Nucor Corp (NUE) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the Nucor Corporation First Quarter of 2013 Earnings Conference Call. As a reminder, today's call is being recorded. Later, we will conduct a question and answer session and instructions will come at that time. Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate and variations of such words and similar expressions are intended to identify those forward-looking statements, which are based on Management's current expectations and information that is currently available. Although Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not effect their accuracy.

More information about the risks and uncertainties relating to these forward-looking statements may be found in Nucor's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them either as a result of new information, future events, or otherwise. For opening remarks and introductions, I would like to turn the call over to Mr. John Ferriola, Chief Executive Officer and President of Nucor Corporation. Please go ahead, sir.

Thank you. Good afternoon. This is John Ferriola, Nucor's Chief Executive Officer and President. Thank you for joining us for our conference call. As always, we appreciate your interest in Nucor. With me for today's call are the other members of Nucor's senior leadership team -- Jim Frias, our Chief Financial Officer, and our other executive vice presidents, Jim Darsey, Keith Grass, Ladd Hall, Ham Lott, and Joe Stratman.

First and most importantly, we want to thank everyone on our Nucor, Harris Steel, David J. Joseph, Duferdofin, NuMit Steel Technologies, and Skyline Steel teams for your hard work taking care of all of our customers in today's very challenging market conditions. As always, you are doing it by working safely, working smart, and working together. You are Nucor's greatest asset and our real competitive advantage. The right people doing the right things every day. Thank you all. Last week, Ham Lott announced his plans to retire in early June and Ray Napolitan has been named as his successor as Executive Vice President leading the Fabricated Construction Products team. Ham's retirement and Ray's promotion are part of the thoughtful and orderly succession planning process that has been an important strategic initiative throughout Nucor in recent years.

Ham began his career in 1975 and has served since 1999 as Executive Vice President responsible for fabricated construction products. Over his 37 years of service with our Company, Ham has dedicated himself to Nucor's continual improvement and strengthening our competitive position. Under his leadership, Nucor's downstream businesses have nearly tripled to their current annual capacity of more than 4.6 million tons. On behalf of myself, Dan DiMicco and the entire Nucor family, I want to thank Ham for his many contributions to making Nucor a better company. Ham, thank you for a job extremely well done and remember, while you may be retiring, you will always be a member of the Nucor family.

Ray Napolitan is a 17-year veteran of our Company. He is a highly effective Nucor leader with experience in our metal buildings, joists, and deck operations. Since 2010, he has served as President of Nucor's Vulcraft Verco group. Ray and his team are well-prepared to build upon our record of long-term profitable growth in downstream and fabricated products. In addition to providing Nucor attractive long-term returns, these businesses enhance the profitability and growth opportunities of our core steel-making business. I will now ask our CFO, Jim Frias, to discuss our first quarter results and financial position. Following Jim, I will update you on Nucor's growth strategy. Jim?

Thanks, John, and good afternoon. First quarter 2013 earnings of $0.26 per diluted share were modestly above our guidance range of between $0.20 to $0.25 per diluted share. The decline from fourth quarter 2012 earnings of $0.43 per diluted share was due to the swing from a fourth quarter LIFO credit of $0.14 per diluted share to the first quarter's LIFO charge of $0.03 per diluted share. The decline from year-ago first quarter earnings of $0.46 per diluted share was largely the result of weaker operating results from our steel mills, as the typical seasonal improvement in the first quarter did not occur. A quick comment about our tax rates that can be confusing due to the impact of profits for non-controlling interests. After adjusting out profits belonging to our business partners, the first quarter of 2013 effective tax rate was 33.4%.

Balance sheet strength remains an important attribute of Nucor's business model. Our total debt-to-capital ratio was 32%. Cash, short-term investments, and restricted cash totaled $1.1 billion at the end of the first quarter of 2013. Further to Nucor's strong liquidity, our $1.5 billion unsecured revolving credit facility is undrawn and it does not mature until December 2016. We have no commercial paper outstanding. Nucor is the only steel producer in North America to enjoy the extremely important competitive advantage of an investment grade credit rating. The benefits of our credit rating include a lower cost of capital, financial flexibility, and Nucor's position as the lowest risk counter-party for both customers and suppliers.

