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Nucor Corp (NUE -1.08%)
Q3Â 2020 Earnings Call
Oct 22, 2020, 2:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day everyone. Welcome to the Nucor Corporation Third Quarter of 2020 Earnings Call. [Operator Instructions]
Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and variations of such words and similar expressions are intended to identify those forward-looking statements, which are based on management's current expectations and information that is currently available. Although Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. More information about the risks and uncertainties relating to these forward-looking statements may be found in Nucor's latest 10-K and subsequently filed 10-Qs which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them either as a result of new information, future events or otherwise.
And now, opening remarks and introductions, I would like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead.
Leon J. Topalian -- President and Chief Executive Officer
Good afternoon, and thank you for joining us for our third quarter earnings call. 2020 continues to present all of us with challenges from the pandemic, social unrest and the economic struggles many people are facing to the wildfires and hurricanes that have impacted our country these last few months. We have also seen how these challenges have brought people together, to care for the safety, health and well-being of one another. I want to thank my Nucor teammates for their continued efforts to take care of our Nucor family and the communities where we live and work.
Joining me today on the call are the members of the Nucor executive team including Jim Frias, our Chief Financial Officer; Al Behr, responsible for Plate and Structural products; Craig Feldman responsible for raw materials, Ray Napolitan responsible for Engineered Bar Products as well as Nucor's digital initiatives; MaryEmily Slate responsible for Sheet and Tubular Products; Dave Sumoski, responsible for bar, rebar fabrication and construction services; and Chad Utermark, responsible for Fabricated Construction products. With regard to our safety performance, our team has had another great quarter. We are on pace to have the safest year in our history. And I want to thank every one of our team members for their hard work and commitment.
At the start of the year, I said the challenge for us to become the safest steel company in the world, and my deepest thanks go out to every member of our team for your continued focus on safety and our most important value. You have remained focused despite the tumultuous year, 15 Nucor divisions have gotten more than one year without a recordable injury. I want to thank each of you for your continued effort, focus and commitment to ensuring that we take care of the most important value in responsibility we have, the health and safety of our entire team and family.
Turning to our financial performance in the third quarter. Business conditions in most of the markets we serve improved as the quarter progressed, resulting in a rebound in demand for bars, beam and sheet products. Increased demand was reflected in our capacity utilization rate which for our steel mills improved 83% from 68% in the second quarter. Better market conditions combined with continued strong execution by our team enabled us to outperform the expectations we had at the beginning of the quarter.
Looking at the business conditions in different end use markets during the quarter. Non-res construction demand continue to be resilient, and in fact is growing for us in areas like our joist and deck businesses, where orders, quotes and backlogs are all up year-over-year. More broadly, while third-party data tracking construction starts and backlogs have been volatile, indicators, they look out further by tracking project inquiries have turned positive in recent weeks. Much of the activity continues to be in data centers and distribution centers, where we've had incredibly strong capability and relationships with owners, developers, fabricators and designers. We expect that these two areas will remain strong for the foreseeable future.
We recently launched a construction solutions team to better service our customers throughout the construction segment and bring together the breadth of Nucor's products for a more coordinated approach to the marketplace. In the automotive sector, we experienced a strong rebound in the third quarter related to automotive demand. Further, we are expecting strong automotive production rates in Q4 that could match or exceed the year ago period. OEMs are focusing on rebuilding inventories to meet the continued strong demand. For reference current days on hand inventory levels are at nearly 10-year lows. We have heard some analysts suggest that consumers are allocating money they would normally spend on travel to upgrade their cars and vehicles. We are pleased with our team's performance in this market and are expecting continued profitable share growth as we move forward.
Moving on to oil and gas end-use markets. There has been no appreciable change here with both rig counts and underlying commodity prices still being low. However, renewable power in energy transmission are showing strong growth, despite effects from the pandemic. Through late September, steel making segment orders related to the renewable power sector have already exceeded 2019 by 15%. We are excited about the opportunities for our company in the renewables market, and we participate in that market through a broad variety of products including plate, two wheeler beams, fabricated rebar, sheet piling and fasteners, the breadth of our product offering and the investments we are making in highly differentiated capabilities present meaningful growth opportunities for us.
Several of our capital investment projects that started operating in recent months are producing excellent results. The ramp up of our rebar micro mill in Missouri continues to outperform our expectations. We generated positive EBITDA through the quarter at Sedalia. Congratulations to the entire Nucor Sedalia team for their excellent performance. Our Kankakee, Illinois bar mill will complete commissioning of the new MBQ rolling mill in Q4. We expect to achieve positive cash flow from this project in Q1 of next year. While the commissioning schedule was slightly extended due to COVID related disruptions, customer acceptance of the new products has been extremely strong. This new capability at Kankakee will allow us to provide our customers with a full range of MBQ, light shapes and structural angles and channels out of one location in the heart of the Midwestern market.
