Nucor 2013 Annual Report Download - page 22

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21
Acquired in 2008, DJJ has provided a significant Nucor growth platform for strategic acquisitions. Since Nucor’s acquisition, DJJ
has added over 1.3 million tons of scrap processing capacity through acquisitions and the opening of new yards. During 2012, DJJ
acquired three additional scrap processors: Gulf Coast Metals Company, Inc. of Tampa, Florida, Van Gundy’s AMPCO Inc. of Grand
Junction, Colorado and State Line Scrap Metal of Gastonia, North Carolina, adding a combined ferrous scrap processing capacity of
approximately 274,000 tons.
Nucor’s total annual ferrous scrap processing capacity now exceeds five million tons.
DIRECT REDUCED IRON OPERATIONS
Nucor owns Nu-Iron Unlimited (Nu-Iron), a DRI plant located in Trinidad. During 2011, Nu-Iron increased its capacity to
approximately 2,000,000 metric tons from 1,800,000 metric tons. The Trinidad site benefits from a low-cost supply of natural
gas and favorable logistics for receipt of Brazilian iron ore and shipment of DRI to the United States.
In late 2013, Nucor also commenced production at our recently constructed DRI plant in Louisiana. The successful startup of this
operation has continued into 2014. With an anticipated annual capacity of 2,500,000 metric tons, this DRI facility is the first step
of a multi-phase site development plan that is expected to include additional operations in Louisiana.
NATURAL GAS WORKING INTEREST INVESTMENTS
The DRI production process requires significant volumes of natural gas. To provide the newly constructed DRI plant in Louisiana
with a sustainable advantage from lower natural gas costs, Nucor entered into a long-term, onshore natural gas working interest
drilling program in U.S.-based proven reserves with Encana Oil & Gas (USA) Inc. (Encana) in 2010. Nucor entered into a second
and more significant drilling program with Encana in 2012. The natural gas produced by these programs will be sold to offset
our exposure to the volatility of the price of natural gas consumed by Nucor. In December 2013, Nucor and Encana agreed to
temporarily suspend drilling new gas wells given current expectations that the natural gas pricing environment will be weak in
2014. By the middle of 2014, when all of the in-process wells are expected to be completed, Nucor will have over 300 producing
wells, which are projected to provide a full hedge against the Louisiana DRI plant’s expected consumption of natural gas into
2015. With this temporary suspension, Nucor retains the valuable option to resume drilling operations in a higher natural gas
pricing environment.
The recently expanded Trinidad facility and the new Louisiana DRI plant, together with Nucor’s ability to ensure a long-term low cost
of natural gas, are important phases in the execution of Nucor’s raw material strategy of providing between six and seven million
tons per year of low-cost, high-quality iron units to our steel mills.