Our natural gas working interest investments to support Nucor's raw material strategy are an excellent example of how financial strength pays off for Nucor. Our strong liquidity and cash flow through the ongoing great recession is allowing us to continue Nucor's long tradition of growing stronger during downturns. 2013 capital expenditures are expected to exceed $1.1 billion. Of this total, we estimate that approximately $300 million is for maintenance capital projects and $800 million is for projects to grow Nucor's long-term earnings power.

We are implementing a number of projects throughout our upstream, steel making, and downstream businesses to develop new products, increase quality, and reduce costs. The most significant of these initiatives are our Louisiana direct reduced iron facility and the related natural gas drilling investments. Expanding SBQ production capabilities at our bar mills in South Carolina, Nebraska, and Tennessee, expanding our Nucor-Yamato structural mills portfolio of sheet piling products. Expanding our South Carolina flat rolled mills portfolio to include wider and lighter gauge hot rolled sheet, adding a normalizing line at our North Carolina plate mill, and constructing a new reheat furnace at our Connecticut bar mill. In his comments, John Ferriola will update you on some of the more significant projects that will be starting up in coming months.

Our team is excited by the opportunities we are executing on to reward Nucor shareholders with very attractive long-term returns on their valuable capital. The objective of our growth strategy is higher highs and peak earnings power and shareholder value through successive business cycles. For the second quarter of 2013, Nucor's earnings are expected to improve from first quarter levels. This reflects our outlook for improved performance at our downstream businesses, raw material operations, and most steel mill product groups. The exception to the anticipated overall trend of improvement is the flat rolled market. Excess supply, both domestically and from imports, remains a very serious challenge for the sheet steel industry.

We are growing more concerned about slowing in the economic recovery. Recently published service center shipment data for the first quarter of 2013 shows a year-over-year reduction in shipments of over 6%, with reductions in every category of carbon steel products. However, this comparison may somewhat overstate the magnitude of market softness. In 2012, the first quarter was the strongest quarter of the year for service center shipments, as seasonal upward pricing momentum encouraged buyers to accelerate purchases. It is also worth noting that first quarter 2013 shipments increased over 14% from the fourth quarter of 2012 level.

We continue to be cautiously optimistic about non-residential construction markets in 2013, as they slowly improve from very depressed levels. The most recent McGraw-Hill construction market survey projects non-residential construction square footage growth of about 8% for 2013 compared to 2012. This level remains less than half the 2007 peak. Nucor will again follow our practice of providing quantitative guidance in the final month of the quarter. John?

Thanks, Jim. The magnitude and duration of this ongoing great recession is unlike anything we've experienced in our lifetime. We are now five years into what remains a depressed and stagnant global economic environment. Here is a statistic that tells the real story. In the United States today, approximately 30 million people are either unemployed, underemployed, or have simply given up hope for finding a job and have dropped out of the labor force. On a percentage basis, the true unemployment rate today rivals levels last experienced during the Great Depression of the 1930s. Against this backdrop, steel market fundamentals remain very challenging.

Utilization rates for the American steel industry remain mired in the 70% range. At the same time, imports have surged over the past several years to levels totally inconsistent with the stagnant domestic economy. These import levels make no sense whatsoever when you consider the fact that American producers are among the lowest cost producers of steel in the world. But the Nucor team always thinks and acts with a long-term perspective. We are able to do this because of the strength of Nucor's business model. These strengths include our strong balance sheet, our healthy cash flow generation through the cycle, a low and highly variable cost structure, great product diversification, our market leadership positions, a flexible production capacity, and most importantly, our culture. Longer-term, we are bullish on the profitable growth opportunities for both the American economy and for Nucor.

Our team is bullish on the American people and their ability to do the right things over the long run to reinvigorate our economy. Speaking frankly, the time is right for a US economic renaissance fueled by our country's abundant energy resources and an unrivaled workforce. That is why we are busy building a stronger Nucor with significantly greater long-term earnings power. Challenging economic times provide excellent opportunities to grow profitably for companies like Nucor. To be more specific, the Nucor team is expanding and diversifying our product lines into more value-added and higher-margin offerings to better serve our customers. The Nucor team remains relentless in its focus on continual improvement in safety, quality, and costs. The Nucor team is aggressively implementing our raw materials strategy and the Nucor team is speaking out for sound economic policies that create what our economy needs the most -- jobs, jobs, and more jobs.