Our new state-of-the-art cold mill in Hickman, Arkansas, continues to ramp up production and to diversify its product mix. Since commissioning the cold mill has added 24 new customers, which has helped the team rapidly grow production and shipments. In fact, the third quarter, cold rolled shipments surpassed our volumes for the first quarter, which was of course pre-COVID. Product development continues to be a focus, including the first trial runs of our third generation advanced high strength steels. Construction of the Gen 3 flexible galvanizing line at Nucor Arkansas continue to progress throughout the quarter. Equipment installation began in the third quarter and the team anticipates a start-up in the second half of 2021. Our other major investment projects remain on track. Start-up of our rebar micro mill in Florida is expected to happen late this year. And the Gallatin expansion start-up is anticipated for the second half of next year with the plate mill in Brandenburg, Kentucky to follow in late 2022.
And before I leave the topic, I also want to give a shout out to our team in Marion, Ohio. We don't talk about it as much, perhaps it's because it's the modernization in another [Phonetic] expansion, but the team at Nucor Steel Marion completed the project to fully modernize our Marion bar mill in the middle of last year. They did so safely, on time and within budget. These investments lowered our cost and our environmental footprint there and Marion's profitability is up almost 200% over last year. So again congrats to the entire team there.
While we are always looking for high return growth projects like these, we're not overlooking opportunities to improve our performance by proactively managing our existing asset base. Over the last couple of years, we've had to make some difficult decisions to restructure parts of our metal buildings group to better align our production capabilities with the needs of the market. While every team member, who has been impacted has had the opportunity to remain with the Nucor family, these decisions are not made lightly or without considerable deliberation. I want to thank our teammates for their dedication and service to Nucor as we've navigated these difficult changes. We recognize our shared responsibility to effectively steward shareholder capital and deliver world-class returns on those investments, today and tomorrow. It is worth noting that Nucor Buildings Group as generated strong operating profits during both 2019 and 2020, even as our teammates their adjusted to these changes in their business as well as the pandemic. With the election less than two weeks away, we believe that no matter who sits in the White House or holds the majority in Congress next year, our leaders in Washington must understand the need to move forward with a significant infrastructure spending bill that includes strong Buy American provisions.
We believe that a long-term commitment to modernizing our nation's crumbling infrastructure is long overdue. And we will continue to remind our elected officials at this when the new Congress convenes in 2021. Real progress on this front would not only boost the economy and create hundreds of thousands of much needed jobs in the short-term, it would also be an investment benefiting future generations of Americans. We are also encouraging the current Congress to pass reauthorization of the Water Resources Development Act before they adjourn. Florida legislation funds critical waterway construction projects that are important market for us and improve the waterway transportation system, we used to ship our products.
Before turning it over to Jim, I just want to say how much I appreciate everyone on the Nucor team working safely and for your focus on serving our customers during these most challenging times. The Nucor teams passion and dedication are getting noticed by existing as well as new customers. Let's keep it up and never lose sight of the importance of valuing every individual and the contribution they make to our collective success. Jim?
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Thanks, Leon. Nucor's third quarter earnings of $0.63 per diluted share exceeded our guidance range of $0.50 to $0.55 per diluted share. Results for the month of September exceeded our forecasted almost every business across our diversified portfolio. Third quarter results included $6.6 million of losses on assets related to our Duferdofin-Nucor joint venture in Italy and a $16.4 million restructuring charge related to the further realignment of our metal buildings business that Leon mentioned. We expect this will be the final restructuring charge associated with that initiative.
The combined negative impact of these actions on our third quarter earnings was approximately $0.06 per diluted share. These charges were not included in our guidance estimates. Excluding these special charges as well as pre-operating and start-up costs, earnings would have been $0.75 per diluted share. Cash provided by operating activities for the nine months of 2020 was $2.2 billion. This exceeded the sum of our year-to-date capital spending of approximately $1.2 billion and cash returned to our shareholders via dividends and stock repurchases totaling $408 million. Nucor's through the cycle earnings and cash flow benefit from a highly variable low cost structure.
Working capital reductions generally provide a countercyclical benefit to Nucor in downturns like the current one, enhancing our cash flow and liquidity. Year-to-date cash flow generated from contraction in inventory, receivables and payables was $643 million. As I previously noted, we made significant progress in reducing inventory volumes during the second quarter. I'm pleased to say that during the third quarter, we were able to respond to increased order flow and production without increasing our inventory levels. Our investment in scrap, wip [Phonetic] and finished goods inventories is basically flat or slightly down from the prior quarter levels on the accounts basis.
