Good day, everyone, and welcome to the Nucor Corporation 4th Quarter of 2020 Earnings Call. As a reminder, today's call is being recorded. Later, we will conduct a question and answer session and instructions will come at that time. Certain statements made during this conference call will be forward looking statements that involve risks and uncertainties. The words we expect, believe, anticipate and variations of such words and similar expressions are intended to identify those forward looking statements, which are based on management's current expectations and information that is currently available.
Although Nucor believes they are based on reasonable assumptions, There can be no assurance that future events will not affect their accuracy. More information about the risks And uncertainties relating to these forward looking statements may be found in Nucor's latest 10 ks and subsequently filed 10 Qs, which are available on the SEC's and Nucor's website. The forward looking statements made in this conference call and speak only as of this date and Nucor does not assume any obligation to update them either as a result of new information, future events or otherwise. For opening remarks and introductions, I would like to turn the call over to Mr. Leon Tapallion, President and Chief Executive Officer of Nucor Corporation.
Please go ahead.
Good afternoon and thank you for joining us for our Q4 earnings call. We hope everyone on the call is having a good start to the year And staying safe and healthy. The last 12 months have been incredibly challenging on so many different levels. The pandemic has impacted businesses and markets and taken a tremendous toll on so many that have cared for and lost loved ones during this time. The distractions we have faced as a nation and as a company are significant, Yet, the Nucor team has never lost its way in delivering the safest year in our history.
Let me repeat that again. 2020 was the safest year in the history of our company. I'm extremely grateful for the hard work, dedication, Ownership of our nearly 27,000 team members who made this result possible. While there still is a great deal of work ahead of us in our journey To our Nucor teammates, thank you. I am proud for you all.
Well done. Now, let's make 2021 our safest year ever. Joining me today on the call are the members of Nucor's executive team, including Jim Frias, our Chief Financial Officer Dave Simosky, Chief Operating Officer Al Baer, responsible for Plate and Structural Products Craig Feldman, responsible for Raw Materials Doug Jellison, responsible for DJJ and Logistics Greg Murphy, responsible for Business Services and our General Counsel Raynapolitan, responsible for Engineered Bar Products Rex Cleary, responsible for Sheet and Tubular Products Mary Emily Slaight, responsible for our commercial strategy Chad Utemark, responsible for Fabricated Construction Products And Dan Needham, who will be joining our Charlotte team on February 1 and be responsible for bar products. At the end of the year, we announced several changes to our executive team. Dave Simosky was promoted to Chief Operating Officer.
Dave has been with Nucor since 1995 and has led multiple steel product groups and strategic initiatives, most recently combining our domestic rebar steel mill In fabrication businesses, Dave is uniquely positioned to help Nucor continue to build lasting partnerships while executing our enterprise wide strategy. Mary Emily Slade has taken on a new role as Executive Vice President for Commercial. This is the first time we have had an EVP level leader in this role at Nucor. The purpose is to enhance our ability to focus on our key markets and to better connect with our customers, meeting the future needs of our While maintaining and maximizing the benefits of the broad and diversified offering of Nucor will be a vital function of Mary Emily's team as we move forward. I'd also like to welcome 4 new team members to our executive team, Rex Cleary, Doug Jellison, Greg Murphy and Dan Needham.
Each of these executive management team promotions will enhance our ability to serve our customers and our shareholders. Business conditions remained strong in the 4th quarter with improving pricing and healthy volumes across our diverse product portfolio. Of particular note, Utilization rates at our sheet mills and plate mills continued their sharp upturn in the 4th quarter. While we were pleased with our operating performance and cash flow for the Our earnings were impacted by non cash charges, which were more than offset by tax benefits recognized in the quarter. The most substantial of these were related to our agreement to exit from the deferredifin Nucor joint venture and the impairment charge writing down the value of our cast Both of which impacted our steel mill segment earnings.
The capabilities of our new state of the art coal mill in the Generation 3 galvanizing line We have under construction at Nucor Arkansas, have diminished our utilization of Castrip. We do plan on continuing to fully support Existing customers as well as the technology to further improve Castrip's product offerings for Castrip licensees. The non cash charge that we recorded upon exiting the deferred to the Nucor joint venture was actually more than offset by a tax benefit related to our investment, so it did not hurt our net income for the quarter. Jim Frias will elaborate more in his opening remarks. Turning now to comment on 2020 as a whole.
The year ended up much stronger than anyone would have anticipated when the pandemic first took hold of our global economy in March of last year. Our team and our business model proved to be incredibly resilient and we were able to take advantage of this that characterized 2020. This allowed us to reliably fulfill our customers' requirements. Our focus remains on continuing to deliver a differentiated value proposition to meet and exceed our customers' needs. Looking at specific end use markets, Construction remained strong throughout the pandemic and automotive was quick to recover in the second half of the year after shutting down in the second quarter.
Together, these two markets account for nearly 2 thirds of steel consumption. We are aware of certain leading indicators signaling a downturn In non res construction activity, but so far, we don't see much evidence of that. Our company is well positioned in attractive Subsegments of the non res construction market, there are areas of strength, most notably warehouses and data centers That may not be fully reflected in the ABI and other indicators, we have worked to build relationships in these sub segments that are bright spots, ensuring that we are providing the best solutions across steelmaking and steel products to serve those customers. We are cautiously optimistic The significant infrastructure spending bill will be passed by Congress and signed by the new President this year. After years of talk, This must get done.