One of the most important of these policies being a global environment of rules-based, rules-enforced free trade. Since the last cyclical peak in 2008, through disciplined execution of our multi-pronged growth strategy, we have invested nearly $7 billion of our shareholders' valuable capital at year-end 2012. With our expected 2013 capital spending of more than $1 billion, our cumulative investments, since the last cyclical peak, will total approximately $8 billion. These investments have dramatically increased Nucor's long-term earnings power. During the next several years, our focus will remain on executing our strategic plan and converting those $8 billion of investments into profits, once the inevitable cyclical upturn arrives.

Our teams continued to push through our growth initiatives during the first quarter. Two very significant projects are scheduled for completion later in 2013. Coal commissioning has begun at our to 2.5 million-ton annual capacity direct reduced iron, or DRI, facility in Louisiana. Due to record rainfall levels and other severe weather conditions in the quarter, we expect to start production late in the third quarter of this year. In January and February, our construction site received a total of more than 30 inches of rain, followed by more heavy rains in March. In addition to this record precipitation, our progress was slowed by extremely strong winds on a number of days in the first three months of this year. After construction is completed, we expect a very fast startup of production for two reasons. Over the past six years, Nucor has achieved world-class operating performance at our DRI facility in Trinidad. Equally important is our extremely high confidence in the reliability and enhanced capabilities of the HYL technology we selected.

HYL is a proven technology. Today, about 25% of DRI production in the world utilizes the HYL technology. The completion and start up of our Louisiana DRI facility had, with our investments in a long-term and low cost supplier of natural gas, is a major step forward in the full implementation of our raw materials strategy. Simply put, we see the strategy as a game changer for Nucor's cost structure for high quality iron units. Our Hertford County North Carolina plate mill will begin hot commissioning its normalizing line in June and begin production in the third quarter. Complementing prior investments in a heat treating facility and a vacuum tank degasser, the normalizing line will allow us to further expand our participation in a number of value-added plate markets. Finally, a recent achievement in one of our downstream products deserves special recognition.

I want to congratulate and thank our teams in our metal building groups for attaining in 2012, for the first time ever, the market leader position in revenue and in shipments. Nucor now enjoys the important competitive advantage of market leadership in eight out of the 10 major products in which we compete; steel beams, merchant bars, rebar, steel joists, steel decking, steel piling distribution, rebar fabrication and distribution, and now, pre-engineered metal buildings. In closing, I want to again thank everyone on the Nucor team for their hard work and sacrifice during these tough economic times. I can confidently assure you that our broad scope of work will pay big dividends to the entire Nucor family when the inevitable economic recovery arrives. Thank you and please keep it going. Nucor's best years are still ahead of us. We would now be happy to take your questions.

(Operator Instructions)

Sal Tharani, Goldman Sachs.

I wanted to ask you about these investments you're making in the growth projects. Is 2013 the peak you think or this will continue on in next few years? Just want to understand the CapEx for the next few years.

In terms of investments, a lot of the projects that we are currently working on will finish out in 2013 or early 2014. We never limit ourselves looking at the future. We're not sure what potential opportunities will come up, so we always keep our options open. We have a strong balance sheet, so if we have the right opportunities, we can continue our investments. That said, we will always be continuing our growth in new products on an organic basis in our existing mills. We're always looking for new opportunities to grow our product range and to improve our products and move further up in the value-added markets.

Should we consider second DRI unit, the second module which you had a little bit postponed something which is going to start sometime in, at least the construction, sometime in '14?

It's too early to comment on that. Our objective right now is to focus on getting the first module up and running and getting the DRI into our facilities. You do know that we have built the infrastructure and support structure at the existing Louisiana facility to support two units, so when we move forward with the second unit, the timeline will be a little bit shorter, the investments will be a little bit lower, and we can move forward a little quicker. It's already in place for the second unit, so that's also a time saver.

Thanks, John. One last thing on non-res construction, are you seeing improvement year-over-year or quarter-over-quarter as moving forward from let's say sometime middle of last year?