On the financing front, during the quarter, we took advantage of the opportunity to work with Meade County, Kentucky to issue $163 million of tax exempt industrial revenue bonds, to provide partial funding for our new plate mill under construction in Brandenburg, Kentucky. The bonds are designated green bonds as proceeds will be used for pollution prevention and control facilities. The bonds mature in July 2060. This is Nucor's longest tenured bond ever issued at 40 years and our first green bond issuance. Concurrent with this capital raise Standard & Poor's and Moody's both reaffirmed Nucor's credit ratings of A minus and Baa1 respectively, while also maintaining their stable outlooks. We continue to hold the highest credit ratings of any steel producer headquartered in North America.
At the close of the third quarter, our cash and short-term investments totaled approximately $3.3 billion. Nucor's liquidity also includes our undrawn $1.5 billion unsecured revolving credit facility, which does not mature until April of 2023. Total long-term debt including the current portion was approximately $5.5 billion. Our debt to total capital ratio net of cash and short-term investments was approximately 13.5% at the quarter end. Our next significant debt maturity is not until September of 2022. $600 million of unsecured notes with a coupon rate of 4.125%. The flexibility provided by Nucor's low-cost operating model and financial strength continues to be a critical underpinning to our company's ability to grow long-term earnings power and reward our shareholders with attractive returns on capital.
Our team has been working on nine significant organic growth projects representing a total investment of about $4 billion. We expect to complete commissioning on six of these projects by the end of this year. The remaining projects are the expansion and modernization of our Kentucky Sheet Mill, the addition of our Generation 3 flexible galvanizing line at our Arkansas Sheet Mill and our Kentucky plate mill. At the close of the third quarter of 2020, remaining capital expenditures for these growth initiatives are estimated to be approximately $2.1 billion. We expect about $300 million of that investment to occur in the current quarter with the balance occurring in 2021 and '22. We expect that our total capital spending for full year 2020 will be in the area of $1.7 billion.
Turning to the outlook. We expect Nucor's fourth quarter earnings to be improved over our third quarter results. Most notably, our sheet and plate mills will benefit from recent price increases. 2020 has been a challenging year in many respects, but it has served to heighten our already strong confidence in Nucor's future. Our teammates continue to capitalize on Nucor's advantage cost position, flexible production capability and financial strength to build long-term value for our customers and shareholders.
Thank you for your interest in our company. We are now happy to take your questions.
Questions and Answers:
Operator
[Operator Instructions] And we'll take our first question from Seth Rosenfeld of Exane Paribas.
Seth Rosenfeld -- Exane Paribas -- Analyst
Good afternoon. Seth Rosenfeld. Thank you very much for taking our questions today. If I can start answering to the question on capital allocation. And then I've a follow-up please on plate? On capital allocation, the restart of Galletin and Brandenburg last quarter actually locks in a great deal of capex next few years. Can you just touch on how we should think about what comes next after these projects? Should we expect capex to gradually roll off or behind the scene, is there a series of additional projects under development right now that we should expect to be approved as the natural capex budget starts to decline going forward? And tied to that, can you just confirm if there's been any indication for the 2021 capex budget at this stage? If you can start there.
Leon J. Topalian -- President and Chief Executive Officer
Okay. Certainly Seth, thank you for the question. I'll start and then Jim maybe can jump into some specifics. Seth, as you think about the question, and I'm afraid in the context, as we think about nearly $4 billion with the capital projects there are either online or coming online, I couldn't be more excited about the EBITDA and the returns in the EBIT in long-term shareholder value that those investments are going to create. But the longest of those is the Brandenburg, Kentucky plate mill, which again in our mind is going to truly change the framework in giving Nucor a market leadership position and the heart of the largest plate consuming region in United States. But, I couldn't be more excited as well as we think about the long-term, one of the effects of COVID as well is it's really mirrored the window of a view and scope for people to think month-to-month, quarter-to-quarter, but these investments are truly for the long-term in the next five, 10, 15, 20 years of returns for our company. So I couldn't be more excited as we think about what is in our [Indecipherable] and every Executive Vice President on this team are focused on those things that are next. With regard to '21, I'll let Jim kind of jump in here and talk about what we're seeing in trends and just give you a generalization of what we're seeing and what we anticipate as we move forward. Jim?
