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Steel market nerves weigh on Nucor after tariff boost

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By Rachit Vats

(Reuters) – Steelmaker Nucor Corp <NUE.N> fell just short of analysts’ forecasts for profit in the third quarter, a one-off charge and concerns the U.S. market may have peaked offsetting gains from President Trump’s tariffs on imported steel.

Profit at the United States’ largest producer nearly tripled in the third quarter as a strong economy and the 25-percent tariff imposed in March boosted shipments compared to last year and drove prices for its steel 23 percent higher.

A dip in shipments from the second quarter, however, played in to concerns on Wall Street that the U.S. steel market may be oversupplied, helping push the company’s shares down 3 percent soon after the opening bell.

The imposition of the tariffs on steel imports raised futures prices for U.S. hot-rolled coil steel <.HRCc1> from $660 a ton in January to $924 at the start of June, but they have since fallen back to $834.

“Hot rolled coil prices continue to grind lower and our channel checks suggest large size orders at $800/ton or below,” said Credit Suisse analyst Curt Woodworth, who has previously downgraded the sector on concern over a glut in U.S. supply.

Nucor, which makes and distributes sheet steel, beam blanks and bar steel for a wide range of industries, said its fourth-quarter earnings may be lower than the third due to seasonality, but said that it sees sustainable strength in end markets.

The Trump administration went ahead with tariffs on aluminium and steel imports on March 23, but exemptions for Canada, Mexico and the European Union were only removed in June, and should continue to boost U.S. producers.

“We expect the fourth quarter of 2018 to be another strong quarter as we believe earnings will be noticeably higher than those generated in the fourth quarter of 2017,” the company said.

Analysts worry that the company’s investments in new production facilities, including a $240 million rebar mill in Florida, come at a time when the U.S. steel market is grappling with oversupply and China’s is showing signs of weakness.

Net sales at the Charlotte, North Carolina firm rose to $6.74 billion from $5.2 billion, beating estimates of $6.63 billion.

Net income attributable to shareholders rose to $676.66 million in the third quarter ended Sept. 29 from $254.85 million a year earlier.

Excluding one-time items, however, the company earned $2.33 per share, just short of estimates of $2.35, according to I/B/E/S data from Refinitiv.

Nucor Shares fell about 3 percent to $57.39 in morning trading. They are down 7.5 percent this year.

(Reporting by Rachit Vats in Bengaluru; Editing by Anil D’Silva)

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