Yes. As Jim mentioned in his comments, as we look forward into 2013, we see a slightly better non-residential construction environment. We use the word cautiously optimistic. We see some signs of improvement. The ABI index has been over 50% for seven months in a row now.

When you look at residential construction, which is sometimes a leading indicator of non-residential construction, housing starts are up over 1 million units annualized, which is the first time since 2007, 2008, somewhere back then. There are some encouraging signs that things are getting better in non-residential construction. Having said that, when we say that they get marginally better in 2013, that would take them to roughly 60% or 65% of the levels that they peaked out at during 2007.

Great. Thank you very much, John.

Evan Kurtz, Morgan Stanley.

First question, just on DRI, one thing that I'm curious about is just the value and use issues with using DRI in an electrical arc furnace relative to pig iron. I was wondering if you can give us a sense of how that slows down productivity? Does it increased tap times? What does it actually do to your operating costs at the mill?

There is a value and use penalty in using DRI. We estimate that to be somewhere in the neighborhood of $15 to $20 a ton. It really isn't a function of productivity. It does slow you down a little bit. It's more of a function of costs on other components, refractory costs, and other operating costs similar to that.

We have done a lot of work on DRI and electric arc furnaces. We've done a lot of testing on our existing furnaces. To date, we've been able to add, at our Hickman facility, we ran heats with 40% to 45% -- I'm sorry, that was actually at, we did them at Decatur, I said Hickman by mistake. But at Decatur, we ran trials using DRI so that we could get a good feel for what the penalties would be both in productivity and in costs. We feel we have a real good handle on those estimates.

That's great. Thanks for all that detail. Something else on non-metal costs, maybe this is too simple of analysis, but just looking at the first quarter in 2013, metal margins were [377], roughly the same in first quarter 2012, [379]. Volumes were a little lighter this year versus last by a few percent, but operating profit was down about 30% or so. I was hoping you can just help us understand some of the moving pieces? I assume some of that's mix, some of that is fixed cost absorption, but just to get a handle on how non-metal costs are tracking year-on-year?

First of all, I think you're comparing the first quarter to the last quarter when you talk about volumes being flat, because versus last year, they're down. Then you're looking at profits from last year. Am I mistaken or did I misunderstand your question?

Volume down 3%, I have, year-on-year versus first quarter 2012 in the steel business [4.277] down this quarter versus [4.424] from first quarter 2012 and then I'm comparing metal margins from the same quarters as well, they're roughly flat?

I didn't think metal margins were flat from last year's first quarter. I don't have that at my fingertips, but I thought they were down.

Okay. Are there any kind of mix issues we should be aware of that could be impacting just margins in general going forward? Aside from just the headline metal margin number that we should be thinking about?

Mix is always an issue when you look at those numbers. I don't have the specifics in front of me, but I would say that our mix did change pretty significantly first quarter of '13 relative to first quarter of '12, if that helps answer your question.

Okay. I'll leave it there. Thanks, guys.

Curt Woodworth, Nomura.

I was wondering if you could spend a little bit of time on what you're seeing in some of the long product markets, specifically on the bar side. It seems like volumes are accelerating for you guys in bar up, I think, 7% year-on-year. But what we've been reading on metal margins, they've been pretty static and I think you guys actually lowered MBQ by about $50 a ton earlier this year. We've seen the import pressure seem to spike a little bit. Do you think it's a function of just that demand is kind of slowly moving along or do you think that the potential for imports is the key issue holding back spreads and bar right now?

Let me start by saying imports continue to be an anchor around the neck of the entire industry. Global overcapacity is a major issue, as is domestic overcapacity in all of the steel products; long products and flat products. That said, we do see 2013 to be slightly better in terms of volumes and in pricing in all of our steel products, with the exception of sheet. We think sheet will continue to be very challenged, particularly in the second quarter. We believe the volumes will be similar or maybe a little bit higher, but pricing will be very challenged on our sheet business.

Okay. Just a quick question on DRI, can you provide any kind of update on your views on metallization rate or reduction costs? I know that it's a relatively widely used technology, but I think the process you guys are using, the ZR process, there's only two plants globally utilizing that technology right now, if that's correct, so any other update there would be appreciated. Thanks.