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Yes. Seth, your question is challenging, and as Leon said, we are excited, because we're not -- we have the financial strength to execute our plans in spite of COVID, in spite of all the other things that may come up, and so we're not thinking about how we may [Phonetic] take to 2022. We're actually thinking right now about what we're going to do in '23 and '24. So we're not ready to talk about those things yet, but I can rest assure, we're thinking about those things. That's what's top of mind for us. We want our business to the long-term perspective. So capex this year is in the $1.7 billion [Phonetic] plus range and next year we haven't gone to the Board yet for formal approval, but it's going to be in the neighborhood of $2 billion. We will come up with the formal numbers in January when we do our, earnings call for year end, and we've been generating a lot of free cash flow. We look at it and from 2017 through nine months ended in September of 2020, we generated $4.4 billion of free cash flow. So, yes, will there be more investments? You're right, there will be. We're not really talking about it, but we're working on it.
Seth Rosenfeld -- Exane Paribas -- Analyst
Thank you. And if I can ask a slightly shorter-term question on the outlook for the plate market please. Obviously plate has been a very weak area across the US sector over recent months particularly compared to sheet in recent weeks. We've seen recently a number of price hikes from yourself and your peers in the plate market. Can you walk us through how those are being accepted by customers and also any confidence you have with regards to the ability of plate to return to historical metal spreads or retrun to historical [Indecipherable] prices. Thank you.
Leon J. Topalian -- President and Chief Executive Officer
Certainly, yes, thanks. So I'm going to let Al Behr, our EVP of Plate and Structural products kick it off and maybe I'll add something at the end.
Al Behr -- Executive Vice President Plate and Structural Products
Okay. Thanks Seth. In terms of the outlook for Plate, we're optimistic our outlook for fourth quarter is improved over Q3. Our backlog ending Q3 was much stronger than it was Q2. The price increases that we had through the quarter have stuck and been supported by the market. We've collected 100% of those announced price increases as a matter of fact we went out earlier this week with another price increase on Plate. So we received several bits of improvement within the market in key segments, and are optimistic about our Q4 outlook.
Seth Rosenfeld -- Exane Paribas -- Analyst
Okay. Thank you very much.
Leon J. Topalian -- President and Chief Executive Officer
Thank you, Seth.
Operator
We'll move on to Andreas Bokkenheuser with UBS.
Andreas Bokkenheuser -- UBS -- Analyst
Thank you very much. Just two questions from me. Number one, can you comment on your scrap market or scrap price expectations here as we get into year-end, kind of look like prices could be trading sideways into November. Is that your expectation as well and maybe how do you think about scrap over the next couple of months after that? That would be the first question, please.
Leon J. Topalian -- President and Chief Executive Officer
Okay. Yes, Andreas, I'll ask Craig Feldman who is in charge of our raw materials to kick this off. Craig?
Craig A. Feldman -- Executive Vice President Raw Materials
Sure. Yes, thanks for the question. You're right, we do see it, I would say, fairly stable in the near term. November, I would say it's generally pretty flat. Beyond that, we can see some of the normal seasonality into December and into the first of next year. But generally speaking it is pretty stable. So I think your assessment was spot on.
Andreas Bokkenheuser -- UBS -- Analyst
Okay and then just thinking about 2021, how do you see your product offering and maybe 2022 as well. Are you bringing new products to the market that -- to markets that would in a manner of speaking close to you before, I mean that was kind of reserve for the integrated producers and the reason I ask, obviously, is we just continue to see all this R&D among the EAS to bring more and better and better products to the market and taking that market share from the EAS, sorry, from the integrated producer. So obviously we see do that over 2021, 2022 and maybe also you're thinking about the integrated producers kind of restarting next year. Is that something you're factoring in or not. Those are my -- that's my other question. Thank you very much.
Leon J. Topalian -- President and Chief Executive Officer
Okay, Andreas. I'll begin and then maybe ask MaryEmily Slate, who is our EVP of Plate and Tubular or Sheet and Tubular to maybe add some detail behind my comments. But to answer your question regarding the differentiated value proposition. If you think about Nucor's investments, it's really not about capacity, it's about capability. And as we think about the investments we're making in our Generation 3 galvanizing line at Hickman, Arkansas, it will be the first EAF producer to be able to produce 2,000 megapascal material for the automotive market. And so as we think about where we are going to be in kind of stating where the puck [Phonetic] is going to be, our investment strategy is absolutely about bringing new and innovative products as well as expanding our capabilities.
