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Operator
Operator
Good morning and welcome to Nucor's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise and today's call is being recorded. After the speaker's prepared remarks, I will provide instructions for callers wishing to ask questions. I would now like to turn or introduce Jack Sullivan, General Manager of Nucor Investor Relations. You may begin your call.
Jack Sullivan
General Manager of Nucor Investor Relations
Thank you and good morning everyone. Welcome to Nucor's second quarter earnings review and business update. Leading our call today is Leon Topalian, Chair, President, and CEO, along with Steve Laxton, Executive Vice President and CFO. Other members of Nucor's executive team are also here to participate during the Q&A portion of today's call. We've posted our second quarter earnings release and investor presentation to the Nucor Investor Relations website, and we encourage you to access these materials as we'll cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks outlined in our Safe Harbor Statement, and disclosed in NUCOR's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, we'll hand the call over to Leon.
Leon Topalian
Chair, President, and CEO
Thanks, Jack, and welcome, everyone. I'd like to begin by highlighting two recent changes to our executive team. In June, Doug Jellison retired after 33 years with NUCOR, Doug worked across many of our businesses and made tremendous contributions to Nucor over the three decades he was part of our team. Most recently, as EVP for strategy, we wish Doug, Luana, and his entire family the very best in retirement. And in May, Randy Spicer was promoted to executive vice president to run our bar and engineered bar businesses. Randy is a talented leader who has most recently served as president of Nucor Tubular Products. He's been with Nucor now for more than 20 years, and we are excited to have him part of our executive team. Turning to our second quarter performance, I'd like to congratulate our entire team on achieving the safest first half of any year in Nucor's history, with 52 of our 109 divisions accomplishing our ultimate goal of zero recordable injuries. These are fantastic results and I'd like to thank our 32,000 team members for your steady progress toward making Nucor the world's safest seal company. In terms of financial results, we generated earnings of $2.68 per diluted share in the second quarter, bringing our year-to-date earnings to $6.14 per diluted share. Second quarter earnings decreased compared to the first quarter, primarily due to lower average selling prices in both our steel mills and steel product segments. Returning capital to shareholders and maintaining a strong balance sheet are key components of our overall capital allocation philosophy, and we made progress in both fronts during the quarter. Nucor repurchased approximately 2.9 million shares for $500 million, and Moody changed its outlook on Nucor's senior unsecured credit rating from stable to positive. One thing I'm especially proud of is the progress our team continues to make in advancing our long-term value creating strategy. During the quarter, we continue to make progress in growing our core steelmaking operations while expanding into new downstream businesses. I'd like to just take a minute and highlight a few of these initiatives. At our Lexington, North Carolina Greenfield Bar Mill, we hit key milestones during the quarter and remain on track to commission the mill in the first quarter of 2025. At our West Virginia Sheet Mill, we've made considerable progress since our groundbreaking last fall and expect construction to wrap up by the end of 2026. As for recently completed projects, we continue to build momentum in production and shipments out of our Gallatin and Brandenburg mills. Gallatin shipped almost 500,000 tons for the quarter, establishing new daily and ship production records. And in late June, we celebrated the grand opening of its new tube mill. At Brandenburg, we shipped nearly 60,000 tons in Q2, but we no longer expect to ship half a million tons for the year due to softer market conditions, elevated plate imports, and our focus on capabilities rather than volume. However, we will continue to focus on achieving full run rate capabilities and becoming EBITDA positive by year's end. We also took additional steps to expand the set of solutions we offer customers, recently announcing two acquisitions as part of our Expand Beyond strategy. As a reminder, this strategy involves targeting steel-adjacent businesses with attractive growth profiles, high margins, and compelling synergy potential. In June, we announced the planned acquisition of Ritech, a leading manufacturer of high-performance overhead doors. In conjunction with this acquisition, we're forming Nucor Door Technologies, our overhead door growth platform, which will include CHI overhead doors as well as Ritech. Ritech has two manufacturing facilities in Wisconsin that produce high-performance doors for warehouse, auto dealerships, advanced manufacturing facilities, and cold storage. The company has a strong reputation for quality products and superior customer service. The combination of Ritech and CHI to form Nucor Door Technologies allows us to offer customers a diverse portfolio of residential and commercial doors. The acquisition is expected to close by the end of July, and we're excited to welcome Ritech's 300 team members to the Nucor family. Earlier in the second quarter, we closed on the acquisition of Southwest Data Products, a manufacturer and installer of data center infrastructure. This acquisition gives us expanded capabilities to serve a rapidly growing market, driven by the rise of artificial intelligence and cloud computing. By combining the capabilities of Southwest Data Products, Nucor Warehouse Systems, and Nucor Buildings Group, We can now provide customers with nearly all steel products that go into a data Center from the building to the interior infrastructure. We believe the cross selling opportunities that right tech and Southwest data products create with existing new core business units will create meaningful value for our customers and our shareholders. Now I'd like to take a minute to revisit our long-term growth plan and how the investments we're making today can create value for our customers and shareholders for years to come. In raw materials, we're investing in new technologies to enhance our scrap, segregation, and recovery rates while reducing our carbon footprint. In our steel mill segment, each investment is aligned with our broader strategy to increase Nucor's product mix towards higher margin, value-added products to address specific customer needs in key markets. For steel products, we're investing in automation to drive efficiencies and create a safer work environment. And we're innovating new products and production methods that our customers value. And finally, we're investing in new downstream platforms where we identify steel adjacent businesses underpinned by strong secular growth trends. Nucor embarked on this long-term growth strategy in 