There's many more than two plants operating globally using the HYL technology. In terms of the metallization rates, clearly we studied both the midrex and the HYL very carefully before moving forward. We're convinced in looking at some of HYL facilities that our teams have visited and did a deep dive into, that we'll be able to achieve similar numbers to what we see in Trinidad, perhaps a little bit better. Looking in the neighborhood of 96.5% to 97% metallization rates and somewhere in the neighborhood of 3% to 3.5% carbon levels. Actually, I think, if I'm not mistaken, Ladd, you might be able to help me out here, I believe there's just been two large HYL facilities, both of about 2 million tons capacity that have started up in the last 1 year or 1.5 years.

That's correct.

Is that the plant in Egypt?

Yes. There's one in Egypt, there's another one somewhere in the Middle East, Dubai, I think it is.

Okay. Thanks.

Brian Yu, Citigroup.

John, a question on DRI first -- once this plant's up and running, can you give us a sense of how much of that capacity will be displacing pig iron versus, let's say, like [prop] scrap that you're buying now?

It'll displace pig iron and it will displace prime scrap. How the mix works out is going to be a function of the costs of the materials at the time we're making these decisions. We'll have several options in front of us. We can use prime scrap, we can use pig iron that we'll continue to purchase or we can use the DRI out of our two facilities. One of the great advantages this is going to give us is the flexibility to make good economic decisions on iron units as we move forward.

Okay. Second one I've got is on the SBQ, it seemed like from the data that we're looking at, SBQ shipments haven't quite recovered yet and with you and another competitor bringing online more capacity, how are you guys thinking about placing that into the marketplace?

Certainly, there has been a lot of announcements on SBQ volume expansions among our competitors. How do we plan to deal with it? We're going to compete fiercely and successfully with the additional SBQ that comes into the marketplace. We have great confidence in our teams, in our equipment, and in our products. We also believe that, given the continual growth in the automotive markets, that there'll be an increased need for SBQ as we move forward. We have automotive, we have energy, which consumes a lot of SBQ, continuing to go strong, grow strongly, heavy trucks, although it's come down a little bit this year, we expect it to return in 2014 to higher levels. Although there's been a lot of SBQ that's been announced and will be coming into the market, we anticipate the demand for SBQ to grow also.

One other thing is, I believe the capital projects we have for SBQ, there's a mix of them. The ones we're doing initially are geared more towards moving up the value added chains. The ones that add capacity will be later in the sequence of capital projects in SBQ for us.

Maybe just one more point, Jim, that's a good point. Thank you for adding that. Just one additional comment on this, in addition to adding SBQ, this is allowing us to realign our existing mills so that our merchant products are produced more efficiently also. By reassigning products to different facilities, we're consolidating our merchant production at some of our facilities, so we're going to gain some efficiencies in that area also. It's important to note, as we always do point out, although we continue to grow into the value-added markets, we do that without surrendering any of the commodity or lower value levels markets.

Shneur Gershuni, UBS Securities.

I figured I would continue the questions on DRI. One thing I was wondering if you can help me out here a little bit, the economics definitely makes sense, love the optionality of choosing where you can go and how you substitute and so forth. In the past, we've recognized and knowledge natural gas as a risk if it goes up and you've taken steps to mitigate that and so forth. How should we think about the spread between iron ore prices since it is a feedstock versus local scrap pricing, which you're effectively replacing? In some respect, is that something that we should be thinking about as a risk or an opportunity? How should we be thinking about that? Is Magnetation as a feedstock something that you might look at in the future?

When you look back historically, the comparison between iron ore pricing and scrap, there's been a very strong correlation for a period as far back as I've looked at in 20, 25 years. We expect that to continue. We see a strong correlation between iron ore pricing and scrap pricing. Keith, is there anything you'd like to add to that?

One point, John, there is a correlation and it does continue, especially over a period of time, an extended period of time. The two have come together as the metallics markets around the world, the arbitrage opportunities sort of minimize themselves.

You're not expecting the potential for any disconnects or anything?

We don't see that in the future. As I said, it's been, as I look back at history for 20 to 25 years, we haven't seen that. I guess I'd never say never, but we don't anticipate seeing anything of that nature.