For example our Nucor Yamato team in Blytheville, Arkansas has just completed a modernization in installing a tandem mill in the NYS II, the NYS II is the jumbo one. The largest section being the heaviest food waste [Phonetic] and while we're the largest in the market leader in beams in North America. We have invested and set on our laurels, we've invested significant dollars to continue to expand and open up and by doing this tandem mill project at NYS it's going to allow us to continue to move up in the foot weight in offering the is heaviest jumbo section beams in all of North America. Specifically into the sheet will allow -- I'll ask MaryEmily to comment, because I couldn't be more excited about our advances as we move into automotive and the opportunities that we see there. MaryEmily?
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Absolutely. Thank you, Andreas. We are excited about this. We are so extremely pleased about how we are able to expand our product offerings, because the cold mill at Hickman, the specialty cold mill that can produce every grade that we currently produce plus takes us into those ultra high strength steel and advanced high strength steels. Not only steels that are made today, but as Leon mentioned, steel that will be designed for the future that will really support the cafe standards to help lightweight our vehicles. The galvanizing line at Hickman as it comes on later next year with the Gen 3 offerings, it will be the only EAF steel that's able to do Gen 3 at this time. And so that really gives us the flexibility in this broadening of our product offerings.
Leon J. Topalian -- President and Chief Executive Officer
Just two other quick comments Andreas. One is around Gallatin. As we think about the expansion in Gallatin, much of their markets that we're targeting with we're hopping, today is currently served by the integrated producers. And so we see a huge opportunity with the expansion in Gallatin to move some of our products into ag, into automotive that we've not been in before and historically again have been supplied through the integrators. The other point I'd add is we think about the largest investment in Nucor's history is going to be Brandenburg, Kentucky. The plate mill will be able to produce three-eighths of an inch, although we have the 14 inches fixed out 268 inches wide, that is not an offering today that we can produce and there's only really one other producer that can go that having a wide. So our capability to serve our customers and those end use markets is something that Nucor's supremely focused on.
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Leon, can I add one more thing. We just received a GM Supplier of the Year Award and we were the only EAF producer that helps perceive that reward -- that award. And this is the second year in a row. If you think about our opportunities here automotives, is the largest sheet user in the United States that use about 33% of the sheet market and we have grown our footprint there, but we have a tremendous amount of opportunity to grow. I think we're about 7% now and we've got a lot of opportunity.
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
These expansions are going to allow us to do that. Andreas, this is Jim. You asked the question about integrating restarts and they're going to do what they think is best for the business, SO we respect that. But we think we've got an advantaged business model, the proof is our financial performance and our financial strength, and so we're not really concerned about that way, one way or the other. We believe we have great opportunities to grow our business in places where integrators are continuous today.
Andreas Bokkenheuser -- UBS -- Analyst
That's very clear. I appreciate the in-depth. So thank you very much.
Leon J. Topalian -- President and Chief Executive Officer
Thank you.
Operator
Our next question comes from Timna Tanners from Bank of America.
Timna Tanners -- Bank of America -- Analyst
Hey, good afternoon guys.
Leon J. Topalian -- President and Chief Executive Officer
Good afternoon, Timna.
Timna Tanners -- Bank of America -- Analyst
I want to follow-up on that last question, I guess, given that there will be fewer alternatives for exposed automotive applications for assuming proposed merger goes through. Just wondering is it too late for Nucor to kind of expand into even further exposed automotive alternatives. Is that something you would consider? And then along those lines, I know we're hearing a lot of the business in Europe, but wondering in the US, if you have a lot of customers that are expressing a preference for buying greener steel?
Leon J. Topalian -- President and Chief Executive Officer
Let me begin with the first part of your question. No, it's not too late and in fact the investments in Hickman, the things at Nucor indicator Nucor Berkeley have done are already supplying all of 14 major OEMs in this country, Tier 1 supply, so we can produce today exposed automotive. As we move forward and we've certainly heard this from many of our automotive customers, they want Nucor to having more significant footprint and presence in the automotive. As we stated, not on the last call, but I think the one before, our focus is to balance our portfolio on all fronts. Today we're about 1.5 million, 1.6 million tons a year that go into the automotive sector. We think around that 2.5 million to 3 million tons is about the right balance for us and so we have a lot of room to grow and we'll see how that moves and unfolds as we move forward.
The other investment with our partners in JFE in Mexico and building the galvanizing line is to purely run automotive steel. And so again Nucor is well positioned to expand that in. And that's regarding your second question. What was the second part of your question Timna?
Timna Tanners -- Bank of America -- Analyst
Just, it was Berkeley in the similar appetite for greener steel like what we've heard in Europe?
