Nucor Steel $NUE - 2026 Play?

Current price of $173 reflects a premium based on the attractive December guidance, however I believe there is still value through 2026, and certainly at a pullback like $150-160. Nucor is the largest US domestic Steel producer recycling Iron scrap into usable high-quality steel. Primarily, this is done through Electric Arc Furnaces which melt scrap steel (junk cars, industrial scrap etc. $200-500 / ton) into recyclable ‘impure’ steel. They buy iron ore pellets ($100-120 / ton) from Brazil in 5-year contracts which they refine via Direct Reduced Iron (baking it in nat gas to deoxidise) resulting in 97% pure iron which can be mixed with refined scrap. They then make: Rebar from 100% scrap - sell for $750 / ton Steel Sheets - $950 spot price / ton Premium AHSS plates - $1100 - 1200 / ton Tariffs are currently shielding these prices though China could still weaken them if they flood the international market. The efficiency lies in the EAFs which can be brought on or offline when needed reducing overhead costs and improving agility. This year domestic steel held at a 76% utilisation rate (\~demand) which murdered competitors like Cleveland Cliffs that can’t turn off their foundries. Nucor averaged 75.9% utilisation rate almost perfectly matching demand. The DRI iron which is used to strengthen less pure steel into higher quality steel sheets and premium AHSS steel is used in automotive industry, data centre servers, warehouses, grid pylons etc. Currently they have an incredible backlog that is ‘materially higher’ than last year, with rebar demand up 28%, and Joists & Decks up 50%. Automotive industry is down but it only accounts for 5-10% of their output. Data centre buildout is forecasted to demand a 30% increase in supply this year and Nucor is set to control 95%+ of the market share. They recently took two DRI plants offline for maintenance so I imagine the earnings in January will be ‘down’ which will produce a nice entry under $160, however this was planned and should be expected in the ‘off-cycle’. They also recently invested $35m into NuScale Power - the only company with a certified SMR design in the US. It currently looks like they are using this to develop their own SMRs to lower production costs of the EAFs, but they could also sell this technology in the future if they develop a big competitive advantage. Balance sheet is very healthy: $2.7bn cash with long term debt of $6.7bn $2.5bn of untapped credit for acquisitions / CapEx D/E is 0.4 with an industry avg around 0.5 Returned $1.2bn through buybacks between $140-145 range Revenue (+14.5% YoY) $8.52bn (while prices fall) Gross margins (+4% YoY) 14% in Q3 however dependent on steel prices. DRI plants coming back online will stabilise this - hopefully there are no delays. Last quarter saw low net profit margins of 5.18% because the DRI plants were offline - should return to \~8% when they come back online beating STLD at 6%. At $170 they are at a slight premium but I expect 2026 to be fruitful regardless - ideally hoping to get a discount after the EPS ‘scare’ in January and a boom in data centre / grid build out. STLD is also strong but i’m interested in the supply strain constraints of 2026