2020 when I became CEO. Over the past several years, we've accomplished a lot, but we've still got plenty left to do. The next two years will likely be our most capital intensive with several active construction projects occurring simultaneously. We plan to fund this with operating cash flow and cash on hand, which was approximately $5.4 billion at the end of Q2. Our largest current project is the West Virginia Sheet Mill, which will begin supplying customers in the Midwest and Northeast with a more sustainable sheet product once construction is completed in late 2026. Between now and then, we're excited about the startups of several other projects. In the first quarter of 2025, we'll begin ramping up our new Rebar Micromill in Lexington, North Carolina, to supply construction markets in the Southeast and Mid-Atlantic regions. In the spring and fall of 2025, we'll complete construction of two highly automated utility tower manufacturing plants to serve the high-growth power transmission and telecommunications markets. After that, we'll be bringing on new finishing capabilities, including a new Galvine encoding complex at Crawfordsville in late 25, and a second Galvine at Nucor Berkeley in mid 26. Each of these projects, along with several others throughout the company, serve important roles. It's not about adding capacity. It's about a differentiated capability set for our customers, while doubling the through-cycle earnings potential for Nucor. We have crossed the midpoint of our multi-year CapEx plan, but several recently completed projects have yet to reach their full earnings potential. We know what it takes to accomplish the goals we've laid out for you at our Investor Day nearly two years ago, and our leadership team is laser-focused on the execution required to get us there. Finally, I'd like to address concerns the domestic steel industry has regarding unfair trade practices. Over the last 18 months, we've seen a material uptick in steel imported from Mexico and Canada to levels far above historic levels, contrary to the Section 232 agreements with both countries. It's also clear that China and other countries have been evading the Section 232 tariffs and other duties by transshipping steel through our neighbors to the north and south. Fortunately, a few weeks ago, trade representatives from the U.S. and Mexico announced an agreement designed to stop the flow of illegally imported steel from China and elsewhere. Under this new agreement, the U.S. will impose a 25% tariff on Mexican steel that is melted and poured outside of North America. And Mexico agreed to raise its tariff rates on imports from countries it does not have free trade agreements with. In our view, this was an important first step to stop the surge of steel imports from Mexico and address the problem of circumvention. However, more stringent efforts are needed, and any exceptions to this new requirement, including through the exclusion process, will largely negate the benefits of the agreement. And we still have concerns about trade practices involving rebar, electrical conduit, and the rise in fabricated steel products coming in from Mexico. We urge the U.S. government to continue working with Mexican leaders to address each of these issues. We also urge Congress to pass the Level the Playing Field Act 2.0. This legislation includes critical updates to the U.S. trade remedy laws that would enhance domestic industries' ability to defend against unfairly traded imports with new tools to address Chinese cross-border subsidies and and expedite investigations of repeat offenders that simply move production from one country to another. We appreciate the bipartisan support that exists for strong trade enforcement. With that, I'll turn it over to Steve, who will share additional details on our Q2 financial results. Steve?
Steve Laxton
Executive Vice President and CFO
Thank you, Leon, and thank you to everyone for joining us on the call this morning. Leon just highlighted how the new core team is continuing to advance the ball on this long term and value creating strategy. And during the first half of 2024 the team also executed on delivering results posting strong earnings of just under a billion and a half dollars at around $2 billion of cash from operations. During the second quarter, NUCOR generated net earnings of $645 million or $2.68 per share, approximately 23% lower than earnings from the first quarter of the year. The majority of our overall change in earnings between the prior quarter is attributable to our steel mill segment. This segment generated pre-tax earnings of $645 million, a decline of roughly 40% from the prior quarter. Lower realized pricing, especially among our sheet mills, was the biggest single factor contributing to the segment reduced profitability. The steel product segment delivered pre-tax earnings of $441 million for the second quarter, roughly 14% lower than the first quarter. Although segment shipments increased in the second quarter, lower realized pricing and decreased margins more than offset volume gains. Our steel product segment is composed of a diverse set of products and market solutions, and I'd like to highlight two of our groups that had more pronounced impact on the segment results during the quarter. First, our tubular products group saw earnings decline by more than 50% during the quarter as those divisions worked through higher price substrate in a declining price environment. Our tubular products group accounts for more than one out of every five tons sold from the steel product segment. Another group to highlight in this segment is our joist and deck operations. These divisions continue to perform well, even as realized pricing for these products moderated from the record levels of prior years. Earnings from joist and deck declined roughly 5% from the prior quarter, but still accounted for more than half of the segment earnings for the second quarter. Our raw material segment produced pre-tax earnings of approximately $39 million for the quarter. Overall, volumes and pricing were softer than the prior quarter, but lower operating expenses more than offset these headwinds. During the second quarter, the power of Nucor's business model allowed it to generate $1.5 billion in cash from operations. This strong cash generation is a key factor enabling Nucor to continue its balanced, consistent, and long-term approach to allocating capital and creating value. Our capital allocation framework includes maintaining a strong investment-grade balance sheet, providing direct shareholder returns, and enabling growth in value through investments. That balanced and disciplined approach to capital allocation was on display again in the second quarter. Newport's balance sheet has long been a foundational source of advantage and an enabler of our long-term strategy. At the end of the second quarter, our total leverage stood at less than 1.2 times trailing 12-month EBITDA, and our cash on hand was a healthy $5.4 billion. And as Leon mentioned earlier, we're pleased to see Moody's revise our senior unsecured credit outlook in May from stable to positive. The second