Okay. A follow-up question if I may, the commentary in your press release today suggests a pickup in Q1 from an earnings perspective. I was just wondering if I could get a bit of expanded color around that? Metal margins aren't the greatest at this point right now. Is it just a function of some of the unplanned outages not occurring? Is it today's price announcement that one of the competitors announced? Or is it some volume opportunities unique to Nucor? I was just wondering if you can expand what's driving the optimism?

First of all, I assume you meant improvement in Q2.

Sorry, in Q2, yes.

Okay. As we said during the script and during Jim's comments, basically in all of our products, with the exception of sheet, we see improvement in demand and marginal improvement, slight improvement. I don't want to mislead anyone here, we see it getting better across all of our products, with the exception of sheet, in terms of volume and pricing to a less extent. Some of our products will see better pricing opportunities in 2013, some will continue to struggle such as sheet. Across all of our products, we see some improvement, with the exception, of course, of sheet as I've mentioned several times.

Great. Thank you very much.

David Galison, CIBC World Markets.

Just wanted to touch on the DRI delay. Just wondering if there's any additional costs associated with the delay? When do you see it turning, swinging into a profit now?

Could you repeat that question? I heard the first part of it but I missed the last part. You were asking if there was any additional issues other than the ones that we mentioned?

No, any additional costs associated with the delay and when you see it turning to a profit?

There might be some minimal additional costs, there always are when the contractors and staff have to stay on site longer. We lost the ability to work on those days when there was heavy rain. It's the case of Murphy's Law striking us there. During the period of December, January, and February, they had record rainfall in the St. James Parish. We'll see a minor increase in the cost of construction, but nothing major at all. It'll just be a case of the inefficiencies for our contractors working during those rainy days. Your question about turning a profit?

This is Jim Frias. The business unit is forecasting making money in the fourth quarter and we expect pre-operating start up costs go up by about $4 million in the third quarter related to ramping up employment at that facility.

Then are you still looking for two to four month ramp up to full capacity?

Yes. We will be at full capacity, we anticipate being at full capacity by the end of the year.

On the non-res construction, you've mentioned being cautiously optimistic. Just wondering if you could talk about what you would be looking to see before maybe becoming a bit more positive on the overall markets?

We have an advantage in the sense that we can look at some of our downstream businesses and we look at the order entry rates, the backlogs, the pricing opportunities in those downstream businesses, Harris Company, rebar fabrication, our Verco and Vulcraft operations and we've see a little bit of improvement when we look year-over-year on our Vulcraft Verco backlogs. We see some improvement on new orders and then on margins were up fairly significantly year-over-year in both joists and deck. Those are some of the things that we watch and we see as positive indicators. What would get us to the point where we were more optimistic would be when we saw rail order entry rate, higher prices, a larger backlog. We do have some anecdotal information from time to time that seems to indicate things are getting better.

We just recently attended an AISC conference and had an opportunity to interact with a lot of our customers there in the non-residential construction area and they were more positive than we've seen them in a long time. Again, these are all small indicators and that's why we put the cautiously optimistic in the sentence. But as we see more and more of these indicators we can gain confidence, we'll be happy to be able to share that with you when it occurs.

All right. Thank you very much.

Richard Garchitorena, Credit Suisse.

Couple quick questions -- one, you have mentioned a few times about the weakness in the sheet market. Can you just expand? Is that really a function of oversupply and the import situation or is it demand sort of flattening out here?

Clearly, you have to look at demand when you say you have an oversupply situation, but the amount of overcapacity globally and domestically in the sheet market is phenomenal right now. It's clearly an oversupplied market, clearly an oversupplied market, and that problem is amplified by the heavy level of imports, the surge of imports, that have come in over the last, really, over the last 1 year, 1.5 years. Yes, it's an issue of oversupply. Demand certainly is not stellar, but demand has been improving quarter-over-quarter by a small amount. We've mentioned a few times, automotive.

We've mentioned energy and formed pipe and tube, so demand is there, and demand is growing slowly. Unfortunately, more and more capacity is being brought online and imports continue to come into the country at very high levels. As long as that situation exists, it's going to be a very challenging sheet market.

Okay. Is it right to assume that on the long products side, you're seeing better improvement, especially recently, given some of the signs that you see on the construction side?

