Nucor acquires Connecticut Steel - There could be a pattern here

As reported, one of the largest and most profitable steel producers in the US, Nucor Corp., has acquired Connecticut Steel for $43 million. Compared to recent mergers and acquisitions either executed or announced, this is a relatively minor transaction. But it has some implications that are worth pointing out. This is the first time that a major US mill, even though it is based on the minimill concept, has taken over a wire rod mill. This reverses a long trend in which major US mills left the relatively small wire rod market to true minimills, or increasingly, to foreign entities and imports. Connecticut's Steel capacity will add to the wire rod output of Nucor's plant in Nebraska. Nucor recently announced a major expansion in their rod production in that plant. It also makes Nucor a player in the welded wire mesh market. Without question, the mesh products will enhance Nucor's coiled rebar program. But the mesh market has also been known for its cutthroat competition. This picture has changed, however, at least for the time being. Carried by a very strong housing market and the subsequent development of necessary infrastructure, the wire mesh market has enjoyed a very good run for the past two years and is especially strong right now. Furthermore, the rebuilding of the US Gulf Coast has not even begun in earnest, and the current Highway Transportation Bill will add further need for wire mesh. Also, Connecticut Steel has no steelmaking facility of its own and relies on outside billet supplies. Some time ago, Nucor bought Roanoke Steel and could be the ideal in-house supplier for Connecticut Steel. We can see a pattern of small steps here. So, expect Nucor to continue on this path. There are some US wire rod mills with a higher capacity than Connecticut Steel that could be realistic takeover targets. The same goes for wire companies - even wire companies with their own rod mill.