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Major Steel Shipper To Build $1.35 Billion Facility In Kentucky

Major Steel Shipper To Build $1.35 Billion Facility In Kentucky

Nucor Corporation (NYSE: NUE) will build a $1.35 billion manufacturing facility in Brandenburg, Kentucky, the company announced. This steel mill will create 400 jobs in the rural town while expanding the Charlotte-based company's presence in the Midwest. The facility will be capable of producing approximately 1.2 million tons of steel plate products per year. Nucor expects the plant to be fully operational by 2022.

Nucor Corporation primarily ships using flatbeds and railroads, moving hundreds of shipments per day between its subsidiary companies and customer locations. The company has three other steel plate mills operating in Alabama, North Carolina and Texas. Nucor President, CEO and Chairman John Ferrigola described the location of the new plate mill as "strategic" in a January 7 call with investors, noting its close proximity to scrap metal yards in the Midwest, as well as to a large portion of Nucor's customer base.

"This investment will enable us to build a clear market leadership position in the U.S. plate market," Ferriola said. "Our acquisition of the Gallatin sheet mill in Ghent, Kentucky five years ago has been a tremendous success, and we are pleased to add a second mill in the state."

According to Ferrigola, proximity to customers will allow for better service and better on-time delivery. In 2017, the midwestern United States accounted for the largest demand for steel at 1.8 million tons. The Southeast and South Central regions were close behind at 1.4 million tons and 1.25 million tons, respectively. The North Carolina and Alabama plate mills produce a combined 2.9 million tons of steel plate annually. The new Kentucky mill will be capable of producing 1.2 million tons of steel annually, while cutting down on shipping costs and capitalizing on an abundance of nearby scrap metal used in its recycling business.

Nucor Corporation is North America's largest producer and recycler of steel and steel products and employs more than 25,000 throughout the United States and Canada. The company reported record net earnings of $2.36 billion and shipped record amounts of steel in 2018. The trend may very well continue after completion of the new Kentucky mill, as the new steel mill in Brandenburg will translate to hundreds of loads shipping per day from that facility, as well as loads of scrap metal shipping inbound to be melted down for recycling.

It is difficult to estimate the load count per day that will ship from the new Brandenburg mill, according to a source at Nucor's Tuscaloosa, Alabama, site. Loads will ship via rail, barge and truckload daily. Load volumes will be consistent month-to-month. Though the location of the mill has been described as strategic, it is too soon to tell what challenges Nucor may experience in terms of truckload capacity in that area.

"The rust belt is tight enough," explained a flatbed expert at a Chattanooga brokerage. "When you come that far south, what you're doing is extending the rust belt, stretching it into a bigger size. That's going to be tough on capacity."

Though it's location on the Ohio River is ideal for transporting bulk shipments of scrap metal, sourcing flatbed capacity may prove to be difficult. Louisville is located between the Indianapolis and Nashville markets, both of which provide many options for flatbed drivers, especially in peak construction seasons. The mill will not be operational until 2022, but will likely provide plenty of job site freight during its construction.

Nucor's new plate mill will produce cut-to-length, coiled, heat-treated and discrete plate ranging from 60 to 160 inches wide, and in gauges from 3/16 of an inch to 14 inches. The Brandenburg mill will strengthen Nucor's plate product portfolio significantly, and give the company the ability to produce speciality plate products that generate higher margins. Nucor's new mill will allow the company to produce 97 percent of the steel plate in demand in the United States, something only one other domestic steel producer has accomplished.

Nucor acquired Gallatin Steel Co. from Gerdau SA and ArcelorMittal in 2014 for approximately $780 million. In 2018, Nucor announced a $165 million, 70-job expansion to the Ghent facility, planning to nearly double its capacity for rolled steel. The facility is undergoing two major investment projects, including a new galvanizing line and a project to increase its hot rolled coil capacity. The new galvanizing line is expected to be operational during the second quarter of 2019, and the plant's hot rolled capacity is expected to increase by 2021. The new Brandenburg facility, as well as the Gallatin expansions, represent over $2 billion in investments by Nucor in Kentucky. The new mill will also generate as many as 2,000 construction jobs before it is fully operational.

Nucor was founded in 1955 by Ransom E. Olds, the founder of Oldsmobile, when he left his company following a stockholder dispute. Olds formed REO Motor Co., a company which evolved into the Nuclear Corporation of America and eventually became Nucor in 1971. Today, the company is comprised of three segments including steel mills, steel products and raw materials.

Image sourced from Pixabay

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