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Morningstar: Nucor Steelmaker Shines

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May 23, 2014 companies, company, cost, direct reduced iron, dri, economic, iron, iron ore, moat, morning star, morningstar, nucor, positive, positive moat trend, saxo bank, saxo tv, saxotv, share, share price, shares, shares 2014, shares prices, steel, steelmakers, tradingfloor.com, trend, trends
US based Morningstar research has been looking at Steelmaker Nucor. Morningstar has assigned the company a positive moat trend, believing it is likely to improve its positioning.

It believes steel companies are most likely to establish economic moat by entrenching themselves as definitive low cost producers. As a narrow moat company Morningstar believes Nucor has done just that.  It's also assigned a positive moat trend to Nucor because analysts there believe that the company is likely to improve it's positioning in years to come.

Researchers point out that because steel is an alloy of iron and carbon the industry comes down to a competition between who can procure iron units at the lowest cost.  In late 2013 Nucor began production of Direct Reduced Iron (DRI) at its new production facility in Louisiana.  At this facility Nucor reduces iron ore by use of low cost natural gas to produce DRI.  

Nucor's DRI facility is the largest such facility in the world and the only one in the US.  Morningstar points out that early results regarding product quality and yield have exceeded even the company's own expectations.

Its view is that Nucor's DRI project will reduce the company's iron related unit costs in years to come which points to a positive moat trend for the company. 

Morningstar has assigned a 58 dollar fair value estimate to Nucor's shares.