Good day everyone, and welcome to the Nucor Corporation first quarter of 2018 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 the conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and various of such words and similar expressions are intended to identify those forward-looking statements, which are based on management 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 related to these forward-looking statements may be found in Nucor's latest 10-K 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 speak only as of the day, 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 John Ferriola, Chairman, Chief Executive Officer, President of Nucor Corporation. Please go ahead.
Good afternoon. Thank you for joining us for our conference call. We appreciate your interest in Nucor. Joining me for today's call are the other members of Nucor's executive team, Jim Dossey, responsible for raw materials. Jim Frias, our Chief Financial Officer. Ladd Hall, responsible for sheet and tubular products. Ray Napolitan, responsible for engineered bar products. Joe Stratman, our Chief Digital Officer. Dave Sumoski, responsible for merchant bar and rebar products. Leon Topalian, responsible for beam and plate products, and Chad Utermark, responsible for fabricated construction products. Earlier this week, Jim Dossey announced his plans to retire from Nucor on June 9th, after 39 years of outstanding service to Nucor. Jim has been an exceptional leader. He has made strong contributions in each of our three major businesses, downstream products, steelmaking, and raw materials.
Jim, thank you for your outstanding contribution to Nucor's long-term record of profitable growth and to our company's unique culture, which is unquestionably our greatest asset. Effective June 10th, Craig Feldman will be promoted to Executive Vice President of Raw Materials. Craig is a proven Nucor leader with 33 years of experience with the David J. Joseph Company. He is well-prepared to continue Nucor's profitable growth in raw materials. Before we review Nucor's first quarter of 2018 results and strategic execution, I would like to share my view on our team's performance. The Nucor team is delivering profitable growth. It is long-term growth built on a solid foundation of sustainability. It is growth that creates value for Nucor's customers, employees, and shareholders. It is driven by disciplined execution of our five drivers to profitable growth. Here are the five drivers the Nucor team utilizes to create value.
One, being a low-cost producer, striving for continual improvement in everything we do. Two, being a market leader in the markets in which we compete. Three, moving up the value chain to expand our capabilities for our value-appreciative customers. Four, expanding our channels to market. Five, achieving commercial excellence to complement our traditional operational strength. I also want to highlight another important point regarding the current debate over our government's trade policies. What some people forget is that free trade does not mean free-for-all trade. There are rules that have been agreed to and adopted by all nations of the international trading community. It is critical that these agreements and the trade laws are rigorously enforced. Enforcing them ensures that everyone is playing by the same rules. Nucor thrives in a marketplace where winners are determined by real economic advantage, not by artificial and unlawful advantages.
Our ability to create value for our customers increases when we are able to compete on a level playing field. For that reason, Nucor applauds the ongoing work of the U.S. government to address the massive volume of dumped and illegally subsidized steel products that have been flooding into our country at historic levels. Jim Frias will now review Nucor's first quarter performance and financial position. Following those comments, I will update you on the execution of our strategy for long-term profitable growth. Jim?
Thanks, John. Nucor reported first quarter of 2018 earnings of $1.10 per diluted share. As indicated in our guidance last month, first quarter results included an expense of $0.07 per diluted share related to the write-off of certain deferred tax assets. Earnings momentum accelerated during the first quarter, especially at our steelmaking operations, with significant metal margin expansion during the month of March. This momentum was partially offset or deferred by the timing impact of Nucor's significant vertical integration. Comparing the first quarter of 2018 to the fourth quarter of 2017, intercompany inventory eliminations resulted in an adverse swing of about $70 million on Nucor's pretax profits. Our strong improvement in first quarter earnings before taxes from the fourth quarter highlighted the value we derived from Nucor's product breadth.
