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The U.S. industrial complex is growing well accustomed to biding its time.
Manufacturers waited patiently for some measurable stimulation from President Obama's massive stimulus package, and I'm not sure we have instruments sensitive enough to gauge the lackluster impact of that program thus far.
Nucor (NYSE: NUE ) CEO Dan DiMicco said in his company's third-quarter conference call: "More than two years after the onset of this economic crisis, the economy continues to sputter with less than 2% GDP growth, and with unemployment and under-employment stuck at alarming levels." He also pointed out that, historically, gross domestic product growth of 3% is required to support increases in steel consumption.
The unfortunate reality about the American economic outlook is that manufacturers across a broad spectrum of industries must maintain saintly levels of patience while awaiting relief. Steelmaker Nucor posted third-quarter profit of $23.5 million amid merely modest declines in net sales, average sales price per ton, and capacity utilization compared with the second quarter.
Adding context to Steel Dynamics' (Nasdaq: STLD ) observation of "a significant decline in our sheet steel backlogs," Nucor noted that flat products "compete in an over-supplied market that has been further pressured by recent new sheet capacity." Competition from imports strains the domestic market further, a condition that DiMicco hopes will be rectified decisively.
Of course, construction-related products like rebar continue to bring up the rear with respect to end-user demand, and one look at the stocks of building supply manufacturers like USG (NYSE: USG ) and CEMEX (NYSE: CX ) tells the painful tale. USG, for its part, reported a loss of $100 million for the third quarter, underperforming even its prior-year loss of $94 million.
Impressively, Nucor confronts the specter of all these challenges with an unassailable confidence. The company is moving forward with a $750 million project to build a plant in Louisiana that will produce iron through a process that uses natural gas instead of metallurgical coal. Any Fool familiar with the diverging pricing trends of met coal and natural gas will appreciate the potential cost savings. Met coal is a driving force behind a global supercycle referenced by miner Peabody Energy (NYSE: BTU ) , while once-mighty natural gas producers like Chesapeake Energy (NYSE: CHK ) are stymied by weak pricing and ample production capacity.
Dan DiMicco's enduring confidence in his company's prospects is unmistakable in comments like: "Nucor's best years are in front of us." Whether you agree or disagree, I encourage you to cast your vote by adding Nucor to your Motley Fool CAPS portfolio, and by sharing your comments below.