quarter saw a new core return just over $630 million back to shareholders through dividends and share repurchases. These returns, when combined with The first quarter you'll direct shareholder returns of more than $1.7 billion year to date. While we target returning 40% or more of net earnings to shareholders we've nearly tripled that rate on a year to date basis. And this demonstrates an important aspect of how new core thinks about managing shareholders valuable capital we either invested to grow and create value or we return it to shareholders. In addition to strong shareholder returns during the quarter we deployed more than $800 million of capital spending and more than $100 million in acquisitions these investments and those to come, will help fuel the future earnings capacity of this company. Turning to our third quarter outlook we expect consolidated earnings to be lower than the second quarter, primarily because of lower anticipated earnings from our steel mill segment. Earnings in the steel mill segment are expected to decline meaningfully as realized pricing has recently continued to decline across most of our major product categories. We also expect sequential earnings to decline in our steel products and raw material segments. Taken together, the magnitude of the sequential decline in consolidated EBITDA for the third quarter could resemble that of our second quarter. Taking a step back to reflect on the broader macro picture, While the US economy appears to continue to avert a more pronounced downturn, it's becoming more evident that activity has softened as the year has progressed. We've also seen an increase in imports year over year and a higher for longer interest rate environment may have tempered or delayed some marginal demand. The confluence of these factors is driving margin pressure on several of our products in the near term. It's worth noting that there are several end markets that remain quite healthy. including construction activity related to semiconductors and other advanced manufacturing facilities, data centers, healthcare facilities, and energy and infrastructure projects. As the largest and most diversified steel producer in North America, Nucor is well positioned to service each of these markets. With that, we'd like to hear from you and answer any questions you might have. Operator, please open the line for questions.
Operator
Operator
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from the line of Bill Peterson from JP Morgan. Your line is now open. Please ask your question.
Bennett (on behalf of Bill)
Caller
Hi, Liam and Steve. This is Bennett on for Bill. Given it's been about three and a half months since you first introduced your weekly CSP back in April, I was wondering if you could share any key takeaways you've received from customer feedback thus far. And furthermore, how has the strategy unfolded relative to your initial expectations?
Leon Topalian
Chair, President, and CEO
Yeah, thanks, Bennett. I'll kick us off. And, Noah, if you have any comments you'd like to add regarding the CSP and SHEA. Look, first, I would tell you we're excited about what we're seeing in the market. I think in a down market like we're seeing or a little softer market like we're seeing today, I think this is exactly where the long-term impact of CSP can be most meaningful, to take out the speculation, the speculative buying in the spot market and create a relevant, transparent, published price. And so, again, I think it's going to take a little bit of time to work through a full cycle in the steel segment or the steel sheet steel CSP side of things. But, again, we like what we're seeing. We're hearing a lot of positive feedback from our customers, and we believe it's helping us to solidify relationships with those customers whose demand is driven more by end-use market conditions and less by speculations. And so those are the customer relationships we value the most. And, again, early days still, but, again, we're liking what we're seeing.
Noah [Last Name]
Executive Team Member
Yeah, Bennett, this is Noah. I just add that, you know, as it's core to our culture, we've done what we said we were going to do with CSP. We believe we've provided relevant, timely pricing. And I think the market conditions over the last few months have afforded us the opportunity just to prove our transparency in pricing. I'll say that the feedback we get from customers is our customers want to deploy their capital in a way that creates value for their customers and not in managing working capital or buying opportunistically. So we're going to continue to do what we've said we're going to do with CSP, remain relevant and timely with our pricing. And, you know, to your point about how do we measure success in the future, we'll gauge success – we'll be able to see success when we see order entry better matching underlying demand. So I think it's a longer-term engagement, but we're committed and we're happy with our progress on CSP so far.
Bennett (on behalf of Bill)
Caller
Great, thanks. And if I could do one more. I think the color was clear on earnings for each segment and the common relative to TQ is helpful, but how should we think directionally about shipments for each segment looking into the third quarter?
Leon Topalian
Chair, President, and CEO
I'm sorry, shipments related to what, Bennett?
Bennett (on behalf of Bill)
Caller
for the steel mill segment and the steel product segment directionally, expectations into the third quarter?
Leon Topalian
Chair, President, and CEO
Yeah, look, you know, I think there's a lot of talk in the market that it's softer and are we heading for a cliff? And I wouldn't tell you we don't feel that way at all. Certainly, we've seen pricing move off historic highs of 21.2 and, you know, even parts of 3. But it's moderated. We think we found... some stability and this market is stabilized in most of our product groups from a demand picture. The back half of the year, we expect it to be relatively flat. Again, if you look at the overall market for the year, the ADC is expected to drop about 1%. So again, from a demand picture, things are really not too bad. And again, many of our products remain incredibly resilient. So you know, specifically on the steel products sector. Again, it's a very large sector for Nucor. It's not just buildings and joists and deck in our Volcraft facilities. We've got, you know, the fabricated rebar. We've got skyline steel. We've got our overhead door businesses in both CHI and Ritech now, and Our data systems are racking, and so it's an incredibly diverse group that's consuming about 22% of our overall steel products into it. So it's an incredibly large business segment for us. But specifically in buildings and products, we're seeing some stable order entry rates incoming over the last few quarters. We've seen that very much stabilized. And so we think the back half of the year, while we're working through some higher rates Christ inventory will continue to tick up and again, from a demand picture, remain pretty resilient.
Bennett (on behalf of Bill)
Caller
All right. Thanks so much and best of luck.
