Nucor-JFE Sheet Steel Facility Starts Production In Mexico

Nucor Corporation (NYSE:NUE) announced that Nucor-JFE Steel Mexico, S. de R.L. de C.V. (“Nucor-JFE”) commenced operation at its continuous galvanizing line.

Notably, the plant situated in Silao, Guanajuato in central Mexico will produce hot-dip galvanized sheet steel for the automotive market.

Per management, the company is excited to expand its presence in Mexico. Notably, the use of its local sales network will help it to increase sales into the automotive market in Mexico. The experience of JFE Steel Corporation of Japan as a leading supplier of high-quality products to the automotive industry will likely aid Nucor to witness substantial gains.

Notably, the facility is projected to have a production capacity of 400,000 tons per annum. It can produce sheets, with 0.4-2.6 mm thickness and 800-1,850 mm width.

The plant started trial production. Notably, full-scale sales and production are expected after obtaining approvals from customers.

Nucor-JFE is well-placed to serve a large number of automakers, who have facilities in central Mexico. Notably, Mexico’s automotive production is anticipated to continue growing and the new United States-Mexico-Canada Agreement (“USMCA”) enhances the amount of North American content in cars and trucks in order to avoid tariffs imposed by the United States.

Nucor and JFE will each provide an equal amount of substrate to be processed at the new plant.

Shares of Nucor have lost 41.1% in the past year compared with the industry’s 34.1% decline.

On the fourth-quarter earnings call, the company expected a sequential increase in earnings for first-quarter 2020.

Profitability in the steel mills unit is expected to increase sequentially in the first quarter. This is expected to be driven by price increases and rise in volumes. Notably, the company expects a more stable pricing environment in 2020, after a severe inventory destocking in 2019.

Earnings of the steel products unit are expected to decline sequentially in the first quarter due to normal seasonality.

The company expects the performance of the raw materials unit to improve sequentially in the first quarter. This is expected to be driven by an improvement in the pricing of raw materials. Also, the absence of the impairment charge associated with its natural gas well assets as well as no planned non-routine outage at the Louisiana DRI plant is forecast to support Nucor’s performance.

Nucor Corporation Price and Consensus

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. (NYSE:DQ) , Barrick Gold Corporation (NYSE:GOLD) and NovaGold Resources Inc. (NYSE:NG) .

Daqo New Energy has a projected earnings growth rate of 353.7% for 2020. The company’s shares have rallied 48% in a year. It currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold currently has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 49% for 2020. The company’s shares have rallied 51% in a year.

NovaGold has a projected earnings growth rate of 11.1% for 2020. It currently carries a Zacks Rank #2. The company’s shares have surged 91% in a year.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.7% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>