Nucor 2013 Annual Report Download - page 6

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However, in this environment, we cannot rely on the economy in order for Nucor to be successful. Instead, we are focused on
what we can control as a company. Since the last cyclical peak in 2008, we have invested approximately $8 billion — nearly
$3 billion of which occurred in 2012 and 2013 — in projects to grow our company profitably by giving us greater control of our
raw material costs and by producing higher-margin products. This is part of our effort to create higher highs in strong economic
cycles and higher lows in periods of weak economic growth.
Our most significant capital investment project was the $750 million direct reduced iron (DRI) plant in St. James Parish, Louisiana.
Plant operations began on December 24, 2013. This is one of the largest DRI plants in the world, with a production capacity of
2.5 million tons annually, and it is also the first DRI plant to operate in the U.S. since 2009. Producing more of our own DRI will
give us greater flexibility to respond to increases and volatility in raw material prices.
Complementing our DRI project is our working interest drilling program with Encana Oil & Gas (USA), Inc. This investment enables
us to secure a long-term, low-cost supply of natural gas. At the end of 2013, over 250 natural gas wells had been drilled under the
program. The performance of wells drilled over the past three years has exceeded initial projections used to justify the investment,
which translates into lower-than-expected gas costs. Natural gas generated from this program will be sold to offset our exposure to
increases in prices of natural gas consumed by our operating facilities.
In June, our Hertford County, North Carolina plate mill started production of its new normalizing line, which was running at full
capacity by the third quarter. The new normalizing line allows us to serve attractive end-use markets, such as energy, transportation,
shipbuilding and armor plate. The normalizing line, along with our recent investments in a heat treat facility and a vacuum tank
degasser, doubles the Hertford mill’s capacity to produce value-added plate products.
Our Norfolk, Nebraska mill completed an expansion of its special bar quality (SBQ) capacity. Now the mill will be able to better
serve the needs of our engineered bar customers by ensuring the highest qualities for the most demanding engineered bar
applications. This project will enable Nucor to offer more products in the energy, automotive and heavy truck and equipment
markets, which represent the strongest markets for steel products in recent years.
In the first quarter of 2014, the Berkeley County, South Carolina sheet mill began producing 72-inch wide sheet steel. This project
involves upgrading and modernizing equipment in order to produce wider, lighter gauge sheet steel that will provide opportunities
to move up the value chain in the agricultural, pipe and tube, industrial equipment, heavy truck and automotive high-strength and
ultra-high-strength markets.
We continue to benefit from our acquisition in 2012 of Skyline Steel, which is a leader in the steel piling distribution market.
With Nucor-Yamato Steel Company (NYS) being a leading steel piling manufacturer, we are expanding NYS to broaden its range
of hot-rolled piling products to take advantage of the mill’s synergies with Skyline Steel. The project, slated for completion in
mid-2014, will add several new sheet piling sections, increasing single sheet widths by 22% and providing a lighter, stronger sheet
covering more area at a lower installed cost. NYS products service the marine construction, bridge and highway construction and
heavy civil construction markets.
Our strategy of focusing on raw materials and
value-added markets provides a double benefit
by reducing our cost structure and expanding
our offerings of higher-margin products, which
will help us achieve our goal of growing our
earnings capacity in the next cyclical upturn.
Closing Thoughts
I am fortunate to work with great teammates on a daily basis at Nucor. Two of those teammates retired in 2013. Ham Lott retired in
June after more than 37 years with Nucor. Ham began his career in 1975 as a Design Engineer at our Vulcraft facility in Florence,
South Carolina. In 1982, he went to Vulcraft in St. Joe, Indiana where he held various managerial positions and then went on to
become General Manager of Vulcraft in Grapeland, Texas. In 1993, Ham returned to Florence to be General Manager of the facility.
Six years later, he came to Charlotte as an Executive Vice President and under his leadership Nucor’s downstream and fabrication
businesses nearly tripled their capacity. Thank you, Ham, for your contributions to Nucor and we wish you the very best going forward.
PRODUCING MORE OF OUR OWN DRI WILL GIVE US GREATER FLEXIBILITY
TO RESPOND TO INCREASES AND VOLATILITY IN RAW MATERIAL PRICES.