We are still driving on roads and bridges designed and built during the Eisenhower administration. This is not sustainable. We would not be surprised if a funding bill focused in part on green infrastructure spending, including renewable power generation and transmission. Nucor is well positioned to meet our country's needs of environmentally friendly steel and steel products. With roughly 50% of our steel used in the There is arguably no company more poised and ready to meet the needs of rebuilding our country than Nucor.
In the automotive market, we believe demand should continue its rebound. We think 2021 light vehicle production in North America We'll be around 16,000,000 vehicles. Having wrapped up the fall contract season, we feel good about our prospects for continuing share gains in the automotive market. The investments we have made at our sheet mills in Arkansas and in Kentucky to expand our production of value added products are paying off. Demand from the oil and gas sector continues to be weak even as oil prices have been rising along with many other commodities.
I think that significant continued improvement in that market is going to depend on how quickly vaccines can get out to a large number of people And how long it takes for commuting and travel patterns to approach pre pandemic levels. Strong demand growth from the renewable energy sector has partially offset the weakness in oil. Our sales to the renewable power sector have been very strong this year With steelmaking segment orders related to these markets growing by double digits compared to the 2019 total, the renewable power market is 1 Nucor is targeting And many of our steel and steel products are essential to its continued build out. We rely primarily on recycled steel to make these products And they themselves are 100% recyclable. This fact positions us well as a supplier of choice Here, as we see sustainability and product transparency becoming a more important factor in product sourcing decisions in the renewable power sector and in most other end use markets.
We are also seeing signs that other end use markets will rebound from this past year's depressed levels, including heavy duty trucks, heavy equipment and agriculture. Turning to our strategic growth projects, we continue to make excellent progress on them during the Q4. Our new rebar micro mill in Frostproof, Florida started up operations on schedule in December. Congratulations to the entire Nucor Steel Florida team For getting this new steel mill up and running on time and for doing it safely. This past October, we celebrated the groundbreaking of our new steel Plate mill in Kentucky.
Our Nucor Steel Brandenburg team has done a great job keeping the project on schedule throughout this year, And we are moving at full speed to bring the state of the art plate mill to market during the Q4 of 2022. We're also making great progress on our expansion project At our Gallatin sheet mill, the expansion project is expected to start up in the second half of this year. With regard to some of our facilities That are in operation. I'm pleased to report the new pickle galvanizing line at Gallatin had an excellent first full year of operation despite the pandemic Shipping 39% more tons than we projected when we approved the project. Year 1 profitability was also ahead of plan.
Gallatin's entry into the value added coated sheet market has proven very timely with the strong flat rolled market conditions that emerged in the second half of twenty twenty and are continuing into Q1 2021. We have experienced very strong customer acceptance of Gallatin's coated product As we further develop target markets that include automotive, solar, tubing, roll forming, grain storage, culvert and cooling towers. Also, the new coal mill at Nucor Steel Arkansas has gotten off to a strong start with shipments almost 30% ahead of our initial plan for the mill. Strong customer acceptance rates following trials were conducted throughout 2020 mean that the new mill is now booked out for this at 85% of its nameplate capacity for contract customers. We are looking forward to running our first prime coil off our new Gen 3 Galb line in Arkansas later this year.
This is slightly behind our original schedule due primarily to the slowdown in capital expenditures We instituted around the beginning of the pandemic. Our new rebar micro mill in Sedalia has also exceeded our expectations. The team there generated a solid operating profit during the most recent quarter and its spooled rebar product continues to be well received by our customers. At our galvanizing line joint venture with JFE in Mexico, we are back up running after government mandated shutdown and beginning to ship coils to automotive customers. Congratulations to the team there.
Our Kankakee, Illinois bar mill completed commissioning of its new MBQ rolling mill in December. While the timeline of this project was slightly extended due to COVID related disruptions, customer acceptance of the new products has been extremely strong. We expect to achieve positive cash flow from this investment in Q1. Construction on upgrades to Kankakee's melt shop, Including a Newcaster and Laidle stir station will begin in earnest in February with final commissioning of this equipment expected in Q4 of this year. This investment will significantly improve the energy efficiency of the Kankakee Mill.
Before I turn the call over to Jim, Let me give a shout out to our teammates at Louisiana DRI Operations. As many of you are aware, we took some downtime at Louisiana In 2019, and have invested approximately $200,000,000 to enhance operational reliability there. It has really paid off. In 2020, the Nucor Steel Louisiana team set new records for production, shipping and operating hours. Most importantly, our team there accomplished all of this while operating safely for more than 4 50 consecutive days.
Later this quarter, we will finish our work improving Louisiana's ore yard. With that, let me turn the call over to Jim to provide more details about our financial performance and outlook for the 1st part of 2021. Jim?