In addition to significantly higher quarter-over-quarter profitability at our sheet mills, strong gains were achieved by a large percentage of our broad portfolio, including engineered bar, merchant bar and rebar, structural steel, plate steel, tubular products, cold finish bar, and our raw materials businesses. Our steel mills benefited from higher levels of capacity utilization and significant margin expansion. Earnings of the raw material segment increased on a year-over-year and quarter-over-quarter basis, driven by improvements at both our scrap operations and our DRI production facilities. Here are some noteworthy raw materials performance highlights. The David J. Joseph scrap business reported its strongest quarterly profits since the third quarter of 2008. Our DRI plant in Trinidad, building on its record production and profit performance in 2017, posted solid first-quarter earnings. The Louisiana DRI facility achieved consistent operations while delivering its second-highest quarterly production, shipments, and earnings.
We are encouraged by the Louisiana team's heightened focus on the key elements of execution, people, process, and equipment. Substantial work remains ahead for the team, but we are very confident in our improvement plans and the people implementing them. Our first quarter of 2018 earnings also benefited from tax reform legislation that was effective this year. Excluding earnings attributable to non-controlling interest and the one-time write-off of deferred tax assets, the effective tax rate for the first quarter was 23.3%. Nucor's financial position is strong. With total debt outstanding of $3.8 billion, our gross debt-to-capital ratio was 29% at the end of the first quarter of 2018. Nucor's strong liquidity position includes our cash holdings of $760 million and our $1.5 billion unsecured revolving credit facility, which remains undrawn. The facility's maturity was recently extended to April of 2023. For 2018, we estimate capital expenditures of approximately $1 billion.
That represents a large increase from 2017 capital spending of $450 million. Approximately 2/3 of planned 2018 capital expenditures are for expansion, product improvement, and cost savings projects, with the remaining 1/3 for maintenance purposes. Nucor's capital allocation priorities are clear, and they have been consistently practiced over many years. Our first priority is to invest for profitable growth. Our growth strategy is simple and flexible, leveraging our five drivers to profitable growth. Our second priority is to return cash to our shareholders, primarily with cash dividends, consistent with our success in delivering long-term earnings growth. Our third priority is to opportunistically repurchase our stock when our cash position is strong and our shares are attractively priced. We intend to continue Nucor's long-term history of being effective stewards of our shareholders' valuable capital.
Our conservative financial practices and highly variable cost structure allow us to invest for future growth and provide value to our shareholders in both good times and bad. Over the challenging nine-year period from 2009 through 2017, Nucor returned $4.4 billion to our shareholders through dividends and share repurchases, while over the same time period, investing $8.3 billion in attractive growth opportunities. Nucor generally targets to return a minimum of 40% of its through-the-cycle earnings to shareholders by regular dividends, supplemental dividends, and opportunistic share repurchases. Earnings in the second quarter of 2018 are expected to increase significantly compared to the first quarter. Orders and backlog are robust throughout Nucor's portfolio of steel and steel products businesses. We believe there is sustainable strength in steel end-use markets. Nucor's focus remains on delivering high returns on our invested capital by taking care of our customers.
Thank you for your interest in our company. John?
Thanks, Jim. Nucor's disciplined strategy for profitable growth is working. Our 2017 earnings were Nucor's highest annual earnings since the cyclical peak year of 2008. That positive momentum has carried over into 2018, as evidenced by our strong first quarter earnings and a bullish second quarter outlook. We are seeing stronger demand throughout the U.S. economy. Recent tax and regulatory reforms have reduced uncertainty and improved confidence. As a result, we are seeing a robust pipeline of projects and strong overall business activity. 21 of the 24 end-use markets served by Nucor are experiencing stable to improving demand. End markets that are particularly important to Nucor are especially strong in 2018, including energy, most of the construction markets Nucor serves, and heavy equipment. With this improved demand, the Nucor team is only beginning to realize the significant pent-up earnings power from investments made during the economic downturn.
As Jim just noted, Nucor invested more than $8 billion over the nine-year period running from 2009 through 2017. Here is just one example of how our investments are paying off. Nucor Tubular Products, acquired in late 2016 and early 2017, continues to generate strong volume and better-than-expected earnings. Our tubular and sheet mill teammates are working together very effectively to achieve synergies that allow Nucor to better serve customers in the construction market with our broader product offerings. The Tubular team has embraced Nucor's pay-for-performance system and set first-quarter production records. At the same time, our sheet mills continue to benefit from profitable base load tons from the Nucor Tubular facilities. Nucor's sheet mill shipments to this value-added channel to market are expected to grow from 720,000 tons in 2017 to more than 1 million tons in 2018.
