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Nucor SWOT & PESTLE Analysis

ID : 52561553| Jun 2019| 15 pages

COMPANY PROFILE -Nucor

Business Sector :Steel and Steel Products

Operating Geography :North America and Canada

About Nucor :

Nucor is North America’s largest recycler and the world’s most sustainable steelmaker. In the 1960's, Nucor founder Ken Iverson started a small steel company on the idea that teammates, customers and communities could trust one another. It started with autos then shifted to nuclear services and then finally to steel. Headquartered in Charlotte, N.C., Nucor operates 25 scrap-based steel production mills – Steel mills, Structural steel foundation distribution, and tabular products, based primarily in the U.S. and Canada.
Nucor’s brands include American Buildings, CBC, Astralloy, DJJ, Kirby Building Systems, Laurel Steel, and Skyline. The industries that Nucor serves include agriculture, automotive, construction, power generation, oil and gas, heavy equipment, infrastructure, and transportation.
Its long-term strategy for profitable growth is based on 5 drivers:
• Strengthen its position as a low-cost producer
• Achieve market leadership positions in every product line in its portfolio
• Move up the value chain by expanding its capabilities to produce higher-quality, higher-margin products
• Expand and leverage its downstream channels to market to increase steel mills’ baseload volume for sustained results
• Achieve commercial excellence to complement their traditional operational strength
• Strengthen its position as a low-cost producer

Nucor’s USP or unique selling proposition lies in being North America’s largest recycler, using scrap steel as the primary raw material in producing steel and steel products. In fiscal 2018, Nucor is credited with recycling approximately 19.9 million gross tons of scrap steel

Nucor Revenue :


Total Net Sales:
$25,067.3 million – FY ending 31st Dec 2018 (y-o-y growth 23.7%)
$20,252.4 million – FY ending 31st Dec 2017

Competitive Analysis of Nucor

SWOT
PESTLE
The SWOT analysis of Nucor is presented below:
Strengths
Weaknesses
1. Consistently strong financial performance
2. Key acquisitions and strategic alliances
3. Focus on technology as a differentiator
4. Innovation in product ranges and customer service
1. Job cuts and cost cutting
2. Frequent controversies undermining the brand
3. Cut down on overseas operations
Opportunities
Threats
1. Popularity of multichannel retailing
2. Artificial intelligence in retail
3. Consumer engagement using augmented reality
4. Tesco and Booker merger to bring new growth opportunities
1. Increasing competition in retail
2. Rapidly changing customer expectations
3. Cybersecurity threats
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Detailed SWOT Analysis of Nucor

 

Strength

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Weakness

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Opportunity

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Threat

1. Global overcapacity and unfair trade practices: High levels of steel imports have a significant impact on Nucor’s earnings. US market is a prime target for foreign steel imports because of weak economic conditions in Europe, slow growth in China and a strong U.S. dollar relative to other foreign currencies.
While the steel industry has historically been characterized by periods of overcapacity and intense competition for sales among producers, we are currently experiencing an era of global overcapacity that is unprecedented. Despite ongoing domestic and global steel industry consolidation, the extraordinary increase in China’s steel production in the last decade, together with the excess capacity from other countries that have state-owned enterprises (“SOEs”) or export-focused steel industries, have exacerbated this overcapacity issue domestically as well as globally. China is the world’s largest producer and exporter of steel, accounting for almost half of the steel produced annually in the world. Chinese producers continue to benefit from their government’s manipulation of foreign currency exchange rates and from the receipt of government subsidies, which allow them to sell steel into Nucor’s markets at artificially low prices. Many of these Chinese producers are government-owned in whole or in part. Imported steel and steel products continue to present unique challenges for it because foreign producers often benefit from government subsidies, either directly through SOEs or indirectly through government-owned or controlled financial institutions. Foreign imports of finished and semi-finished steel increased more than 15% in 2017 compared to 2016, remaining excessive with imports of finished steel products alone capturing 27% of the U.S. market despite significant unused cost-competitive domestic capacity. The surge comes from numerous countries and cuts across many product lines. Countries that contribute significantly to the import total include South Korea, Turkey, Japan and China. China is not only selling steel at artificially low prices into its domestic market but also across the globe. When it does so, steel products that would otherwise have been consumed by the local steel customers in other countries are displaced into global markets, compounding the issue.