Thanks, Leon. 4th quarter earnings of $1.30 per diluted share exceeded our guidance range of $1.15 to $1.20 per diluted share. As detailed in our news release, results for the just completed quarter included a number of non operational items that were not included in our guidance. After tax effects, again for the items not included in our guidance, The total impact was produced net income by just under $34,000,000 or approximately $0.11 per diluted share. Earnings significantly exceeded our guidance as the pace of margin expansion at our steel mills surpassed our expectations.
Conditions improved for many of our businesses throughout the quarter and now are the strongest they've been in some years. As Leon mentioned and as detailed in our news release, we were able to claim tax deductions related to our investment in deferred affinity Nucor joint venture that more than offset the related loss on assets we recorded in the 4th quarter. Cash provided by operating activities For full year 2020 was $2,700,000,000 Nucor's free cash flow or cash provided by operations minus capital spending was $1,200,000,000 in 2020, comfortably exceeding cash dividends paid to stockholders of $492,000,000 Over the last 3 years, Nucor has generated $3,900,000,000 of free cash flow, even as we reinvested $4,000,000,000 in our businesses. As mentioned on previous calls, we have intensified our focus on maintaining appropriate working capital levels and reducing the asset base we require to generate strong profitability. I am happy to report That even as steel market demand and pricing has rebounded strongly in recent months, our tons of raw material inventory are actually down by more than 6% from the prior year end.
At the close of the 4th quarter, our cash, Short term investments and restricted cash holdings totaled just under $3,200,000,000 Nucor's liquidity also includes our undrawn $1,500,000,000 unsecured revolving credit facility, which matures in April of 2023. Total long term debt, including the current portion, was approximately $5,300,000,000 Gross debt as a percent of total capital was 32%, while net debt represented 13% of total capital. The flexibility provided by Nucor's low cost operating model and financial strength continues to be a critical underpinning to our company's ability to grow long term earnings power and return capital to our shareholders. Dividends and share repurchases totaled $531,000,000 or 74% of net income during 2020. And with the dividend increase announced in December, Nucor has increased its base dividend for 48 consecutive years.
Every year since we first began paying dividends in 1973. Speaking of growing long term earnings power, Let me take a moment to provide a brief rundown on where we stand on some of our organic growth projects. 3 projects started operations in 2019. A new specialty cold rolling mill at our Arkansas sheet mill, A rolling mill modernization at our Ohio rebar mill and a hot band galvanizing line at our Kentucky sheet mill. Another 4 projects started production during 2020.
Our rebar micro mill in Missouri, our Illinois Merchant Bar Rolling Mill, Our joint venture sheet steel galvanizing line in Mexico and our Florida rebar micro mill. The remaining three projects are The expansion and modernization of our Kentucky sheet mill, our Generation 3 flexible galvanizing line at our Arkansas sheet mill and our Kentucky plate mill. At the close of 2020, remaining capital expenditures for these three are approximately $1,900,000,000 With the Kentucky plate milk project representing about 3 fourths of that total, we expect that Nucor's total capital spending for 2021 will be in the area of $2,000,000,000 Approximately 80% of the 2021 spending is to improve product capabilities and reduce costs. Turning to the outlook for the Q1 of 2021. As Leon indicated, we are encouraged by a number of positive factors impacting our markets.
We expect earnings in the Q1 of 2021 to be significantly higher than our reported results for the Q4 of 2020. The expected performance of the steel mill segment in the Q1 of 2021 is the primary driver for this increase as our sheet, Plate, bar and structural mills are all forecasting increased profitability. Our Downstream Steel Products segment's performance in the Q1 is expected to decrease compared to the Q4 of 2020 due to typical seasonal patterns and some margin compression due to a lag between rising steel input costs and increased selling prices. The raw material segment's performance in the Q1 is
Thank you, Jim. And we'd be now happy to take any of your questions.
And our first question will come from Seth Rosenfeld with Exane BNP.
Good afternoon. Thank you for taking our questions today.
If I can kick off please with
a question specifically on your raw materials segment. Obviously, very strong performance this last quarter.
I was wondering if you can touch on
a little bit your own expectations for scrap prices as we look ahead through 2021. That has been a very strong last couple of months. What would be your expectations going into the February settlement and longer term given the growth in domestic EAF capacity Where you see domestic scrap prices settling out. And as a follow-up, please, you touched on earlier some of the work within your DRI business in Louisiana with Susie Paying off. Can you give us a little bit of color and the level of profitability in Louisiana and your broader DRI business?
How should we think about that progressing going forward? Is there more Sorry, do we already hit a pretty strong level at Q4? Thank you.
Okay. Seth, I'll start with the back half Your question regarding DRI, and while we don't specifically call out the individual divisions profitability, what I'll tell you in the results that I shared with you in my opening remarks regarding Louisiana's performance and reliability, their uptime, Again, their incredible safety record and the things that they continue to be able to improve in their reliability is going to yield Stronger financial performance. What I'd like to do now is maybe invite Craig Feldman Craig to share Just a little bit of backdrop around scrap, what we're seeing, some of the metallic spread as well as how we think about Prime scrap as we move forward. So Craig, why don't you jump in and then I'll maybe close at the end.
Sure, Leon. Thank you. And Seth, thanks for the question. You asked the question about longer term view on scrap. Our crystal ball probably isn't significantly better than yours.