With these improvements in market demand, Nucor is primed and ready to create increased value for our shareholders. We are doing it by leveraging our significant product offerings and an unrelenting focus on achieving commercial excellence in taking care of our customers. While reviewing Nucor's performance in 2017 and early 2018, it is important to examine the steel industry environment in which we are achieving strong volume and earnings growth. Specifically, illegally traded imports remain a very serious and yet-to-be-resolved challenge. Finished steel imports in 2017 captured 27% of the U.S. market. In the first quarter, they remained at relatively high levels, estimated to be 25% of market share. Nucor will continue to fight aggressively for free and fair trade. The Nucor team continues to develop attractive opportunities for profitable growth. Currently, we are executing seven exciting growth initiatives that total about $1.3 billion in invested capital.
Three of the projects are in our sheet business. A $230 million specialty cold rolling facility at our Arkansas sheet mill, with about 500,000 tons of annual capacity and scheduled for startup in the first half of 2019. It will greatly expand our capabilities to serve the light weighting needs of the automotive market. A $176 million hot band galvanizing line at our Kentucky sheet mill. With 500,000 tons of estimated annual capacity and set for startup in the first half of 2019. It will expand our share of the Midwest coated sheet market and support further expansion into automotive products. A $270 million sheet galvanizing facility in Mexico being constructed with our joint venture partner, JFE Steel, with approximately 400,000 tons of annual capacity and on track for a production start in the second half of 2019.
It is centrally located to serve Mexico's growing automotive market and will obtain half of its substrate from our Berkeley sheet mill. The other four of these projects are in our long products business. An $85 million modernization of the rolling mill at our Ohio rebar mill, with about 400,000 tons of annual capacity and completion expected in the first half of 2019. This project enhances our low-cost producer and market leadership position in the Ohio market. A $180 million merchant bar rolling facility at our Illinois bar mill, with 500,000 tons of estimated annual capacity and a production start date expected in late 2019. We will benefit from multiple logistical advantages and will displace tons supplied by competitors outside the region. A $250 million rebar micro mill outside of Kansas City, Missouri, with about 350,000 tons of annual capacity and a startup set for late 2019.
A $240 million rebar micro mill in Central Florida with 350,000 tons of estimated annual capacity and a startup expected in the first half of 2020. These micro mills are also a logistics play that expands Nucor market leadership and a low-cost producer position in the rebar business. For a company such as Nucor, with our unique position of strength and our proven ability to execute profitable growth strategies, this is a time of great opportunity. Our team is both ready and eager to demonstrate the pent-up earnings power that we have built into our company during our industry's downturn. As always, the more than 25,000 men and women of Nucor are the reason that Nucor's best years are still ahead of us.
Nucor's senior leadership team in Charlotte would like to thank all of our teammates throughout Nucor for working together to build a safer, stronger, and more profitable Nucor. Thank you. We would now be happy to answer your questions.
If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, it is star one. We'll take our first question from Martin Englert with Jefferies. Please go ahead.
Hi. Good afternoon, everyone, and congratulations on the strong results.
Good afternoon. Thank you.
There was a notable improvement within the raw material segment of profitability, and you touch on this in the release and some of your commentary, but can you discuss what's changed at the Louisiana DRI facility and what incremental work you have planned there?
Yeah, I'd be happy to. The improvement in the raw material segment was twofold. DJ Joseph's team did a great job during the first quarter, and they contributed to the good results in the first quarter. So we thank them for all that hard work. In Louisiana, they had a very good quarter. In terms of production and shipments and profit, it's their second-best quarter ever. So good work, and congratulations, and thanks to the team there. In terms of what are we doing, it's really a focus, and we mentioned it briefly in terms of people, process, and equipment, and it's a focus on making sure that we take care of the details that we know how to take care of on a steel plant and on an iron plant.