Operator
Operator
Thank you. Appreciate it, Bennett.
Operator
Operator
Your next question comes from the line of Martin Englert from Seaport Research Partner. Your line is now open.
Martin Englert
Analyst, Seaport Research Partner
Hello. Good morning, everyone. Can you provide an update on Nucor's ore material strategy, specifically upgraded low copper shred products and low emission iron making? To the extent that it's applicable, maybe this is longer term, but if you could touch on electrolysis process for iron ore in your investment in electric.
Leon Topalian
Chair, President, and CEO
Yeah, Martin, I... We'd love to address that. I'm going to ask Al Baer, who's taking over our raw materials group here in a second, to provide you a more detailed update. But I would tell you broadly, for the last 25 years, Nucor has taken a very, very deliberate focus on controlling our raw material inputs across the spectrum. Over the last decade, decade and a half, we've been really focused on how do we control more of that? How do we give ourselves the flexibility and optionality to be able to do that for the long term. But Al, if you would maybe share some of the things that we're working on, some of the projects that are already completed and where we're headed.
Al Baer
Head of Raw Materials
Sure, Leon. And thank you, Martin, for the question. You know, you asked just about our raw material strategy. I'd summarize it this way and say that what we're aiming to do is create competitive advantage by supplying our mills with the most cost-effective stream of inputs and to do that while minimizing the embodied carbon in our finished products. And so that's our guiding light. And under that, then, we execute that by building flexibility and adaptability into our raw material stream. And we've talked about that for a number of years. And I've had the opportunity to demonstrate that through changes in the market that we see. So one of those that gives us flexibility is low copper shred. And I know you asked about that. And I'll share a few thoughts just on how we're attacking that area and how we think of it. And the first thing I'd share with you, Martin, is that low copper shred isn't new for us, that we've been making that product for about 12 years at two different locations. And so we've mastered the discipline of how to make it. We've mastered the discipline of how to use it in the mix. But you have seen recently a renewed investment and some newer investments in low copper shreds. as we see the demand for high quality metallics going up. And we're responding to that by making additional investments in low copper shred to add to the flexibility that's so key to our strategy. And so in terms of where we sit today, I'd share with you, we can process today about 1.4 million tons of low copper shred, and we're bringing on another 750,000 tons as we speak. So that'll give us in the very near future about 2.1 million tons of capacity. And then as we look out another couple of years, I'd expect us to add another 3.5 to 4 million tons of additional capacity, landing us somewhere in the 5.5 to 6 million ton range for low copper shred. But Martin, I'll share with you, if you think about the 4 million tons of DRI that we also make, and you add to that 6 million tons of low copper shred, it puts us at about 10 million tons of metallics that we control, which is about two-thirds of our needs. And so that's a sweet spot for us because it gives us incredible control while at the same time allowing us the ability to be very flexible and very opportunistic in the market and how we serve the rest of our needs. I know you asked about Electra, too, and I just want to talk just for a minute about that. I think what I'd say is we remain really excited about that project. It's got a long ways to go, but it's a very interesting technology. We remain an investor and are considering additional investments in that space. And Noah and I work on that together and are following that closely. That's got really interesting advantages for us, particularly in the lower carbon range. I wouldn't consider that a cost benefit, but that's primarily a green and sustainability benefit and really exciting technology.
Martin Englert
Analyst, Seaport Research Partner
Thank you for all the detail. That's helpful. If I could, one last one there. Sequentially implied steel conversion costs seem like they stepped higher quarter on quarter. You've guided to flat conversion costs in 3Q. Can you touch on what led to the sequential step up in unit conversion costs in 2Q?
Steve Laxton
Executive Vice President and CFO
Hey, Martin. This is Steve. Thanks for the question. The conversion costs really are a function of a few different things, a few different moving parts. And in the quarter, what you see is Utilization rates were down a bit. That always affects our cost. But probably more pronounced, there is a flow of materials through our production processes that creates a little bit of timing differences, and that causes the conversion cost to look higher on a quarter-over-quarter comparison. I think the most important thing probably for you to take note of is that input costs right now are moderating, consistent with what you see with CPI other indicators.
Martin Englert
Analyst, Seaport Research Partner
Okay, excellent. Thanks for the additional cover there.
Operator
Operator
Thanks, Martin.
Operator
Operator
Your next question comes from the line from BNP Calibus. Your line is now open.
Tristan
Analyst, BNP Calibus
Hi, good morning, and thank you for taking my questions. The first one is on the policy front. When you look at the upcoming elections, what risks do you see? For instance, solar and wind have been a source of growth and a potential upside for your business. How concerned are you of any potential new administration removing some of the funding for those areas?
Leon Topalian
Chair, President, and CEO
Yeah, Tristan, it's really hard to speculate today on what might come and, you know, a change of control in the administration. You know, from a macro standpoint, I would tell you Nucor has had incredible success with both Democratic as well as Republican candidates in office. As we think about that, again, not trying to completely evade your question or be so ambiguous, you know, would there be some pressure on um ira and would there be some potential for that yeah we've heard the same rumors as well what is the overall impact to new core well it's it's really hard to predict what i would tell you is our strategy is to invest in the long term we're not over weighted to any single um side of the market so we serve a incredibly diverse range of customers, have an incredible range of capabilities for those customers. So we're not so overweighted to offshore wind or, you know, certain elements of that, that if it changed, it would be impacting the new corner. But on the other side of that, if those change, do you see different benefits in some tailwinds from tax? relief, less regulation for investment moving forward. And so, again, it's really a very difficult question to speculate on what might happen tomorrow with a different precedent. And so we'll just have to wait and see. But again, I love how we're positioned. I love the strength of our portfolio and where we're headed that I think is going to continue to serve this marketplace incredibly well.