Let me just share a few thoughts with you though. We certainly do anticipate a near term correction in the month of February, which I guess is not all that surprising given the nearly $200 increase that we've seen in the last 90 days or so. In fact, we've already seen some international scrap prices, notably Turkey, Paul here just really in the recent days. So we certainly see some moderate corrections from the January levels, especially on obsolete grades, Which are highly elastic and where flows have really been pretty good recently. Prime scrap grades are also likely to moderate a bit, But we don't believe we'll fall as much as the obsolete grades.
February pricing would likely be down $30 to $50 a ton Depending on both the grade and the region. But we'd certainly characterize that as a, I would say, a fairly normal correction Given the size of the recent run up in prices and just a couple of other things and Leon alluded to this in his opening remarks, but there's some other The overall commodity price environment is pretty darn solid. And I don't think Leon mentioned this, but a relatively weak dollar It really could help put a floor under that and really sustain the general commodity environment. The other thing I would point to you, there are some Seasonal factors. The month of February is typically a pretty weak month for scrap pricing overall.
And meanwhile, March typically sees higher prices. So we track this pretty closely with some heat maps as you might imagine, Seth. Historically, scrap prices in the calendar month of February Are either flat or down around 70% of the time and we're going back the last 20 years or so. And March is the exact opposite of that with With prices rising or flat around 70% of the time. So we certainly could see some exceptions to those trends, But we really believe that this year will follow that more typical seasonal pattern, if you will.
So bottom line, our near term view on scrap pricing is Some downward pressure and it's likely to stabilize after that. And if I may, one final comment on this. Just an observation with regard to scrap and steel pricing, and this may not be fully apparent or intuitive to most folks. But scrap pricing follows steel pricing and not the other way around. Again, steel demand and steel pricing lead scrap demand And scrap price.
And as Jim and Leon alluded to in their opening remarks, our view is pretty darn optimistic right now. Hopefully that gives you some color.
Great. Thank you very much.
Thanks,
Moving on, we'll go to David Gagliano with BMO Capital Markets.
Hi, thanks for taking my question. I just have really just one. I was wondering if you could talk a little bit more about the spending plans beyond $2,000,000,000 in 2021, given the timing of the remaining capital spend on the Kentucky plate mill, I know it's early, but can you just give us a bit of a sense as to what your thoughts are with regards to 2022 on the capital spending side?
Yes, this is Jim. I'll take a shot at that. I had some things in my opening comments regarding capital spending And I'm trying to find that to make sure I repeat it in the exact same fashion. When we think about 2021 spending, Roughly $900,000,000 of that will be on the plate mill, roughly $250,000,000 of it is going to be on Gallatin And roughly another $100,000,000 is going to be on completing the galvanizing line in Arkansas. And we have about $1,900,000,000 overall on those three projects Going forward, so you can then extrapolate off the bat what's left beyond 20 21 and most projects hit 1.9 minuteus the 900 to 250 into 1.
And that tells you what's going to carry over roughly into 2022. Beyond that, we're always working on possible capital projects across our portfolio and it's way premature for us Talking about what new major capital projects could be afoot, but there's always ideas that are being worked on across the company.
Okay. Can you remind us again, maintenance CapEx again is what these days?
There's no exact number, but we think of it as being in the range $400,000,000 to $500,000,000 and it's never for sure maintenance. As we said in our comments, a significant portion of this year's CapEx roughly 80% Can be categorized as creating some incremental value of our existing costs or broadening our Now you have 5, Mitch.
Okay, that's helpful. Thank you.
And moving on, we'll go to Timna Tanners with Bank of America Securities.
Hey, good afternoon, everyone.
Good afternoon, Timna. How are you?
Good. Thanks. I wanted to ask a little bit more to understand the Flat Rolled segment's Volume and pricing and not to dwell on the past, but just looking at your average realized selling price in the 4th quarter, it rose like $80 a tonne and the spot Increase that we calculated at least was about 3 times that. So I'm just trying to figure out how to do the right calculation in terms of the average realized selling price You guys on flat rolled, especially as we see this really sharp increase into the Q1, trying to think about how to calculate that. And then along those same lines, what if you can remind us, what is the capability of the Flat Rolled segment?
When I looked at your volumes, Shai, of $2,300,000 that was less than the Q1. And given how high prices were, I would have So can you just run through what the capability is and how to think about prices? That would be great.
Sure. Why don't I start off and Mary Ann, like you've got some comments regarding kind of how we look forward in terms of The contract versus spot market, but look, at the end of the day, Ken, I'll begin kind of a little broader. And so as we think about The supplydemand picture, the demand side really again all product groups are incredibly strong. We're at or near historic Levels of backlogs in almost every product group that we have, including our downstream groups as well. Order activity and entry rates remain Very robust and continue to be strong.
And I think a further strengthening sign of that or support of that, as we talk to our customers, They're experiencing very similar things with their customers in incredibly strong backlogs, order entry rates again at the customer level. So as we look forward And I think Jim framed up well in his opening remarks. As we look at our sheet board, But really all product groups, but in particular, as we look at Q1, we see a significant improvement as we move forward. Mary Anne, we want to share just a little bit about, again, how we're looking at 2021 and now that we've completed the contract here.