That's focusing on things like preventive maintenance, taking care of the equipment the way we should be taking care of the equipment. Training the teammates to make sure that they're ready for all of the situations that can occur in the DRI facility. That's paid big dividends. We are still doing a detailed examination, an investigation into the equipment, and we're not ready to talk about what modifications we'll have to make to the equipment in that facility right now. We should be ready maybe by the next call, sometime around the middle of the year, towards the end of the year. We'll have completed the engineering study, and we can talk to you more about the equipment changes or modifications that we need to make. But we're pleased with what the team is doing.
I will point out that I mentioned the focus on preventive maintenance, and in the second quarter, around June 18th, I think is the exact date, we will be taking the facility down for 30 days. This is a practice that we've done forever in Trinidad, and it's taken down to perform the annual preventive maintenance so that we can ensure greater reliability for the rest of the year when we're running. So that'll be taking place in the second quarter, and it's part of our renewed focus on people, process, and maintaining the equipment in the way that it should be maintained.
Thanks for all the detail there. Within the downstream steel product segment, can you discuss some of the margin trends that you're seeing, maybe on a more granular level, such as rebar fabrication, given the rising substrate costs?
Well, Chad, I'll let you start with that. Chad's in charge, as I mentioned, of our downstream businesses. Chad, why don't you take the first shot at that?
Thanks, John. Our backlogs on our downstream fabricated businesses remain very healthy, and they are growing. We continue to see strong end-use demand across our portfolio of downstream products. Year-over-year quotes, orders, and backlogs are up significantly. Yes, we have experienced some margin compression resulting from the recent increase in steel pricing. However, each of our downstream fabricated businesses are responsible for selling value and being profitable. Overall our current backlog remains profitable in this current steel pricing environment.
Okay, excellent. Thanks for the detail.
You're welcome.
We'll take our next question from Curt Woodworth with Credit Suisse. Please go ahead.
Yeah. Good afternoon, everyone.
Good afternoon.
Maybe start, John, on the rebar expansion. So 700,000 tons, I think on my numbers, it's about a 7% addition to U.S. supply. But by the same vein, imports are down over 1 million tons annualized the last four months. The AISI data is running up, I think, close to 900,000 on domestic shipment recovery. Can you talk to the decision around doing two micro mills, say, instead of one? How do you see Turkey and kind of exemption risk playing into that? Was 232 part of your thought process at all in terms of allocating more capital to rebar? And can you comment on what your rebar utilization rate was this quarter?
Well, there's several questions in there, but let me start by talking in general about the strategy that surrounded the decision to build two micro mills. I mentioned this in the last call, but this all began with a detailed market study and a market analysis that we did, both of rebar and merchant product throughout the United States. And the conclusion that we came to was twofold. Number one, we recognized that we didn't have all of our production in the right location, so we had to do a little bit of rationalization, a little bit of switching some of our products and some of the locations in which we produced that product, so that we could better serve the local markets surrounding those facilities and take advantage of logistical costs.
When we did that, we realized that that gave us an opportunity, two areas, one in Florida and one in Missouri, right near the Sedalia area, where we saw pockets of market demand for rebar that were currently being served by competitors outside that market. When we looked at this, we said there's three things we are looking to accomplish, and we believe we will accomplish when we start up those facilities. Number one, obviously, we're going to be adding to our footprint, and we give better coverage to our customers on a national footprint basis. Number two, it's a better rationalization of our mills. We'll be producing the products at the mill most appropriate to produce it from a logistics perspective and from a scrap availability perspective.
Then number three, specific to those two micro mills, they're being located in regions where currently the market is being served from competitors outside the local region, and in areas where we have a good supply of scrap that's under our control through the David J. Joseph Company. We expect to have a significant logistical advantage both on the scrap side and on the shipment to the customer side. That was the strategy behind the decision to go with building the two micro mills. Now, certainly, the fact that we still have confidence that 232 will have an impact on the level of imports of rebar coming into the country, that certainly plays into it. That gives us a little bit additional level of confidence in the success of these mills. But it was really driven by the points that I mentioned earlier.
