Company Overview
Nucor is the largest steel producer in the United States by volume, and the largest operator of electric arc furnace (EAF) mini-mills in the Western Hemisphere. Unlike traditional integrated steelmakers that use blast furnaces fed by iron ore and coking coal, Nucor's EAF model primarily melts recycled scrap steel, giving it a lower cost structure, smaller environmental footprint, and greater production flexibility. The company produces sheet steel, plate steel, structural steel, bar products, and steel fabrication services, serving construction, automotive, energy, and infrastructure end markets.
Commodity Exposures
Steel prices — specifically hot-rolled coil (HRC) benchmark pricing — are the primary driver of Nucor's revenue and margins. The company's EAF model means its main raw material input is scrap steel rather than iron ore, but scrap prices themselves correlate with iron ore pricing. Nucor also operates direct reduced iron (DRI) facilities in Louisiana and Trinidad that use iron ore pellets as feedstock, creating a secondary direct exposure. Natural gas is a significant energy input for EAF operations, though Nucor has partially hedged this through long-term contracts. The metal spread — the difference between steel selling prices and scrap purchase costs — is the true margin driver, analogous to a refining crack spread in energy.
Price Sensitivity
Nucor's earnings are highly cyclical and closely tied to the HRC steel price. Each $100/ton change in HRC pricing can impact annual EPS by approximately $5-7 per share, reflecting the operating leverage in steel manufacturing. The company's market-based pricing model (minimal long-term fixed-price contracts) means earnings respond quickly to spot market movements, both upward and downward. Nucor's scrap-based EAF model provides a natural partial hedge: when steel prices fall, scrap prices typically fall proportionally, preserving some metal spread margin.