Nucor (NUE) Q4 2025: Steel Mill Backlog Surges 40%, Signaling Demand-Led Upside
Nucor enters 2026 with a 40% YoY increase in steel mill backlog, underpinned by robust non-residential and infrastructure demand. Strategic project ramp-ups, lower imports, and disciplined capital allocation position NUE for a free cash flow inflection and margin expansion. Investors should watch for execution on new capacity, trade policy durability, and the pace of growth in end markets like energy and data centers.
Summary
- Historic Backlog Growth: Steel mill and products backlogs hit record highs, reflecting strong infrastructure and industrial demand.
- Capex Downshift: Major project completions drive a step down in capital spending, setting up a free cash flow rebound.
- Trade Policy Tailwind: Lower imports and Section 232 tariff enforcement reinforce market share and pricing power.
Performance Analysis
Nucor closed 2025 with solid earnings and EBITDA performance despite sequential declines tied to seasonality and planned outages. The steel mill segment, accounting for the majority of profits, saw an 8% drop in shipments and a 35% decline in pre-tax earnings quarter-over-quarter, as lower realized pricing in sheet and plate offset gains in bar and structural. However, sheet prices began to recover late in the quarter, with most benefit expected in Q1 2026. Steel products also experienced volume declines, largely due to seasonality in rebar fabrication, while raw materials earnings were impacted by scheduled DRI outages.
Despite these headwinds, full-year capex reached $3.4 billion, funding a wave of projects now transitioning from construction to ramp-up. Start-up and pre-operating costs weighed on 2025 profitability but are expected to moderate as new lines become EBITDA positive. Shareholder returns remained a priority, with $1.2 billion returned through dividends and buybacks, and the company finished the year with $2.7 billion in cash, preserving balance sheet strength.
- Backlog Expansion: Steel mill backlog up nearly 40% YoY, steel products up 15%, with structural group backlog at record levels.
- Segment Dynamics: Steel mill remains the profit engine, but sheet and plate pricing volatility impacted Q4 margins.
- Capex Transition: 2026 capex guided to $2.5 billion, down from $3.4 billion, with growth investments focused on new capacity ramp-up.
Entering 2026, Nucor expects higher consolidated earnings, led by shipment and pricing improvement across all operating segments, and a return to positive free cash flow as capital intensity recedes.
Executive Commentary
"We begin 2026 with real momentum built on years of hard work, disciplined investment, and a relentless commitment to grow the core, expand beyond and live our culture. Since 2019, we have strengthened our steel mill segment through 15 major projects across our sheet bar and plate groups. These investments have enhanced our capabilities while shifting our product mix toward higher margin products that address growing customer needs in key markets."
Leon Topalian, Chair and CEO
"With lower capital spending, incremental EBITDA from recently completed capital projects, and improved market conditions as a backdrop, we expect Nucor to generate meaningfully higher free cash flow in the year ahead. We enter 2026 with healthy, favorably priced backlogs, supporting both higher shipments and better margins across most of our product lines."
Steve Laxton, President & COO (and interim CFO)
Strategic Positioning
1. Project Ramp-Up and Capital Allocation Discipline
Nucor’s long-term growth strategy is entering a new phase as major projects—including the Lexington rebar micro mill, Kingman melt shop, Alabama towers facility, and new Crawfordsville sheet lines—transition to ramp-up. These assets are on track to be fully ramped and EBITDA positive in 2026, supporting both volume and margin growth. The West Virginia sheet mill, a flagship project, remains on schedule for year-end completion and will expand Nucor’s reach into high-value automotive and consumer durable segments.
2. Trade Policy and Market Share Capture
Section 232 tariff enforcement and successful trade cases have driven U.S. steel import share down to 14%, from 25% a year ago. This supply constraint, combined with healthy end-market demand, gives Nucor pricing power and room to increase domestic shipments—projected up 5% in 2026. The company’s 85% utilization in sheet mills provides incremental capacity to take share as imports remain low.
