- Some steel buyers are signing longer-term contracts with steel suppliers amid fears of a looming steel shortage.
- There will not be a steel supply shortage in the US, according to NucorCEO Jon Ferriola.
- Nucor reported earnings Thursday.
- Watch Nucor trade in real time here.
NucorCEO Jon Ferriola says he’s not worried about the steel market’s biggest fear – a looming supply shortage.
“There’s not going to be a shortage of steel in this country,” Ferriola told analysts on his company’s first-quarter earnings call Thursday.
President Donald Trump last month announced a 25% tariff on imports, raising several key questions about the direction of the US steel market.
Steel buyers, according to a Morgan Stanley note out Thursday, have been entering into longer-term contracts with suppliers in order to get ahead of what they see as an upcoming supply shortage.
“Customers who have historically operated on short-term supply contracts are now, for the first time ever, requesting index-linked, long-term supply contracts with service centres,” Morgan Stanley analyst Piyush Sood said in a note to clients sent out on Thursday. ” This behaviour suggests that consumers fear a steel supply shortage could materialise in 2018.”
But Ferriola says there’s no need to worry.
“I can assure you there’s going to be no shortage,” he said Thursday. “Our customers have confidence in our ability to supply them and we won’t let them down.”
Ferriola did, however, note the steel market is tightening amid increased demand. He says demand is so strong that steel buyers will stomach the tariff because they simply need steel.
“If steel needs to come into the country, it will come in,” he said. “People will pay the tariff and they will bring the product in and they’re going in at a fair price.”
Nucor reported adjusted first-quarter earnings of $US1.10 a share on revenue of $US5.6 billion. Both were ahead of Wall Street estimates.
Nucor shares are down 4.63% this year.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.