Tristan
Analyst, BNP Calibus
All right. No, I... I understand, and I appreciate the color. And as a quick follow-up to that, when it comes to trade, a little bit again, what do you believe should be the new administration number one priority when it comes to steel? I mean, you've been vocal about Vietnam being an issue. Is there a specific trade case against the country and Mexico, the New Deal? To your understanding, does Brazil have an exemption Yeah, where do you see where, you know, what would you be pushing for?
Leon Topalian
Chair, President, and CEO
Yeah, look, you touched on some of that. And what I would tell you is we've always advocated for is not free trade, it's fair trade, to make sure that our trading partners are actually following the TRQs that are put in place, things like the USMCA. So while we think it's the right first step, that the administration put into place a few weeks ago with Mexico, it's not enough. We still have concerns with rebar, with electrical conduit, with some other products that we see are surging that have to get brought back into control. We've looked at the fabricated steel products sector over the last several years has more than doubled its import levels from about 1, 1.2 million tons. We believe that's closer to 2.4 million tons today. That has got to get curved. That has got to get brought into control. And then, again, the other piece of all of that is if we begin to pick apart the most recent announcements with exclusions, you know, it was all for naught. It won't have had any teeth put into it. So, again, you're going to see Nucor continue to advocate vocally and in Washington, regardless of the administration, to create a level playing field that protects this industry from illegally dumping subsidized steels from making it out into the shores of the United States.
Tristan
Analyst, BNP Calibus
All right. That's very clear. And maybe the last one, if I can squeeze that in on plate. You made a big pricing adjustment last month. What are you seeing from a demand perspective? Do you think you've hit the bottom in terms of prices? Are you starting to see a bit more stable demand environment, or is there further adjustment to come? And if you can touch on the various end users and markets, that would be appreciated.
Leon Topalian
Chair, President, and CEO
Sure, Tristan. I'll ask Brad Ford to speak to our current outlook in the playgroup and Yeah, go from there, Brett.
Brad Ford
Employee at Nucor
Yeah, thanks, Leon. Thanks for the question, Tristan. I think it's important to start with some context. We're coming off of some pretty strong years for plate. Really, 21, 22, and 23 were pretty robust. So as we think about this market being a little bit softer, there's a couple things to address. One, you know, we are seeing some softness in the more interest rate-sensitive portions of the market, namely kind of vertical construction, some of the heavy equipment and agriculture side. Um, and two, and most significantly, you know, back to the import conversation, we were challenged in the first half of this year by meaningful, meaningfully higher levels of imports, which gained some market share and put pressure on pricing. Uh, you know, this pressure on pricing has led our distribution customers to take a pretty cautious approach, uh, to purchasing as they try to right size their inventories. Um, All that said, we do see some bright spots as we think about the second half of the year. Back to imports, we've seen certain countries use up almost two-thirds of their quota really through the first five months of this year. So we expect a slightly lower import picture in the second half. Bridge and power transmission markets remain strong. And what we're hearing from our customers and developers is onshore wind is really going to pick up kind of late in the second half. And then there's the impact from IJA funding and project awards, really, as we think about those picking up here in late 24 and early 25, which supports not just plate, but our structural businesses and a lot of our steel products.
Tristan
Analyst, BNP Calibus
Okay. That's very clear. Thank you very much.
Operator
Operator
Thanks, Tristan.
Operator
Operator
Your next question comes from the line of Chris Lamina from Jefferies. Your line is now open.
Chris Lamina
Analyst, Jefferies
Hey, thanks, operator. Hey, guys. It's Chris Lamina from Jefferies. Leah, you mentioned automation in the steel product segment, and you've alluded to it a bit in the past. But I was wondering if you could kind of elaborate on how automation could impact your margins. I mean, what sort of cost benefits might you see? Is this sort of that you just need to remain competitive? Or do you think that you can become an even lower cost producer relative to the rest of the industry by some of the automation initiatives that you're putting in place?
Leon Topalian
Chair, President, and CEO
Yeah, Chris, we'll appreciate the question. And I would tell you, I like our position where we sit today. I think we are cost competitive with anyone in the world. And again, we have always advocated we will compete against anyone in the world as long as it's done fairly. Again, back to the import question. But Regarding automation, regarding AI, it's something that I would tell you Nucor is embraced and embracing, and the changes are coming at an incredible rate of speed. And so we're seeing the potential applications of AI and automation in a whole raft of different areas of our businesses, technologies that we're using to deploy AI. to create safer outcomes for our team members, to create cost advantages, to create efficiencies. And so I'd like Chad Unimark, who's over our innovation group, and maybe John Hollitz to just touch on maybe a few of those specifics. Chad and John, if you would, to give Chris a little more detail and background of what we're doing, how we're embracing that.
Chad Unimark
Head of Innovation Group
Yeah, thanks, Leon. Yeah, for our teammates. When you think about Expand Beyond, yes, we're going to continue to invest and look for businesses so that we can bring technology that will allow us to be more efficient and take care of our customers. Some specific examples in our new core racking group, we've invested and we have robotic well cells that are operating at several of our facilities right now, and we're excited about what we're seeing there. We've mentioned this before, but our two new tower and structure greenfield plants, they have highly automated material handling equipment as well as robotic plasma and well cells. And we look forward into the spring and fall of next year as we bring those plants online and see the automation take place. You know, as a reminder, many of our downstream businesses in the new core face these demand fluctuations through the cycles. And what we are seeing is that automation in key manufacturing areas can really help us navigate that demand fluctuation so that we can really take care of our customers. John?
