It's a Brave New Uncertain World

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Silence can be either the greatest form of wisdom, or the most deafening alarm.

Staring through a tunnel of uncertainty, one of the largest U.S. steelmakers declined to issue fourth-quarter guidance despite reporting record earnings. Nucor (NYSE: NUE) earned $735 million for the third quarter, crushing the prior-year result by 93% and beating the revised guidance issued last month. Following a string of key acquisitions, the company enjoyed a 75% increase in sales.

As with last week's similarly positive results from steelmakers POSCO (NYSE: PKX) and Steel Dynamics (Nasdaq: STLD), Nucor's earnings are certainly a welcome development amid a torrent of global financial turmoil. Nonetheless, the company's silence with respect to the coming quarter speaks volumes. Fools are in no mood to be kept in the dark, and to Nucor shareholders this must be awkward silence indeed. On the other hand, I suppose the axiom holds that if you can't say anything nice, don't say anything at all.

Words unspoken
Let's listen to Nucor's sound of silence: "There is little forward visibility on either the economy or our industry, even for the fourth quarter. These conditions are such that financial projections are not practical." Obviously, when major players in a bellwether industry are unable or unwilling to forecast industry conditions even for a quarter in progress, economic uncertainty has reached critical boiling point. I also hear whispers from Nucor's balance sheet, which indicates sizable debt, inventories, and goodwill, though with those acquisitions, this isn't too surprising. Just keep an eye on it.

Echoed in the wells of silence
Considering the alarm bells of recent production cuts from steel and aluminum giants like ArcelorMittal (NYSE: MT) and Aluminum Corporation of China (NYSE: ACH), and following explicit warnings of near-term demand weakness from Rio Tinto (NYSE: RTP), I trust Fools are cautious within these industries at present. In order to see through this veil of uncertainty, though, Fools must continue to watch the bellwethers closely.

For those standing pat with battered positions, Nucor's silence contained a welcome caveat: "What we can say is that 2008 will be another record year for Nucor and today our competitive position is stronger than ever, both here and globally. ... We are still strong believers in the long-term strength of the global infrastructure build and the associated bull market for steel." I share that long-term outlook, and look to China's now-sputtering growth with some measure of hopefulness. On Nucor's near-term prospects, however, I too shall remain silent for now.

Further Foolishness:

• Weakness in steel demand won't snuff the coal fire.
• Gold is certainly stronger than steel.
• Cheap scrap metal helped Nucor, but is killing this scrapper.