2. Cyclical nature of the steel industry and challenging global markets: Although the nature of steel industry has always been cyclical, manufacturers of steel and steel products in North America are witnessing very challenging global market conditions. From 2015 through 2017, approximately 71% of the average domestic industry capacity utilization rates have lost steam. These rates compare unfavourably to capacity macro-level uncertainties in the world markets which continue to weigh on global and domestic growth in 2018.
During economic booms, steel demand increases and during recessions, it drops. Steel industry went through a consolidation phase at the end of fiscal 2014. Due to overproduction, a low steel demand phase was experienced in the steel industry from 2014 to 2016. One of the reasons for this low demand could be long life of steel products, a minimum of 10 years. Thus, the industry gets pushed to go through a cyclic phase once every 5 to 6 years. Overproduction of steel by China aggravated this situation. It dumped its excess steel at low prices in other countries because of low domestic demand. To compensate for these low-priced imports from China, manufacturing operations were stopped internally by some major producers such as those in Europe and the United States. Fall in steel price was one of the outcomes of oversupply of steel by China. As a result, several thousands of employees lost their jobs in Luxembourg’s ArcelorMittal, South Korea’s Posco, and US Steel, etc. just to highlight a few names. It is still unclear how the industry is going to resurrect from these setbacks.

3. Price fluctuations of raw materials: The price of Nucor’s principal raw material, ferrous scrap, is volatile and often increases or decreases rapidly in response to changes in domestic demand, unanticipated events that affect the flow of scrap into scrap yards and changes in foreign demand for scrap. Electricity and natural gas usage are significant costs to Nucor. Total energy costs increased approximately $1 per ton from 2016 to 2017, primarily due to higher electricity and natural gas unit costs.
In its attempts to mitigate the scrap price risk, the Company undertakes managing scrap inventory levels at the steel mills to match the anticipated demand over the next several weeks. Certain scrap substitutes, including pig iron, have longer lead times for delivery than scrap, which can make this inventory management strategy difficult to achieve. It gets greater control over its metallic inputs and helps in mitigating the risks by successful implementation of its raw material strategy, including key investments in direct reduced iron (“DRI”) production coupled with the scrap brokerage and processing services, which are performed by its David J. Jospeph Company‘s team. Nucor is more likely to protect its gross margin from significant erosion by passing relatively quickly the increased costs of ferrous scrap and scrap substitutes to its customers during periods of stronger or improving steel market conditions.
During weaker or rapidly deteriorating steel market conditions, including the global steel market environment of the past several years, weak steel demand, low industry utilization rates, the impact of imports create an even more intensified competitive environment. All the factors discussed above have an effect on pricing, which increases the chances of lower gross margins been experienced by Nucor.

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TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
References used in Nucor Analysis Report

1. Nucor Who We Are - https://nucor.com/who-we-are

2. Nucor Website Financial Information https://nucor.com/financial-information

3. Nucor Website Environmental - https://nucor.com/environmental

4. Government in talks with US over steel import tariff - https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/government-in-talks-with-us-over-steel-import-tariff/articleshow/67289618.cms

5. worldsteel Short Range Outlook April 2019 - https://www.worldsteel.org/media-centre/press-releases/2019/worldsteel-short-range-outlook-april-2019.html

Copyrights and Disclaimer

Nucor SWOT and PESTLE analysis has been conducted by Akanksha Sreen and reviewed by senior analysts from Barakaat Consulting.

Copyright of Nucor SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.

Nucor SWOT & PESTLE Analysis
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