John, one other thing that may be worth adding is the idea that Kankakee is going to shift its product mix with some of the investments we're making there to make more merchants. Right now, they're primarily a rebar mill. While we're adding rebar in one place, we're taking rebar out in another.
Yeah, that plays to what we talked about.
Yeah.
We're really doing a study, taking a look at making sure that we produce the products that the market demands in the area that they are being produced. I tell you, I applaud our teams on both the rebar and the merchant side. They did a great job on the market analysis, and I'm confident that we're going to be in a much better position to serve the market and improve our margins at the same time.
Okay. That's helpful. Just a follow-up with regards to the comment that metal spread, the exit rate, obviously, 1Q significantly higher than the average of where you started. Can you give us a sense on potential upside to metal spreads or maybe where the March level was, versus the quarter, so we can get a better sense for how it could look 2Q? Thank you.
Well, as you went through the first quarter, we were still seeing the price of scrap increasing. When you look at the rate in which the scrap price was increasing during the first quarter, and at the same time, the slower rate that the CRU was advancing as pricing was moving up, you saw some of the margins begin to improve towards the end of the quarter. We think scrap now has pretty much stabilized. As we look at scrap going forward, we see it, particularly on the obsolete side, maybe down a little bit, but certainly stabilized. On the prime side, probably more stable, not too much down movement, but stable. We believe that based upon our contracts, as we look forward into the second quarter, we see pricing continue to improve on our contract business and on our spot business.
With stable scrap pricing and increasing selling price, we should see margin expansion as we move into the second quarter.
Understood. Thanks, guys.
We'll take our next question from Timna Tanners with Bank of America Merrill Lynch. Please go ahead.
Yeah. Hey, good afternoon, everyone.
Good afternoon, Timna.
I wanted to delve into a little bit further the build-out of galvanized. I know maybe that's been a longer-term philosophy and plan, but the hot-rolled market is particularly tight, and the galvanized premium has been coming down. Supplies hot-rolled when Nucor shifts more into value-add. Is there not an opportunity for Nucor to also supply that market? I guess that's one question about galvanized versus hot-rolled and that opportunity. In line with that, just wondering, how do we think about Nucor's opportunity to take share in light of falling imports in the sheet market?
Okay. Let me start with the first question, the question about galvanizing. We believe that, and it's been a long-term strategy of ours, to improve the value-added products out of our sheet business. When you look at the projects we've got going on today with the gal line in Mexico, the gal line at Gallatin, and the cold mill at Hickman, our value-added products coming out of our sheet group will improve by about 10%. It'll go somewhere today, it's somewhere in the neighborhood of about 37% value-added. That'll go up to about 47%. We think that that's an important long-term strategy. You mentioned about the hot band, and certainly, as I've said before, we always think of our investments in terms of long term. Yes, right now, hot band is strong, and there's some pressure on hot band, so pricing looks good on hot band.
But over the course of the cycle, we think value-added products always give us a little bit better margin. As to your second question, which was, well, who's going to produce the hot band needed to galvanize if we move more of our product from hot band into galvanize? That's an easy answer. We challenge our teams to produce more hot bands on the mills that we have, okay? If we see an opportunity in the future, we'll take the appropriate actions to meet the needs of the market through investment. So we don't see that as an issue. So we're confident in both of those things. One of the key things that I would mention that, again, when you look at hot band, cold rolled, and galvanized, is making sure that we maintain that diversity so that we have the flexibility to move as the market shifts.
You know our business. It goes up and down in hot band, cold rolled, and gal, and we want to have the ability to produce the products that are needed, whatever the given market is at the given time. So that's why we're moving in that direction.
Okay, great. I want to shift gears and ask you a little bit about the balance sheet. I know over the years you've held a really large cash position, and this quarter is unusually light. Can you just talk to us about maybe your philosophy there? What is the minimum level of cash necessary on the balance sheet? Are you changing your view there? Because certainly there was a big inventory build, so maybe that was just temporary, but if you wouldn't mind expanding a bit on the balance sheet. Thanks.