John Hollitz
Employee at Nucor
Thank you, Chad, and thank you, Chris, for the question. I'll share a couple of other examples from a few of our operations. One is our SBQ mill in Memphis, Tennessee, where here our team has embraced AI to optimize the production scheduling of a very complex steelmaking process. We've been able to reduce the man-hours committed to this process by about 80% through the use of AI. In addition to that, we also benefit from yield savings, reducing working capital, and operational efficiencies. Switching gears to another project, for the last six years, we have been developing a robotic joist line at Volcraft in South Carolina. Joist production traditionally has been a very labor-intensive process. This new robotic line, which we have been operating now for about one year, utilizes patented robotics and vision technology to perform the assembly and welding of joists. This is really a game changer for our team and We're looking to grow this across the rest of our choice operations in the future.
Steve Laxton
Executive Vice President and CFO
Hey, Chris, this is Steven. I'll just add on one other thing to address your question about advantage or not. Nucor has always been about creating production efficiencies. That's how we win. And so if you think about the scale and reach of what we do, any technology advantage is leveraged across a bigger system for more more gains. So I'll call that a scale efficiency if you want to. Nucor is unparalleled in our industry and the ability to do that.
Chris Lamina
Analyst, Jefferies
Thank you. That's very helpful. I appreciate that.
Operator
Operator
Your next question comes from the line of Philip Gibbs from KeyBank Capital Markets. Your line is now open.
Philip Gibbs
Analyst, KeyBank Capital Markets
Hey, good morning. Good morning, Phil. So you called out in the press release $137 million of startup costs. Is the vast majority of that related to Brandenburg at this point?
Steve Laxton
Executive Vice President and CFO
Yeah. Hey, Phil. This is Steve. It's really two projects, Brandenburg, which is slightly a little bit bigger in the quarter, impact in West Virginia. As we're – As we're accelerating the spending at West Virginia, you're seeing a little bit more impact there.
Philip Gibbs
Analyst, KeyBank Capital Markets
Okay. Are you also including non-cash costs in that number?
Steve Laxton
Executive Vice President and CFO
No, generally not. It's generally contractor work and site-specific work.
Philip Gibbs
Analyst, KeyBank Capital Markets
Okay. Okay. It leads me into my next question. So West Virginia, I think plan is to get it started, at least in terms of some level of commissioning in 2025. But it sounds like it's probably more so in the back half of the year based on your slide deck and then also ramping throughout 26 and 27 as you build product capabilities. Is that the way to think about it?
Leon Topalian
Chair, President, and CEO
It's a year later. So back half of end of 26, Phil, is when we'll ramp up Brandenburg into 27. I'm sorry, West Virginia, not Brandenburg. Yes, West Virginia.
Philip Gibbs
Analyst, KeyBank Capital Markets
Okay. And you all said in your deck that conversion costs expect to be flat quarter on quarter. Did you have anything from a maintenance perspective to call out in particular in 2Q? And do you have any any maintenance outages in the third quarter, anything beyond normal?
Steve Laxton
Executive Vice President and CFO
Phil, in terms of overall in the company, you won't notice it necessarily, but in some of the segment numbers, some of those maintenance costs at our DRI plants as we have outages do swing the cost impacts a little bit in that segment.
Philip Gibbs
Analyst, KeyBank Capital Markets
I was just asking for steel.
Steve Laxton
Executive Vice President and CFO
Yeah, for steel now, you shouldn't see any pronounced impact heading into the third quarter.
Philip Gibbs
Analyst, KeyBank Capital Markets
Okay. And then lastly for me, any update in terms of what to think about CapEx for this year or next to the extent that you didn't mention it? Thank you.
Steve Laxton
Executive Vice President and CFO
Yeah, Phil, the guidance we've given on the year is about $3.5 billion for Apex spend, we'll keep an eye on that. We'll update as we have in the past years as we get closer to the end of the year if we see any meaningful adjustment to that. And then Leon mentioned it in his prepared remarks at the outset of the call that for the next couple of years, you'll see an elevated level of capital spending as we move through some of these projects. There's about $6.5 billion of really larger projects that you'll see us move forward on in the next couple of years.
Philip Gibbs
Analyst, KeyBank Capital Markets
Thank you.
Operator
Operator
Thanks, Phil.
Operator
Operator
Your next question comes from the line of Alex Hacking from Citi. Your line is now open.
Operator
Operator
Yeah, good morning. I wonder if you could maybe comment on how much incremental steel demand, if any, you're really seeing from the IIJA at this point, or is that still something that's on the horizon? Thanks.
Leon Topalian
Chair, President, and CEO
Yeah, what I would tell you, Alex, is a couple things. If we think about those three pieces of legislation, I would tell you that the CHIPS Act is, you know, by far the most out front. We're seeing, you know, that steel getting processed and put through and, again, that moving at a much higher rate. We're, you know, I think followed that by some of the IRA, particularly in... you know, torque tubes and some of the applications within the wind and solar. And then lastly, and again, still early innings on the infrastructure bill itself. And so, you know, one of the things to keep in mind is, you know, that through cycle kind of start to finish by the time the state requests the funds till it's, you know, seeing what hit the order books could be two years. So again, that we have a long maturation process that's in there from, you know, the, federal package passed to the state actually getting the money for the bridge, road work, or the infrastructure that they want to rebuild in that state. So that, we believe, will continue to increase in the years to come as more and more states continue to move further up that, you know, that process map of actually getting those funds into the states, but it's still early days.