Leon J. Topalian -- President and Chief Executive Officer
Yeah, OK. At the end of the day, without a doubt, as I've taken over CEO, I've spent a lot of time on the road and of late with COVID, but prior to COVID in lot of June's calls with different investors, the ESP question and responsibility is something that Nucor takes incredibly seriously. We are seeing it in our customer base. And one of the things that you're going to see Nucor unfold in the coming months is a very proactive approach in telling our story. We have an amazing story to tell as you all know, Nucor is the largest recycler of any product in North America. We recycle over 20 million tons of scrap and a 100% of what Nucor produces is recyclable. And so as again as we move forward, we have a very big story to tell with a much more deliberate and proactive in telling our story and sharing. Again, when you think about the carbon footprint of EAF producer with 70% of Nucor's imported steel being recycled. We have a unique value proposition in that regard. And again we're going to do some very proactive things to tell that story.
Timna Tanners -- Bank of America -- Analyst
Okay, cool. I wanted to, if I could also just ask one question. One other question on the guidance. So, it was interesting, we've seen things a little bit more sideways in terms of pricing and for bar structural and plate, and some volumes in plate be a little lower. So the guidance implies that the sheet business profitability will offset some of that seasonality, and some of that more sideways move. Is that the way we're taking it or is there less seasonality this year. Just wondering if you could give us a little more color on what's embedded in that guidance?
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Hey, Timna, it's Jim. Let me take and if Leon wants to add something he can. The way our contract customers pricing works, there is a lag and we get the benefit of pricing. So we didn't get very much benefit in Q3 from price momentum that began in that quarter. We'll get most of it in the fourth quarter. So, and then again, Al touched on this earlier, Al Behr about the price in which we recently made in plate, they have been accepted by the market. So those things together are going to drive better price realization in those two businesses and its separate from market demand. Market demand, we expect to be somewhat stable other than some seasonality, but [Technical Issues] is important. We faced Q3 with a stronger backlog than we've been in Q2 with plate. The same thing is true in sheet. Our backlogs were much higher seen in Q3 than they were in Q2.
Timna Tanners -- Bank of America -- Analyst
Okay, thanks guys.
Leon J. Topalian -- President and Chief Executive Officer
Thanks Timna.
Operator
And we have a question from Phil Gibbs from KeyBanc Capital Markets.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Excellent. Good afternoon.
Leon J. Topalian -- President and Chief Executive Officer
Good afternoon. How are you?
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
I'm doing well. Thank you. How are you?
Leon J. Topalian -- President and Chief Executive Officer
Doing very well. Thank you.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Maybe if we could talk a little bit about DRI. You mentioned it in your outlook, comments in your release that business is getting better. I would think certainly the increasing price of big iron is helping that, but maybe just give us a high level view on how some of your operational changes have perhaps brought some greater output outcomes?
Leon J. Topalian -- President and Chief Executive Officer
Yes, absolutely. Phil, I'll let Craig Feldman, EVP of Raw Materials kick-off, because we got some good news regarding the performance and what our teams in both Trinidad and Louisiana have done. But Craig, why don't you provide more detail.
Craig A. Feldman -- Executive Vice President Raw Materials
Yes, absolutely Phil. Really pleased with the performance, as you remember, second half of last year, we had a pretty significant outage at Louisiana and made some significant improvements in that operation. It couldn't have gone better, to be honest with you. The improvements we've made really allowed us to set some new records and reliability at Louisiana. We went 62 days, [Indecipherable] than second and third quarters of this year in terms of uninterrupted production. So very, very pleased there. With regard to Trinidad, similarly, the team has done a remarkable job just improving reliability and yield. In fact just heard the other day that some of the DRI performance metrics were released and we are at the top of the list in terms of the quality of output from Trinidad as well. So very, very pleased with the progress to date.
The one remaining project we have will be finished in Q1 of next year and that's the material handling operation or material handling yard that will be completed. We should get some operational efficiencies through the beginning of next year on that as well. No doubt and you referenced it in terms of the pressure or the price increases that will certainly give us a little bit of a tailwind as we finish out this year and into next year. Stubbornly high iron ore prices are still there, but certainly the projections for a normalization of iron ore prices, everything we read, look at for iron ore prices could give us a little bit of a tailwind as well. So overall, very, very positive, very, very pleased and want to get a shout out to both of the plants for their performance, focus on the liability and very optimistic about where we're at.
Leon J. Topalian -- President and Chief Executive Officer
Thanks, Craig.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Leon, are you all seeing any signs of stabilization or any green shoots in the oil and gas beside clearly it's been weak and continues to be, but any push for expedites or early intentions on capex plans from your customers next year just any insights there would be helpful.