Sure. I'll talk about that, Timna. We're constantly analyzing market conditions, our balance sheet, and our future plans. We think of our minimum cash balance as being probably in the neighborhood of $500 million. We're not there, and of course, with our strong credit rating, we have a lot of flexibility in how we respond to cash needs.
Can you comment on the inventory build then, perhaps? Is that just a seasonal phenomenon, maybe with the rising prices and-
Yeah, that's a good question. Working capital in general for our business always goes up countercyclically. So when prices go up for scrap and prices go up for our selling prices, both inventories and receivables build, and we're seeing that right now. And of course, the opposite happens. If you looked at our free cash flow and our cash from operations, particularly in 2015, when energy prices collapsed and the sheet market faced more challenging times, again, that number was $2 billion of cash from operations. So right now, in an up cycle, working capital is using more cash. That's just kind of common.
Okay. Makes sense. Thanks again.
Thank you.
We'll take our next question from Novid Rassouli with Cowen and Company.
Hi, guys. Thanks for taking my questions. I was wondering if you can discuss your expectations for May imports, given the Section 232 exemption is set to expire on May 1st. Obviously those would be imports coming in or being licensed two to three months ago, so arguably we could see a steep drop-off given the lack of clarity. Just wanted to get your guys' thoughts around that.
Well, there certainly is a lack of clarity. There's no doubt about that. It's tough to answer that question without knowing exactly what's going to happen. Let me tell you what we certainly hope and what we expect to happen given the president's commitments to our industry. Number one, we need, and we expect May 1st to be a firm date. There needs to be no more delays, no more extensions on this. It needs to be where, as he's promised, that if we can't come to some reasonable renegotiated agreements, we hold firm with a 25% tariff applied to the countries that have not been exempted. We hope that is the case. It's hard to predict what's going to happen with the imports. Hopefully, as I said, the May 1st date is firm. Then we would expect to see one of two things happen.
Either imports would go down, or if the demand in our country necessitates it, imports would continue, but they would continue at the fair market price, having paid the 25% tariff. One of the things that I hear a lot about, and there's concern about a shortage of steel in the future or after the May 1st date. I can assure you there's going to be no shortage. There's a tightness in the marketplace, certainly. That's a result of demand improvement. The economy is better. Demand is up. Tax reform legislation has contributed to that. Deregulation has contributed to that. To some extent, a partial implementation of the 232 has contributed to that. The result, the bottom line is demand has gone up. If steel needs to come into the country, it will come in.
People will pay the tariff, and they'll bring the product in, and they'll bring it in at a fair price. I like to say that I'm confident that there's not going to be a shortage of steel in this country. Now, there might be a shortage of dumped or illegally traded steel in the country, but there will not be a shortage of steel.
Is it safe to say that as far as conversations with your customers, nobody's panicking or trying to secure greater tonnage with you guys post May 1st?
No. When we talk to our customers, and we ask them, quite frankly, "Do you see a shortage or do you see a tightening?" The answer we get is, "We see a tightening." As I mentioned, the tightening is a result of a lot of things, but primarily, demand is up. I would point to when you look at our utilization rates last year, in the first quarter of last year, they were already fairly high. When you look at the utilization rates in the first quarter of this year, it's a little bit higher, a couple percentage points, 3 percentage points or 4 percentage points higher. So, our customers have confidence in our ability to supply them, and we won't let them down.
Got it. Just one more follow-up, if I may. On scrap, you'd mentioned that you think that scrap's basically stabilized, but meanwhile, we've been seeing Turkish scrap prices drifting lower over the past month. U.S. scrap sentiment was fairly bullish about a month ago, and then the April increase in prices kind of fell short of expectations. Just wanted to see if the weakness abroad has been impacting the U.S. market at all, or if you think it could?
Oh, that's certainly a factor. It absolutely does impact the U.S. market. But I would also add to it, we're coming into spring. The scrap flows a little bit better in the spring, particularly obsolete. On the prime side, we'll take a little credit and brag on the fact that we think the DRI facility running so well as it did in the first quarter contributes to putting a cap on the prime scrap numbers. So yes, the reduced exports and the improved flow of scrap into the United States because of spring, we think that's the primary reasons that the obsolete will be stable to down. Given the DRI and other alternative materials coming into the country today, prime scrap, we think, will be pretty stable going forward also.