Absolutely. Thank you for the question, Timna. In Q4, we actually were still working on contracts for 20 And as we've talked before, there is a lag in contract pricing. It's usually done on a monthly or quarterly basis. And we're really well positioned.
You saw that increase in 4th quarter, but we're really well positioned going into 20 21 with a healthy contract versus spot mix. And I think one area to note is that almost 20% of our Each capacity is dedicated to internal downstream customers, including BullCraft Building Systems and Nucor Tubular. And each of these businesses are growing, doing very well, projecting very good years. And our backlog right now is at close to historic high and it's about 50% Better than this time last year. And so as I stated, That 20% is for internal downstream customers and then we also have about 50% to 55% of our capacity locked up with external customer contracts.
The pricing follows the market on a monthly or quarterly basis. Does that answer your question?
I was on mute. Sorry, I guess, but I mean in the Q1, you also had strong internal sales from what I could tell. In fact, if anything, your tubular products We're higher in the Q1 than the Q2. So I'm just trying to figure that out. And I understand that you have contract business and I don't expect you to detail it And to all your customers on the line and all that, but if you only achieved a third of the spot price increase in the last quarter, And that would suggest that you have contract tons that are absorbing more than half of your quarter over quarter move just back in the envelope.
So I'm just wondering, do we expect like the similar contract percentages of fixed versus variable or lagged variable into the future? Has anything changed in your contact structure and is it possible to regain the volumes you did in the Q1 or is the Q4 a better run rate?
Tim, let me jump in real quick. First off, I think it's important to remember These contracts are not fixed price contracts. There are things that flow into them. And so again, that exact breakdown as you described on the back of the envelope, we're not going to lay out on this call. But at the end of the day, there is a lag effect on the layup and As well on the way down.
And so, our expectation as we move forward, yes, there is obviously more opportunity because the price increases that we've Hass, and certainly, the movements that you've seen in the indices like CRU, we think are going to move forward and Stay strong. In terms of the volume, our sheet mills are operating at an incredibly high utilization rate at well, they're at capacity. And so that we see continuing and again, I think their production levels will stay very high.
Yes, Tim, Some details on capacity utilization. We marked our capacity at 2,942,000 tons for the 4th quarter and we actually produced 2,902,000 tons. So we computed 98.65 percent utilization rates. Now the reason the shipments Are so different compared to the Q1. We may have had some extra inventory at the end of 2019 that helped us boost our shipments.
We do have more downstream processing now with more galvanizing lines. So the WIP inventory in our system is probably a little higher when we think about The WIP that's sitting at Galpin that would have just gone straight to high fan ship in the past. So there's other factors that come into play in terms of the timing of shipment versus production. But we would expect to have a strong shipping month in the Q1 as well as a strong production month.
Okay. Thank you. I have room for another one. I just wanted to get your thoughts on the like higher level philosophical view on the scrap market. So I know we talked about the near term dynamic, which makes a lot of sense.
But if you listen to Steel Dynamics call, they sounded pretty relaxed about scrap availability even with all the new capacity consuming more scrap over the next couple of years. And if you listen to Cliffs, they'll tell you that there's going to be a run on scrap. So kind of wanted to hear where Nucor stands in terms of your perspective. Clearly, you have the DRI capability that enables you to be more vertically integrated in the iron units. But Do you think that it's going to be an issue?
Do you think that it makes sense to expand your position? Just would be great to get your thoughts.
Yes, maybe I'll kick us off and Jim or Craig jump in, you've got some other points. And look, as we look out at the long term, as the mix Continues to shift from integrated mills to EAFs. And again, we're about 70% of the Steelmaking capacity today in the United States, the EDF sector is, the demand on prime Scrap is going to stay very tight. That's going to increase. And as we've pointed out on previous calls, because we need more prime, the automakers are going to make more units because The steel mills need that scrap.
So the high metallics, the quality metallics side of things and controlling Our own downstream input to that for us is really very strategic. And so I don't think we're at the point where we're going to increase that, but there are things that we're doing every day to continue to maximize that, The investments in Louisiana and continuing some of those investments in the OER to increase the efficiency and increase the yield In throughput there will be areas of that. But again, as we move forward, I do see as more EEF based Mills come online and the demand as we move up the value chain even for ourselves in automotive is going to put continued pressure on the prime market. Craig, anything you'd like to add to that?
Yes, actually I do. And you touched on some of it, but Tim, you're right. There is A lot of dialogue around this topic and it's something that we've been thinking about frankly for years. And we do agree with The assertion that high quality metallics, as Leon just said, will become tighter going forward. Even obsolete grades, we do envision that Getting tighter with the conversion from integrated to EAF.
And maybe what I'd like to talk about more is what we've been doing and preparing for in that regard and how What we've been doing with our overall raw material strategy, if I could. And I guess the key to that strategy really It's around our flexibility and optionality and it's really around 3 key components that give us access to an influence over Our total raw material needs. And first of all, and we talk about this a lot with regard to the DRI plants, but our capability there is roughly 4,000,000 tons of High quality material. And those plants, the 2 DRI plants really can reach all of our DRI consuming mills on the river or the East Coast In a very economical or freight logical way. And as Leon alluded to, the Louisiana team really has made tremendous progress to improve the production and the reliability.
