Shares of mini-mill steelmaker Nucor
Because Nucor produces steel by recycling scrap metal, its operating costs are very sensitive to the price of scrap. As I noted in my review of Metal Management's
OK, I suppose that explanation deserves a little fleshing out. According to the Chinese Ministry of Commerce, steel exports rose over 116% year over year through May. That kind of import surge absolutely demolishes the pricing power of domestic firms like Nucor and U.S. Steel
I think the weakness in domestic consumption, particularly housing, shouldn't surprise anyone. Even housing's biggest cheerleader has conceded that "we're in a real estate recession." Nucor's interesting joint venture with Lennar
All of these situations are unpleasant, but Nucor is an incredibly well-managed and well-financed entity. My Foolish colleague Anders Bylund has alluded to the company's "share the pain, share the gain" philosophy, but I would like to add the anecdote that the almost-$20 billion company wrote a letter to employees justifying the purchase of a corporate aircraft. That is remarkable.
If you take the long view here, Nucor's zero net indebtedness both positions the firm to withstand a sector downturn better than Steel Dynamics