Seeking Alpha: New Headwinds For Nucor, But Still Some Value

Steel continues to be a tough place to make money as an investor on the long side, as well-run producers like Nucor (NYSE:NUE), Steel Dynamics (NASDAQ:STLD), and ArcelorMittal (NYSE:MT) have seen share price movements of -9%, +4%, and -41% over the past year. While input cost inflation has eased, the supply/demand balance has kept a lid on price realizations as major markets like non-residential construction and autos can't absorb enough steel to push up capacity utilization.

In some respects, conditions are arguably more challenging for Nucor now than six months ago. In addition to weak oil prices reducing demand in the energy end market, foreign currency markets now make the U.S. market an even more attractive destination for imports. I do like Nucor's leverage to the improving non-residential construction market, as well as the company's internal margin improvement initiatives. I think Nucor's shares are trading below what would normally be fair value for this point in the cycle, but experienced commodity company investors know that these stocks can stay weak for extended periods and trade with above-average volatility.

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New Headwinds For Nucor, But Still Some Value