And meanwhile, and sometimes this gets overlooked as the new wire team in Trinidad Just keeps chugging along and they've got a long history of low cost production and really world class quality and reliability in the way they produce DRI. And the second leg of this is really the David Joseph Company or DJJ's recycling operations with 4000000 to 5000000 tons a year of ferrous processing capacity and they're just really well positioned to supply our own mills. Most of these DJJ locations, and there's about 65 sites in total, are focused on producing scrap again Within the freight logical range of our own mills, and we continue to, obviously, opportunistically add capacity to the DJ, the processing platform, as we did in the last 18 months or so with a handful of tuck in acquisitions, including a couple of shredders. And finally, the 3rd leg of the overall strategy is, again, the DJJ brokerage and trading team really gives Excellent coverage of both the domestic and international markets from a on a third party supply basis, which we think is a big advantage. And I know the DJJ Brokerage team prides itself on knowing its supply base extremely well And has access to scrap substitutes, not only in the U.
S. But globally. And for example, the team did a really nice job here recently with the tightness in supply, which I do believe, Tim, to back to your question, is And supply, which I do believe, Tim, back to your question is symptomatic of what we're going to see in the future. But they've been able to capitalize on both Some, I would say, long standing relationships with key supply partners, but also went to some areas of the world that we haven't been to in a long time. And they've done a really good job with that to secure all the material we need despite those supply constraints.
So To sum it up, yes, we certainly envision that the metallics market could and probably will tighten up, but the Flexibility and the options that we have from our own DRI scrap processing assets of around 8000000 or 9000000 tons a year in total, Along with the 3rd party relationships, that gives us the access and influence just on the material that we have Our own assets dedicated to give us about 1 third of our total metallics demand covered. So that 8000000 to 9000000 tons really represents about a third. So Yes, feel very confident, very comfortable in our ability to economically and efficiently secure our metallic needs going forward. Will it be will there be the normal market gyrations? Of course.
But feel like our strategy is well established and we're in a good spot to navigate it well.
Moving on, we'll go to Carlos De Alba with Morgan Stanley.
Thank you very much. Good afternoon.
So two questions, if I may. Just first one, how do you see the profitability
in your
downstream businesses Throughout the year, do you expect the bottom in the Q1? You highlighted obviously a sequential decline there, but do you think we will see the bottom in the coming months and then Improvement as we move into the Q2. And then the other question is regarding working capital. Again, any comments that you can provide us In terms of the evolution of working capital throughout the year, that will be useful. Thank you.
Sure. Thanks for the questions, Carlos. And let me begin with the first one and Chad, you and Mark, I might ask you to just chime in as well if I don't I'll cover all of this. But at the end of the day, 2020 was, as I mentioned in my opening remarks, certainly a very challenging year. And at the same time Carlos Nucor in our downstream businesses, we had 3 product groups that set record For profitability.
And so we ended up in a very, very strong position. And again, as we move forward, Looking at order entry rates and backlogs, we're at or near historic highs. And so while we expect to see some compression there, The recent price increases, our metal margins are actually going to continue to grow in most businesses. And certainly, the downstream side will face a little bit of compression. But again, it's coming off again in most of our downstream near record Profitability standpoint, so again, we do see it staying very strong as we move forward.
To your point around working capital, that's something that we as a team, I'm really proud of our executive leadership team. At the onset of this pandemic in February of last year, we met and we put some things in place with our leadership across All of the mills and operations to be incredibly disciplined and took very, very deliberate Yes, to manage our working inventory and scrap with and finished goods. And that discipline and that Well, that discipline is going to continue and it has continued. And so we're not long as we think about the product groups, we're not long in scrap, we're not long in With and we're not long in the steel mills providing to our downstream product group. So we feel very good about the true cycle profitability Of all of our businesses.
Chad, any comments you'd like to add on the product segment?
Yes. Thanks, Leon and Carlos, thanks for that question. Yes, I want to echo what was said by Leon and Jim about The forward look that we see in non res construction and for most of our downstream businesses, and we are very excited as we enter 2021. And I know there are some sources out there that are indicating non res may not be as strong as perhaps we say it is or even looking into the future, but We derive our business outlook from numerous sources, but we do put a heavy emphasis on our customer input and our internal order entry data And we are excited as many of our downstream businesses have very strong backlogs and as in some cases, we have record backlogs, All time record backlogs as we head into 2021. And also, we monitor our recent quoting activity.
And I can tell you in a lot of our businesses over the last 4, 5, 6, 7 weeks, we've seen activity rise. I want to repeat something Jim Frias said In his opening comments and while we respect and do monitor the Industry Trade Group data, We offer that some of the rising non res construction arenas may not be fully reflected in that architectural data. So, our strong relationships with key customers, our breadth of product that we offer to the market, I guess I would just summarize by saying we're excited as we head into 2021. There will be some compression in some of our downstream businesses With rising steel costs, but those prices are being passed on in the marketplace, are being accepted and we look forward to the coming months. Thanks, Liam.
