The fourth quarter will also present the usual seasonal issues driven by the holidays and year end plant shutdowns by customers," he added.
Because of slower operating rates expected for the fourth quarter, flat-rolled steel product prices may have already seen their highs for the medium term, the executive added.
The CEO was speaking to Wall Street analysts on a conference call after the Charlotte, North Carolina-based steelmaker reported its third consecutive quarterly loss due in part to lower shipments and high-cost raw material inventories at its sheet mills. [nN22440738]
"While our fourth quarter results will benefit from significant improvements and raw material costs, our results could be negatively impacted by the potential of lower operating rates in both sheet and bar products," he said.
As customers take advantage of shortened lead times on mill orders, fourth quarter volumes are more difficult to predict.
"We believe real demand is in for a long, slow recovery. This outlook reflects the very serious structural imbalances that created the current economic crisis," said DiMicco, pointing to excessive debt and consumption levels that preceeded the sharp global downturn that began a year ago.
Specifically, demand remained extremely week for fabricated construction products through 2009. Compared with the year-ago period, Nucor's steel joist production decreased 50 percent, steel deck sales declined 40 percent, metal building volumes fell 53 percent.
Fabricated rebar tonnage increased 11 percent, due to the volume contributed by the Ambassador Steel fabrication plants acquired by Harris Steel in August 2008.
"Apparent demand will continue to meet real demand as we work through this year and customers work down inventories to what they found is acceptable levels in these tight credit markets and with the economic slowdown," said DiMicco.
In the fourth quarter, he added many of its customers' typically shut facilities for the holidays and could extend those down periods given weak economic conditions.
"We do not believe that real demand has really improved much since the end of last year. And we don't see things improving in the economy from a flat-roll standpoint or long products standpoint, whether we're talking automotive, construction, housing, non-residential construction, oil company goods, or what have you," said DiMicco.
In spite of the gloomy outlook, he said Nucor's backlogs have improved throughout the year. But because customers are taking advantage of shorter lead times backlogs are not high enough to predict operating rates for the entire quarter.
Turning to prices, DiMicco said they did move up from month to month throughout the quarter, but since then, there has been a definite softening on flat-rolled pricing.
"So we may have experienced a peak in pricing at the end of the third quarter and beginning of the fourth quarter when it comes to flat-rolled, whether hot-rolled or cold-rolled or galvanized," he added. (Reporting by Carole Vaporean; Editing by David Gregorio)