Great. Thank you.
And we will take our last question from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.
Hey, good afternoon.
Good afternoon, Phil. How are you?
Doing well, John. How are you?
Very well, thank you.
Good. Jim, you had mentioned, I think in your script that there was a certain lag impact. I just wanted to be certain that I heard that correctly and what that may have been.
In regards to, I do not remember having the words a lag impact, so you must be reading something in between the lines. Are you talking about the momentum of margins as we went through the quarter?
No, I thought you had mentioned something, it was maybe along the lines of the $70 million.
Oh, yeah. Thank you. Yes. Our corporate elims line has a number of components. It includes interest expense, corporate overhead, intercompany profit eliminations, and then incentive-based compensation. I was speaking to one sub-component of that line, and that's intercompany profit. If we compare the fourth quarter of last year to the first quarter of this year, it was a $70 million drag by comparison. That should be lower in the second quarter.
Eliminations.
Yeah, intercompany eliminations. Yeah.
Okay. What was the thought in reclassifying some of the tubular and piling businesses?
Yeah, that's a good question, too. Last year was the first year where we had both piling and Nucor Tubular Products in that steel product segment together in our 10-K. We got feedback from a number of investors that said, "It seems to us that makes more sense in steel products than in steel mills." We reevaluated and decided that was probably a better answer, and so we made that move.
Okay. John, I got a question regarding this geopolitical situation in Russia. I know they're a big supplier to the U.S. of pig iron. Does that put more of a premium on the DRI operational execution, I guess, is one part of that comment that I'm making here. Do you see a potential issue coming out of there, just given everything that we're seeing going on in terms of the noise right now?
Well, it's impossible to predict what's going to happen on the geopolitical front. That goes without saying. What we feel very good about here at Nucor is that we have options. We have flexibility regardless of what happens. If you do see something happen on the pig iron side, we have the DRI that we can count on. Also having the great organization of DJ Joseph as part of the Nucor family, that gives us a great deal of advantage, frankly, in terms of being able to secure scrap, not only domestically, but frankly, from around the world. Source alternative iron units from other places in the world. They've got contacts all over the world. One of the things, the advantage that we have is that we've got options that we can take advantage of if something does happen.
In any one particular region of the world, we've got options both internal to our own company and through the David J. Joseph Company externally, bringing iron units into our country. We don't worry too much about that.
Okay. Terrific. Just one last question from maybe a commercial operational standpoint. Where do you see your backlogs on the steel side on a product basis, maybe the longest or the tightest, and where might be there some shorter leads or weaker spots? Just trying to gauge where we are in terms of the strength of the products. Thanks.
Well, I am not going to go product by product from best to worst, but I will say that in terms of the tightest market we see right now is our sheet product, and maybe it is make a more general statement and say in our flat products, because plate is also pretty tight right now. So flat products, tighter. The long products, not as tight. Although we do see some tightness in our structural market also. So, with the exception of structural, long products are a little bit looser. Flat products are tighter.
Thanks, John. I appreciate it.
Okay. Thank you.
That does conclude our question -and -answer session. I would like to turn the conference call back over to John Ferriola for any additional or closing comments.
Thank you, Ashley. Well, let me close by saying thank you to our customers. We appreciate the opportunity to partner with you and to earn your business every day. Always know that Nucor stands ready to seize new opportunities with you. I want to say thank you to our shareholders. We appreciate your ongoing confidence in our team. Finally, to my Nucor teammates, let's keep it going. Let's keep winning together. I'm confident our best years are still ahead of us. I want to thank you for what you do for Nucor every day, and most importantly, thank you for doing it safely. There is nothing more important than safety. Absolutely nothing. Thank you all for your interest in Nucor. Have a great day.
Once again, that concludes today's conference call. We thank you all for your participation, and you may now disconnect.