Again, on long products, we are seeing some slight improvement and we anticipate that to continue as the year plays out, as 2013 plays out. But again, we're talking about a slight improvement. We haven't seen anything to get very excited about at this point. All the things that we talked about during the call so far increasing, small increase in the amount of non-residential construction is helping. Introducing new products and moving up the value chain, increasing the breadth of our product offering, for Nucor that's also certainly helping.

We see a small improvement as the year plays out in long products and frankly, we see the same in some flat products. We believe that plate will be marginally better in 2013 than in '12. We see plate continuing to, both in volume and in pricing, increase incrementally as we go throughout the year. Sheet is going to be the challenging product for us and frankly, all forms of sheet, [top-hand], cold-rolled, galvanized, electrical steels are all going to be very challenged.

Okay. Great. One other question, on CapEx, you broke out the maintenance versus the growth, I was just curious, the CapEx for the Encana JV, is that captured in the growth CapEx and how does that ramp-up in the coming years?

It is captured in the growth CapEx. We haven't disclosed how it ramps up in the coming years. You can get an idea by looking at the 10-K filing, the contractual obligations table has a separate line for Encana investments, excuse me, for our natural gas investments.

Okay. Thank you.

Nate Carruthers, Steel Market Intelligence.

A little bit more on the sheet side, there's a new sheet mill being planned in Arkansas. Can you give us your thoughts about the facility and its impact on Nucor and the industry in general?

There's a new sheet mill being built somewhere in Arkansas being proposed in Arkansas? I haven't heard that. (laughter) That was a joke.

Yes. (laughter)

I'll start by making the comment that you've heard me make several times during the call. We have a tremendous overcapacity situation in the United States, in North America. There's absolutely no need for additional capacity. Having said that, if the plans move forward and it does move forward to getting built, it's going to take some time to get built. The last new mill that was introduced took about three years from the time that it was announced until they began production. If I remember correctly, it was about 3 years, maybe 3.5 years.

During that time, Nucor is not going to sit idle. We'll continue to grow our product offerings. We'll continue to add to our value-added offerings. If a mill does start up, we'll compete. We'll compete fiercely, we'll compete successfully. As I think back to the last mill that came online in the United States back in, I think it was, around 2007, I remember hearing things about how Nucor would be most negatively impacted by that new operation because it was located in the South, close to our mills. At the time, we said that we would develop a plan and trust in our team to take on that new competition and compete successfully with it. All I'm going to say is, you can see how well that worked out.

If the new competitor continues to move forward, we'll do the same thing. We'll develop a plan, I could tell you, when they start up, they'll meet fierce resistance fierce competition. We'll have the plan, we have the capability, and most importantly, we have the team. I've said this many times on many calls, I will put our team up against any team anywhere in the world and I trust that they will compete and they will compete successfully. Those are my thoughts.

All right. Thank you very much.

Phil Gibbs, KeyBanc Capital Markets.

John, when you were discussing the SBQ additions, I think you had two parts; the first was the upgrade of the existing mix and then the second was the new production capability later in the year. Can you remind us of the upgrades to the mix and then what your new capability will be later in 2013 with the investments in Memphis, Nebraska, and South Carolina? Just from an absolute tonnage standpoint, as well?

I'm going to ask our Executive Vice President for the Bar Products, Jim, to handle that. Jim?

This is Jim Darsey. As Jim Frias stated earlier, our primary focus early on in our SBQ upgrades was to improve our product quality and to improve the value that we offer to the market, move up the value chain. Those projects are underway in Memphis. We're installing two quality assurance lines there; one is an in-line quality assurance lines and one is an off-line quality assurance line. The off-line one will start up in the third quarter of this year and the in-line quality will start up in the fourth quarter of this year. Also in Memphis, we're adding a second metallurgy furnace to improve our quality and provide the ability to provide higher grades of material. We're also adding a second vacuum degasser hood, where we'll have two complete stations for vacuum degassing; again, the quality and moving up our ability to participate in higher grades of SBQ steel.

At Nebraska, our project that we're focused on this year is upgrading one of our mills. We're going to add straightening paneling and sharing and packaging equipment there, primarily focused on improving the quality of our product. The mill work will be completed this year. In 2014, we will be bringing on additional mill capacity at Nebraska.