Operator
Operator
Okay, thanks. And then just to follow up on Brandenburg, if I could. Right now it's operating around 20% utilization rate. If the plate market was booming, is there anything stopping Brandenburg from a technical perspective to ramping to 100% utilization rate over the next six to 12 months? Or are you still in that startup phase, proving out the capabilities phase and the mill is really not ready to run at that rate yet. Thanks.
Leon Topalian
Chair, President, and CEO
Yeah, look, really, really good question, Alex. And here's what I would tell you. The short answer is no. You know, we anticipate and the team at Brandenburg continues to do an amazing job of bringing that mill online. So we expect that even despite market conditions, that mill will be able to achieve its full run rate capabilities in 2024. Now, we'll decide how long we need that and how long they run at those capabilities. But no, from a technical perspective, yeah, they're still working out some bugs, but there's nothing materially that's going to keep us from achieving that full rate capacity situation by year's end. And again, we'll be mindful as we think about how we introduce those cuts to the market. Obviously, we know our Plate market, we know the customers, and again, we've been selling in the plate market for over 20 years now, so we'll be mindful about how we think about that. At the same time, balancing, that team's got to be able to achieve that so that when it's required, they know they can hit that last gear and produce all the tons that are required for our market.
Operator
Operator
Thank you.
Noah [Last Name]
Executive Team Member
Okay. Thank you, Alex.
Operator
Operator
Your next question comes from the line of Tina Tanners from Whole Feces. Your line is now open.
Tina Tanners
Analyst, Whole Feces
Hey, thank you, and good morning, everyone. I have a near-term question and a big picture question. So in the near term, I wanted to ask about the magnitude of EBITDA decline commentary and if it was more about pricing than volume again, as you said last quarter. And then same concept, but just wanted to follow up on the downstream segment, if indeed the squeeze in tubular was about the higher cost substrate and that should be normalizing, joist and deck should be normalizing, should we not see like a smaller magnitude of decline in the downstream?
Leon Topalian
Chair, President, and CEO
Yeah, look, Tim, that's a fair assumption and assessment. What I would tell you is we think about products. The reason we forecasted a decline in Q3 is a few reasons. One, they're still working through some of that higher price backlog that we know is going to flow through in the coming weeks and next couple of months. However, again, one of the bright spots as we think about where inflation is, unemployment is a little bit more elevated, seeing the Fed's appetite or at least intimation for some rate cuts, that certainly could have some impact. considerable impact, particularly to the product segment that you would see more likely the back half of the year, Q4 and into Q1. But again, we know what our backlogs are. Those backlogs are strong. And again, from a demand picture in the Volcraft and Joyston deck, we're out for the rest of the year in terms of that backlog strength. But we also know what that pricing is. And again, we're going to see some squeeze on that as we get into Q3.
Steve Laxton
Executive Vice President and CFO
Yeah, Tim, I'd just add to what Leon said, the first part of your question about the near term. It's much more about pricing and margin pressure than it is volume pressure. So you were correct in that assumption.
Tina Tanners
Analyst, Whole Feces
Okay, thanks. And then taking a step back on the big picture, there is an incredible amount of appetite for grain-oriented electrical steel and also for further options on automotive exposed. And I know we've talked about this in the past, but I've been hearing Gallatin can make thicker grades. I know West Virginia is targeting auto. Can you just remind us, A, you know, when could you make some of these other auto grades and compete more broadly in the auto sector? Is that still the design? And is grain-oriented even on your radar still? I just wanted an update there. Thanks.
Leon Topalian
Chair, President, and CEO
Yeah, Tim, I'll kick it off and certainly open it up to anyone that, you know, wants to add some thoughts. But look, as we think about the auto sector over the last couple of years, we're supplying that one to one and a half to 1.6 million tons annually. So it's a customer base we know. We've got a great relationship with many of the big OEMs. Their appetite for our iconic steels has been incredible. We've achieved the supplier of the year award with General Motors for going on five years, and hopefully that will continue. And so Our expectation is to double that volume in the next several years. And so as you see West Virginia come online, that is going to be a key focus for us. How we think about how far upstream we go into that, like the exposed automotive, we'll wait and see. Again, we know we can produce those steels, and we're going to be deliberate about how we think about doing that because, again, we want to make the most of it. money that we can possibly make for ourselves, customers, and our shareholders. So we're going to be really deliberate and mindful, not to get too overweighted to auto, but to be very deliberate about how we continue to move up in that value chain and the higher value products there. Electrical steels, look, I would tell you, stay tuned. It's something that we've looked at. We, again, know that market. We know who's in it. We know the imports that are coming in, where it's being supplied, and the end uses that could be potentially attractive as we move forward. So, again, as Nucor continues to evaluate that, we make no mistake. We've got some great partners. We've got some great relationships with those that are currently making it around the world that will continue to evaluate that and see if that fits where we want to go. And, again, I would just tell you, stay tuned in the coming months.
Tina Tanners
Analyst, Whole Feces
Okay, will do. Thanks, Leon and team.
Leon Topalian
Chair, President, and CEO
Thank you.
Operator
Operator
Your next question comes from the line of Martin Englert from Seaport Research Partner. Your line is now open.