Leon J. Topalian -- President and Chief Executive Officer
Yeah. Well Phil, I think it's optimism in that end market would be a little loft, but right now I think it's going to be incredibly pressured Q4 in that area. I don't see it bouncing back much. I think there'll will be some positive momentum as we get into '21. But again, that will remain to be seen, but Nucor stands ready to supply that market. It's not a huge piece of Nucor's business, not even 9% overall in our mix into that sector. I think as we see, one of the key variables will be whether now we get a vaccine, what happens when that rollout look like either end of the year and into next year. In terms of travel and transportation, the airline industries and cruise lines and again what is the mobility in that sector work all through to bring similar served in terms of the area. So we much like you do today that I don't, I think there will be pretty flat.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Thanks. And if I could sneak in one more. Do you think the Gallatin expansion on the primary sheet making front is still a mid-20, mid-21 start up. Is that still your intention as of right now.
Leon J. Topalian -- President and Chief Executive Officer
Yes, it is. And I think Jim touched on this in the last call. As we entered Q2 we put a pause on a couple of our bigger projects and when I say pause it didn't stop the work that was already in place for the engineering work in Brandenburg that was already happening. So in the case of Brandenburg for example that few months it didn't delay the start up at all. While Gallatin is certainly have some pressure we still feel very confident that the team has done a really good job of keeping that schedule in mid next year to set a target.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Thank you. Thank you.
Operator
And we have a question from Alex Hacking from Citi.
Alex Hacking -- Citi -- Analyst
Yes, thanks. I just wanted to follow up quickly on the Arkansas or AHFS capacity which is coming online. I have in my notes that that's going to be 500,000 tons. So I wanted to check that. And then secondly, I just wanted to ask, how quickly do you think the market will -- your automotive customers will absorb that product? A, knocking down your door and they're going to want to know right away or that's going to be a kind of a multi-year process to build that up? Thank you.
Leon J. Topalian -- President and Chief Executive Officer
Thanks Alex. I'll let MaryEmily answer.
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Thank you, Alex. And it is 500,000 tons a year and we've been very pleased. We are running 24/7 at this time. We broke production records in September and look to do that again in October. We are running very close to nameplate at this point through fourth quarter. The backlog is strong and we've been very successful in getting contracts for next year. So we look to be about 50% to 60% contract for next year. And by the -- by the end of the year the galv line will come up and that -- part of that production will be by galv line.
Alex Hacking -- Citi -- Analyst
Okay, thanks. And just a follow-up if I may. I mean is that being used on the expo side?
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
At this point, no, but the line is Hickman, Arkansas is more focused on internal parts with stringe requirement so that you can take weight out of the steel and add strength. So there right now, we don't have any project and to view any future off of that line.
Alex Hacking -- Citi -- Analyst
Thank you.
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Thank you.
Operator
And we have a follow-up question from Seth Rosenfeld from Exane BNP.
Seth Rosenfeld -- Exane Paribas -- Analyst
Thank you for taking the follow-up. If I may add two questions on the cash expectations from end of the year. First, can you comment on expected cash tax benefit for the remainder of this year. I think the prior guidance was $350 [Phonetic] million in the full year. Is there any update on that for the cash tax deferral? And then on working capital, can you just walk through any expectations for seasonal working capital release in Q4, obviously demand conditions have been volatile this year, what should we expect for the remainder of 2020?
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Great questions. First on the cash benefits to taxes related to our significant capital spending, that we're in the midst of, we still believe it's just over $700 million over three years between 2020, 2021 and 2022. This year's numbers can be in the $170 million-ish range for that portion, because of the timing of when some projects are going to finish, and some of it's going to fall into the next year and then year after that. And then what was the last part of your question, I had lost track, I'm sorry, Seth.
Seth Rosenfeld -- Exane Paribas -- Analyst
Your working capital to the [Speech Overlap]
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Working capital, you're going to have higher prices and sheet in place that's going to use some working capital receivables. And because of the risk of supply, we'll probably move up our scrap inventories and pig iron in particular, which has a long lead time to obtain in the fourth quarter. So you could see some growth in working capital on the balance sheet, it won't be material, maybe between 100,000 tons to 200,000 tons of pig iron. And I'm hoping it's a big number on receivables, because there is still 30 days. But I'm going [Phonetic] to get much pricing as we can in the fourth quarter.
Seth Rosenfeld -- Exane Paribas -- Analyst
Thank you very much.
Operator
And we'll take a question from Phil Gibbs from KeyBanc Capital Markets.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Thanks. MaryEmily, did I hear you right in so much that you said the specialty cold mill is running essentially full out right now?