At Darlington, we're installing the rod block there, construction is well underway, and the rod block will be cold commissioned and started up in the early third quarter of this year. That is a product expansion there and we'll be producing rods from 0.4375 inch diameter up to 2.125 inch diameter in bar and coil. Again, that project starts up third quarter of this year.

This is phased out. Our press release last year indicated that we will be adding close to 1 million tons of SBQ capacity. That is still the case, but it's spread out over a couple of year time period.

Okay. It's 1 million tons of added melt and finished product capability, but you're also enhancing the mix at the same time?

Yes.

Okay. Thank you.

David Lipschitz, CLSA.

Two quick questions -- how much was the impact of Trinidad in the quarter? Was it meaningful or --

We don't have an exact figure but it was probably in the eight -- as we give in terms of DC -- it was probably the $8 million to $10 million range in terms of vision contribution, which means around close to $0.02 per share.

Then just more of a theoretical question, you talked about the McGraw-Hill data up 8%. If you look at that forecast, I think in the next three to five years it gets back to like 1 billion square feet or something like that over the next three plus years, something like that, which you said is still well below where we were in the mid-2000. What kind of level of square footage do you think we need to get to where we don't really need to cut capacity or imports need to go away, where people can get pricing power to that effect? Because right now, you're still, like you said, even if it's up 8% this year, you're still less than half of what the peak was.

We don't really need to see it get back up to the levels we had seen it in 2007, 2008. To some extent, that was almost an artificial time period with credit on steroids that I don't expect to see again. But if it approached 70%, 75%, 80% of the peak levels of 2007, we'd be pretty pleased with where we are. We think that would support a strong market for both our long product and for our building products.

One final question, in terms of if raw material prices, you're bringing down your raw material prices, your competitors are trying to do the same thing. If iron ore on my consensus said is going to be at $100 plus or minus sometime next year, do we end up in a deflationary type of environment for prices for steel?

There's a lot of if's in that question, that's for sure. Iron ore, I've read recently articles that say iron ore will be $80 to $100 and I've seen just as many articles saying that iron ore will be at $150 to $160 a ton. Certainly, what happens with iron ore is going to have an impact on the economics of steel production, but I'm not in a position to be able say whether it's going to be a bull or a bear. My best guess would be, as we move forward, that you'll see some pressure on iron ore pricing, you see them come down a little bit, I'm not sure it'll come down to those levels.

Okay. Thank you.

Sal Tharani, Goldman Sachs.

John, you have invested a significant amount of money in your flat rolled business to get more and more involved in the OCTG market and you have gotten some share. I was just wondering, if you look at the OCTG landscape, there is a bunch of capacity coming in and one can argue is it good or bad for the OCTG market. But certainly, it will create a significant amount of demand for the flat roll in the US, because most of these guys are going to buy locally. I was wondering if you have seen improvement in your market share or you are in discussion with any of these new projects and you think there would be an opportunity for you or significant opportunity for you in there?

A couple of comments to start off, first, we do believe that there is a significant amount of OCTG coming online. We do believe that will create an opportunity for our flat roll mills and we are certainly pursuing that very aggressively. There are some challenges, some headwinds, that we'll have to overcome. One is the amount of OCTG imports that are flooding into the country. That's a challenge not only for that industry, but for ours and we are working with that industry to take action to get that corrected.

Thank you.

I was just going to make one more comment and that is this -- that we are working with our existing customers and we're very aggressively working with potential customers to be their supplier. As you mentioned, we have made quite a few investments in that business. We believe that we're very well-prepared and the feedback we're getting from our customers and our potential customers are that they also believe we are well-prepared to meet their needs in the future.

Great, John. Thanks for that.

If there's no other questions, I'll make a few closing comments. First of all, I'd like to thank you all for your interest in Nucor. It's always appreciated. Ham, I'd like to take this opportunity to again thank you for all that you have contributed to Nucor and to the Nucor family. Thank you very much for 37 years of outstanding service. [Applause] To all of our teammates, thank you for what you do every day for Nucor and thank you most importantly, for doing it safely. Thanks again. Have a great day.

That does conclude today's conference. We appreciate your participation. You may now disconnect.