Martin Englert
Analyst, Seaport Research Partner
Thanks for the follow-up. I wanted to see if you could touch on how you source electricity for your steel mills and the typical duration for agreements and how you might be thinking about protecting that cost if rates and capability of what you have to pay to get that start to rise in the future.
Leon Topalian
Chair, President, and CEO
Yeah, Martin, look, I'm going to kick it off. And I'm really glad you asked that. You know, over the last three or four years, and really since I took over as CEO, it's been something that we've talked about. And not just talked, we've actually take meaningful steps. So you saw a few years ago, our partnership with an investment in NuScale, this small module reactor in the advanced nuclear industry. reactors that are getting built. Obviously, Bill Gates and TerraPower are doing their own SMRs, as well as two other manufacturers. So from a Nucor perspective, we have a large power consumption that we look at. We're in 40 different states. We've got 30 EAFs around the country that we need to build relationships with. You've got to understand as well, we've been doing this since 1968. We have incredible relationships with the utilities that we're in because we're the largest power consumer in many of those states. But the macro picture to what you're asking, as you think about the green and digital economies, you think about the data center infrastructure build-out in the cloud computing that's got to be handled. That volume is insatiable. And so we as a nation have really got to think about how are we going to solve that energy need because almost everywhere they're looking, These data centers now are growing from, you know, 100 megawatts to 678, 900 megawatts in demand. It's a huge, huge appetite. So you're going to see Nucor continue to look for opportunities to promote, invest in, or otherwise position ourselves for the long term so that not only do we get surety of supply and at the right cost. And again, many of our contracts are long-term pricing, so we're not going to the market daily or monthly. We'll have firm power rates versus variable. But You know, we have a consistent pricing model that we're able to look out years and years into the future that will continue that. So, again, it's a really important question for our nation as we think about manufacturing as well as the U.S. citizens and how they're going to be able to afford energy in the years to come as we think about the current environment in America. you know, decommissioning of our existing coal plants, about 70% of them will be idled by 2030. So we've got to find, and I think we have to re-embrace as a nation, nuclear energy as the cleanest, most reliable form of energy that's out there. But Steve, anything you'd want to add on kind of current climate and pricing and utilities?
Steve Laxton
Executive Vice President and CFO
Yeah, Mark, I think just to build on what Leon said, a couple points of emphasis, you know, we're multi-site locations. So It's not specific to a particular delivery point. It's also the vast majority of our power is purchased under a tariff rate agreement. And so those fluctuations tend to change slowly over time. But Leon highlighted really the more fundamental long-term importance of the company or as a country. And we've, of course, you're familiar that we've put in place some purchase power agreements and we've taken some proactive steps. to partner with, ironically, I shouldn't say ironically, with folks out of our sector, some technology companies on procurement and worked with utilities closely on the development of their plans. So I'd say that we're very front-footed on this issue. Energy is about, it's a little less than $40 a ton cost last quarter. Roughly, give or take, about 80% of that is electricity-based. So it is a meaningful part of our overall cost.
Martin Englert
Analyst, Seaport Research Partner
I understand there's a lot of facilities, but is there an average duration or goalposts, whether that's five years or 10 years under contract for the EAS?
Leon Topalian
Chair, President, and CEO
Martin, I would tell you that that does vary. I'm not sure I've got a great average answer for you across the spectrum. What I would tell you is in most of those cases, they're multi-multi-year contracts that we're signing with the utilities. So they're not one to two years, they're five, eight, 10-year type contracts. So all of those could be at different positions of where we sit in 2024, obviously, because of the timing and when those plans came online. So again, from the macro, it is a long-term, Contract is the way you could think about that.
Martin Englert
Analyst, Seaport Research Partner
You touched on this or alluded to this to some degree in your answer, but do you have concerns that higher electricity rates might stymie some of the reshoring activity and potentially disadvantage some of the U.S. manufacturing base given U.S. has been More so an ideal market, at least from a cost of energy or electricity perspective historically versus some others globally?
Leon Topalian
Chair, President, and CEO
You know, short answer, Martin, yes, I do. You know, I think if you look today, the U.S. is building no nuclear power. Right now in China, they're building 27 facilities. And so... I am absolutely, because again, we're talking, we're end use customers. We're talking to some of the biggest companies in the country and the partnerships that we have with them. And they are looking out five, eight, 10 years, and they know they can't get the power today. And so there are absolutely cases where we know projects aren't moving forward because they can't meet the power requirements. So yes, is the short answer to that question of, It's an issue that has got to be dealt with because it's sitting right at our front door. And again, we have an opportunity to embrace that and to think about how we, again, as a superpower in the world, how we continue to proliferate manufacturing, support manufacturing, and again, the overall economy through our energy independence.
Martin Englert
Analyst, Seaport Research Partner
Okay. I appreciate all the color and commentary. Thank you.
Leon Topalian
Chair, President, and CEO
Thank you, Martin.
Operator
Operator
I would now like to turn the call to Lee Antopolian, Chair, President, and CEO.
Leon Topalian
Chair, President, and CEO
Thank you. And once again, I'd like to thank our new core team for an outstanding first half performance and safety. Thank you for your efforts, your dedication to one another in helping us to achieve our goal of becoming the world's safest steel company. I'd also like to thank our customers for giving us the opportunity to serve you each and every day. And finally, thank you to our investors for trusting us with your valuable shareholder capital. Thank you for your interest in Nucor, and have a great day.
Operator
Operator
This concludes today's conference call. Thank you for your participation. You may now disconnect.
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