3. End-Market Diversification and Adjacency Expansion
Growth is increasingly tied to secular megatrends such as data centers, energy infrastructure, and transmission towers. Nucor’s data systems business now supplies 95% of steel demand for U.S. data centers, and the towers segment is scaling with new automated facilities. M&A focus is shifting toward steel-adjacent businesses that are less capital intensive and potentially countercyclical, aiming to smooth earnings and leverage core capabilities.
4. Cost Structure and Free Cash Flow Inflection
With the bulk of major capex behind, Nucor expects a sharp improvement in free cash flow in 2026. Maintenance and compliance capex is guided to $800 million annually, reflecting inflation and company scale. Startup costs remain elevated in the near term but will decline as projects ramp, supporting margin expansion and increased cash generation.
5. Balance Sheet Strength and Shareholder Returns
Nucor maintains an A- credit rating and ample liquidity, enabling continued investment and shareholder returns. The company increased its quarterly dividend for the 53rd consecutive year and targets returning at least 40% of net earnings to shareholders, with the remainder reinvested for growth.
Key Considerations
Nucor’s 2025 results and outlook reflect a business at a strategic inflection, balancing new capacity, trade tailwinds, and disciplined capital allocation. The following considerations will shape investor focus in 2026:
Key Considerations:
- Execution on Project Ramp-Ups: Timely and profitable startup of West Virginia and other new assets is critical for volume and margin realization.
- Trade Policy Durability: Continued enforcement of Section 232 and product-specific tariffs is pivotal to sustaining low import share and supporting domestic pricing.
- End-Market Growth: Infrastructure, data centers, and energy remain robust, but interest rate-sensitive sectors like automotive and residential construction have yet to rebound.
- Capital Allocation Flexibility: Lower capex and rising free cash flow increase room for opportunistic M&A and enhanced shareholder returns.
- Cost Inflation and Utilization: Maintenance capex and labor costs remain elevated post-COVID, but higher utilization and product mix shift should offset margin pressure.
Risks
Risks center on macroeconomic shifts, trade policy changes, and execution on large-scale project ramp-ups. A reversal in tariff enforcement or a downturn in infrastructure demand could pressure volumes and pricing. Additionally, delays or cost overruns in new capacity, or slower-than-expected ramp to EBITDA positivity, may weigh on near-term margins and free cash flow. Management’s optimism is grounded in current backlog and policy, but external volatility remains a key watchpoint.
Forward Outlook
For Q1 2026, Nucor guided to:
- Higher consolidated earnings driven by shipment and pricing gains across all segments
- Improved results in steel mills, with sheet leading the increase
For full-year 2026, management expects:
- Steel mill shipments up approximately 5% year-over-year
- Capex of $2.5 billion, down from $3.4 billion in 2025
Management highlighted several factors that support this outlook:
- Record backlogs and robust non-residential and infrastructure demand
- Low import share providing pricing and volume tailwind
Takeaways
Nucor’s 40% backlog surge and major project ramp-ups position the company for a free cash flow and margin inflection in 2026.
- Backlog-Driven Upside: Historic backlog levels in steel mills and products signal sustained demand and pricing power into 2026.
- Capital Intensity Eases: Completion of major projects reduces capex burden, enabling higher free cash flow and flexible capital deployment.
- Watch Execution and Policy: Investors should monitor project ramp timelines and trade policy enforcement for sustained upside.
Conclusion
Nucor enters 2026 with operational momentum, record backlogs, and a clear path to higher free cash flow as capital spending moderates. The combination of trade policy support, end-market diversification, and disciplined execution sets up a strong risk-reward profile, though macro and policy shifts remain key variables.
Industry Read-Through
Nucor’s backlog surge and capex transition signal a broader demand tailwind for U.S. steel and infrastructure suppliers. The sharp drop in steel imports, driven by tariff enforcement, is reshaping domestic market share and pricing dynamics—benefiting producers with spare capacity and diversified end-market exposure. Competitors with lagging project execution or higher exposure to import-sensitive segments may face relative headwinds. Adjacency expansion into data centers, energy, and infrastructure is likely to accelerate across the sector, as operators seek to capture secular growth and offset cyclicality. Watch for similar capex downshifts and free cash flow inflections at other major North American steelmakers.