* Many steel customers pause before ordering for Q3.
* Capacity may inch up in 2010, depending on economy.
* Higher operating rate would require rise in real demand.
By Carole Vaporean
NEW YORK, June 23 Looking at economic
fundamentals, expect a bit of a slowdown in U.S. steel demand
over the next six months, Daniel DiMicco Chairman, CEO and
President of Nucor Corp. (NUE.N), said on Wednesday.
Speaking with Reuters on the sidelines of the American
Metal Market's 25th Steel Success Strategies conference about
the outlook for Nucor's orders in the 2010 second half, DiMicco
said, "Nucor goes with its customer orders."
He added, however, that many of its customers remain wary
of third-quarter economic growth and end user demand.
"People are pausing and taking a breath to see how things
play out from here," the executive of one of the largest U.S.
steel producers said, echoing comments from competitors.
Some industry sectors are faring better than others. Noting
that auto shipments have been stronger than construction and
energy has shown some improvement, he said, they remain about
half of peak demand in 2007 and 2008.
"Construction is still bouncing off the bottom," he said,
citing a more than 10 percent decline in May U.S. housing
starts and a record 32.7 percent decline in May home sales to
their lowest level in four decades [ID:nLDE65M1WY]. (Graphic:
DiMicco pointed to its earnings guidance announcement out
last week, in which Nucor said its most challenging markets
remain residential and nonresidential construction.
The company said its beam mills and plate mills had seen
some improvement, primarily due to increased margins.
Asked for his outlook on North American operating rates,
DiMicco said he expects them to fluctuate with demand.
"But we have already gotten the bang for our buck. In order
to see higher rates, we will need to see an increase in real
demand," he said.
The United States' steel industry operating rate has risen
to 73 percent of capacity currently from about 60 percent at
the beginning of the year as pockets of demand have picked up.
DiMicco said Nucor is currently operating at a 75 percent
rate that, at best, may inch up during the rest of the year.
"It all depends on what happens in the economy," he said.
One constraining factor remains tight credit. Though bank
lending has loosened slightly, a Nucor spokesman said some
smaller customers were still unable to gain access to credit
and this was hampering their ability to build inventory.
DiMicco also called on the U.S. federal government to
release more money from its economic stimulus package for
infrastructure building and on state and local governments to
raise spending on roads and public buildings like hospitals.
Despite improvement over year ago operating rates and steel
demand, DiMicco pointed to historically high U.S. unemployment
and said, "We are still in the worst recession since the great
depression in the 1930s. There is still a lot of work to do."
Instead of cutting jobs, he said, more people could work
for fewer hours, as has been the case at Nucor during the
Discussing Nucor's acquisition plans, DiMicco said, "We are
never not active in talking to people. But in terms of things
happening, it's just a matter of timing."
Charlotte, N.C.-based Nucor was looking domestically and
internationally, outside China, for potential targets, he
(Reporting by Carole Vaporean; Editing by Walter Bagley)