Carlos, this is Jim Frias. I just want to add 2 ideas. 1 on this side, on commercial discipline. Leon touched on how the team got together and was very thoughtful about managing working capital As a result of the crisis, we also were very thoughtful about the volatility downward in pricing that we were seeing last summer And not getting caught up in that and taking too much business on our books at below market pricing. And so that discipline has positioned Well, as we go into 2021 to not have a lot of low priced backlog to work through.
And so yes, with the Three movement in steel pricing we've seen in the last 90 days, there is some minor compression in downstream business, but it's going to be minor. So that's the first point. And then back to your question on working capital, we think volumes of working we can think about on a tons basis will be similar. Scrap prices will be relatively flat, so we think inventory values will be relatively flat. The receivables values will go up because steel wool pricing on average selling prices will be higher in Q1 than they were in Q4.
So we'll let you estimate What do you think average prices are going up? So take that times the amount of tons we ship and that should be the build of Working capital for 1 month because we basically collect receivables in about 30 days. And I guess that's pretty much it. So thank you for the question. Thank you very much.
Next, we'll hear from Tyler Kenyon with Cowen and Company.
Thanks very much. Good afternoon. Just first question here on the wind down of the Dufrynd JV. Was there Operating headwinds from that JV in 2020 and was that flowing through the steel mill segment? Just curious as to How large that may have been?
I'm sorry, when you say an operating wind down, do you mean were we incurring Losses at the joint venture?
Correct. And was that flowing through the Steel Mills segment?
Yes. It was incurring operating losses that were not very material, but they were generating losses and it was going through the steel in the segment. Okay. And then
just maybe your outlook just for start up costs as we move into the new year and maybe in comparison to 2021, which
I believe were Over $100,000,000
Yes, we did $28,000,000 in the 4th quarter in both 2019 2020 relatively flat just over 100 We're going to start off with the Q1 pre operating startup being about $42,000,000 and it's probably going to be on average higher The last year, it might be in the range of 120. We don't really give a 1 year outlook, but I would think that that 40,000,000 pace is probably Going to be the right range. We're going to have a few areas winding down, but both Galton and Brandenburg will be ramping up. So we'll get quarterly updates as we go, but right now, dollars 40 $1,000,000 Q1. And there was another part of your question I wanted to speak to and I lost track of it.
Was that Friday didn't answer?
No, that was that's helpful. And I just wanted to ask one more. I'm sorry. I just wanted to ask one more on the CapEx. So Jim, you said roughly $2,000,000,000 for 2021.
If I sum all the spend this year just on the major projects, The plate mill Gallatin expansion in Galwin in Arkansas, I get about $1,250,000,000 And then assuming $400,000,000 or $500,000,000 of maintenance Related spend, the difference is a bucket somewhere around $300,000,000 $350,000,000 Just curious as to what kind of projects these are, Sounds like it may be additional growth, and maybe how we should be thinking about that bucket moving into 2022?
One of the projects was at our NYS plant, we had a roughing mill that had been in service Since infancy of NYS II, which makes the bigger sections. And it had really been reaching its end of useful life, we need to replace it. But when we replaced it, we didn't Replace it with an identical stand, put something in that was more robust. Could and you should speak said to me, I started No,
that's great. Actually, I think you were doing great. I might invite Al there. I want to just quickly share and share with Tyler the Tremendous work that the NYS team has done in bringing that project online and really expanding the capability of what Ranges they can run is again, that investment wasn't just a maintenance replacement. So I wanted to make a few comments.
Yes, I'd be happy to
and thanks Alex. I want
to make sure we address your question because that was a 2020 project. Were you asking about 2021 or 2020?
He was asking about both. He wanted to know what was in the bucket for 2020 and then what's going to be in 2021. So I'll talk about 2021, if you could sort of give him what it was 20 and maybe what the projects capabilities are?
Yes. So that was about $145,000,000 Alex at our Arkansas B Mill and that just a modernization of 1 of the rolling mills and it's not it's an example of one of the many capital projects we do that don't always get a
lot of press, The new stuff, the
new mills for good reason get
a lot of press, but we continually upgrade and added the capabilities of these mills on a regular basis. So That gave us improvements in quality, certainly in safety and flexibility and agility, the ability to move between sections More seamlessly. And so I think it's a great example that our mills, that mill has been around for 30 years. It's not a 30 year old mill by any stretch. It's continually upgraded at State of the art, and we maintain those facilities to be competitive into the future.
So we're excited about that. And I think it We'll ensure that we maintain our leadership position in Beam's and compete effectively for a number of more years.
Yes. And I would just add Tyler that there are projects of a similar nature. Next year, We are doing some investing in our process gas business adding process gas plant at both Galton And Brandenburg, those I think are in the $40,000,000 $50,000,000 range each. And then there's another project that is being worked on that Our team has asked us to keep silent because we're still negotiating some things, but it's in the mid-100,000,000 range, like 150,000,000 Range kind of a project. We'll talk more about that in the future once some things are finalized in terms of negotiations.
And next we'll hear from Alex Hacking with Citi.
Good afternoon and thanks for the call. I have a couple of questions. The first one is just on the cadence of the ramp up At Gallatin, obviously, with flat rolled markets so tight, there's a lot of interest in exactly how much tonnage Gallatin can contribute in the second half of the year. So Any color there, I would appreciate. And then secondly, just following up on Timna's question around metallics.