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Yes. Yes, they are running completely call about 90%.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
And that's less than [Speech Overlap]
Craig A. Feldman -- Executive Vice President Raw Materials
Phil as a reminder that mill has the capability to make regular cold mill as well as advanced high strength steels. And so the mix is more toward the commercial grade cold mills today.
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Absolutely.
Craig A. Feldman -- Executive Vice President Raw Materials
And so, MaryEmily maybe you could touch on that because I don't know the details of what you do, I'm sorry.
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Yes, absolutely Phil that's a great question, because right now, we've been really pleased with the quality and the performance, but what we are running are the lower and the normal [Indecipherable] grade. We've also done all of our trials on the advanced high strength steels and we've been very successful. So we're completely pleased with what we're sitting off that line. We've even been able to run some Gen 3 trials that the steel will be ready when that galv line comes up and it's ready to run. So as we go forward, that mix will change and move into higher and tight cold rolled products.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Has that project itself moved out of start-up, or you -- are you making cash on that asset right now?
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Yes, yes. We are and expect for the year to be cash positive.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
And then lastly Jim, if I could on the start-up costs overall, I think you pre-operating at start-up you said something around $22 million in the release. What does that include those pre-operating and start-up costs. And then when would the projects within that bucket start to break free?
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Well, there is several projects and the biggest single item is at Nucor Steel. Assume an $9 million range and then there is $4 million to Gallatin and 3 million at Brandenburg, and then the others will be spread across our small projects. In the fourth quarter, we think it's going to be the neighborhood of $24 million to $25 million and will peak at just over $10.5 million. We expect Gallatin to be in the -- just under $4 million range and Brandenburg to be $4.5 million and again dollars in smaller levels in other projects. So as we go into next year surely to tell, but [Technical Issues] should start falling off. But obviously because we have some ramp up at Gallatin and Brandenburg, so if I can make a guess and it's purely a guess, next year is not going to be materially different, maybe just a little bit higher depending on how we could ramp up start-up costs at both Brandenburg and Gallatin.
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Understood. Thanks for the color.
Operator
And we will now take our final question from Tyler Kenyon with Cowen.
Tyler Kenyon -- Cowen & Company -- Analyst
Hi, good afternoon. Hope everyone is doing well. Thanks for squeezing me in here. Jim, I just had a question for you just on the capex. In the $1.7 billion budget just for 2020 here, how much of the $4 billion of major capital projects, how much of that spend will have been spent by year-end and maybe how we should think about that as a component of your earlier comments for 2021 being roughly $2 billion in total capex?
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
I don't have that exact number at my fingertips, but ballpark it in price spend, $2 billion of the $4 billion redeemed this year, somewhere in that range.
Tyler Kenyon -- Cowen & Company -- Analyst
Okay. And then just on the 2021 commentary [Speech Overlap]
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
In 2021, again, we don't have a final budget. The total number is $2 billion. We will be prepared to give you a better breakdown of that 2021 number, between [Indecipherable]. I know a substantial amount if its carried forward, but it's also carried forward on projects we don't -- aren't looking at $4 billion. So we, a lot of mid-sized projects going on all the time in the business of our scale, our base capex, is that $400 million to $500 million a year these days just to support the business.
Tyler Kenyon -- Cowen & Company -- Analyst
Thanks very much.
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Okay. You are welcome.
Operator
And ladies and gentlemen, that does conclude today's Q&A session. I would like to turn the conference back to Leon Topalian for any closing remarks.
Leon J. Topalian -- President and Chief Executive Officer
Thank you. Before concluding our call today, I want to express our appreciation to our shareholders. We value your investment in our company. So we take the obligation seriously that comes with it and also like to thank our customers. We're excited about the capabilities we are building to better serve you today and most importantly for tomorrow. Thank you for the trust and confidence you placed in the Nucor team each day to supply your needs. Before I conclude, I want to impress upon everyone listening today, just how confident I am, so we're going to come out of this challenging year, a stafer, stronger, more diverse and inclusive and a more profitable Nucor. Thank you for the interest in our company.
Operator
[Operator Closing Remarks]
Duration: 49 minutes
Call participants:
Leon J. Topalian -- President and Chief Executive Officer
James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President
Al Behr -- Executive Vice President Plate and Structural Products
Craig A. Feldman -- Executive Vice President Raw Materials
MaryEmily Slate -- Executive Vice President Sheet and Tubular Products
Seth Rosenfeld -- Exane Paribas -- Analyst
Andreas Bokkenheuser -- UBS -- Analyst
Timna Tanners -- Bank of America -- Analyst
Phil Gibbs -- KeyBanc Capital Markets -- Analyst
Alex Hacking -- Citi -- Analyst
Tyler Kenyon -- Cowen & Company -- Analyst