If we go back 12, 18 months ago, There's quite a bit of chat in the marketplace that some of the North American integrated mills might be interested in selling pig iron. Haven't really heard much about that recently and obviously some of the structure there has changed on the integrated side. But from where you sit, is that something that Seems like it could be possible at some point. And would that help ease up some of the potential tightness in prime scrap? Thanks.
Hey, Alex. Thanks for the questions. I'll start with the back half of your question or the second question around metallics first and maybe ask Desymauski to address Your opening question is, as we look, the short answer, would we love to have a domestic supply of pig iron? Absolutely. But the caveat is at a price competitive point in the marketplace.
And so if Those integrators can come back on and produce pig iron at a competitive price. We will absolutely be lining up and purchasing our pig iron Domestically, but again, that certainly is a challenge. We'll see what happens. And to your point, Several of our competitors have talked about restarts in doing just that and we'll see how that unfolds as we move forward. But that's I'm certainly not going to speak to their strategies in executing, but again, it's got to be at a price competitive standpoint.
And today, I'm not sure if They can reset that cost or not. So really no other color to add there. Dave, you want to comment on the first part of this question?
Yes, sure, Alex, our Gallatin mill with the expansion will be able to produce about 3,000,000 tons a year, which is about 1,400,000 ton add. And the start up is in the Q4, so it's hard to imagine that there'd be any material tonnage coming out of Gallatin This year, but the start up at the beginning of next year, well, the start up at the end of this year goes smoothly, We'll be able to run that rate sometime in the Q1.
Perfect. Thanks so much. Thanks.
Next, we'll hear from Chris Terry with Deutsche Bank.
Hi, Liam and Jim and And Tim, thanks for taking my questions. I just had 2. Just wanted to flush out one final thing on the CapEx. I know you talked about this a bit on the call, but Just looking at 2020, the guidance $1,700,000,000 you spend about $1,500,000,000 And then 20 $21,000,000,000 the $2,000,000,000 I think is unchanged. Just want to check is that catch up from 2020, is that now not in play because That was sort of like an unallocated project that you're talking about or should we expect that to then be added back in 2022?
Yes, that's a great question, Chris. It's when we estimate CapEx, we're aligned with input from the business units and I think that Sometimes we get a bit conservative in trying to make sure that they give us the maximum amount we're going to spend in any year. And so that was the reason for the shortfall and there will be carryover of what they did spend this year and the next year. But I would still say that The same thing goes through for their expectations for 2021. So there's probably going to be carryover at the end of 2021 as well.
So I still think that overall Spending should be in the range of $2,000,000,000 for 2021 even with that carryover effect.
Okay. So are you able to say what year 'twenty two number expectation is?
No, I cannot. No.
Okay. And just another quick one maybe for you, Jim. Just the tax rate, the cash tax and the P and L tax For 2021 and maybe further out if you can even into 2022?
Yes. I'd say a normalized Tax rate is going to be in the neighborhood of 24% and for book purposes. But for cash purposes, obviously, we Received significant tax benefits this year. We paid very little tax in the first half of the year and we're going to be seeking a refund $140,000,000 when we we don't have the final number yet, but it will be in that range when we do our tax return in August as a result of the great work our tax team Did this year and I'll do a shout out to a few folks. Deb Douglas is our International Tax Manager and she's the one who figured out the Opportunity to take advantage of the worthless stock deduction that allowed us to capture so much value after we made the decision to exit DN.
And then of course the overall tax team, including all the managers, John Taylor, Amy Cattell and the others You did a great job of doing all the year end work that's necessary for us to come up with those figures. But we're going to have Cash benefits beyond this year because of the accelerated depreciation on our big projects. And we think that over the 3 year period, it's 5 $75,000,000 If you give me a minute to look, I think next year's cash benefit is going to be in the neighborhood $240,000,000 And year after that, when we finalize Galpin, because that's going to be the excuse me, Brandenburg, that's going to be the biggest impactor. It's going north of $330,000,000 cash benefit, but our book rate should be in a normalized range of that 24%, Which includes the federal and state rate, assuming there's no tax increase during that time period. Thanks Jim.
Appreciate it.
And that does conclude our question and answer session. I'd like to turn it back to Leon Tapaglia for any closing comments.
Thank you. I'd like to conclude by once again thanking my Nucor team for your focus and commitment to living our culture as we work through a very challenging year. As you look back and reflect on 2020, I want you to know that you've displayed the very best of the Nucor culture by working safely, being innovative as we adjusted our operations, relying on teamwork In taking care of our customers and serving each and every one of them, both the pandemic and the protest for racial justice Caused us to rethink how we define safety. We started to think more broadly about how Safety means to one another and how inclusive that is as a team. I'm proud of the steps we took in 2020 to commit ourselves to becoming an even more inclusive And diverse company where every team member feels a strong sense of belonging and ownership.
I've said many times during this pandemic that we'll not just emerge from this crisis Emerge from this crisis is a stronger company, not just financially, but also culturally. And I believe we have seen the results that are already showing to be true. Thank you for your interest in our company.
Thank you. And that does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect.