Good day, everyone, and welcome to the Nucor Corporation First Quarter of 2020 Earnings Call. Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate and variations of such words and similar expressions are intended to identify those forward-looking statements which are based on management's 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 this date 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 now like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Good afternoon and welcome to our first quarter earnings call. I want to begin today by taking a moment to honor the heroes surrounding us during these unprecedented times. Thank you to the doctors, nurses and healthcare workers drawing close when the natural tendency is to pull away. Thank you to the EMTs and first responders like my own daughter, who are serving on the front lines battling to save lives. Thank you to the U.S. postal workers; UPS and FedEx drivers and to the truck drivers delivering our food and medicines. I'd like to also thank the Nucor team members who have continued to work in order to support our country's essential systems and processes. And finally, I want to offer our thoughts and prayers and sympathy for those who have lost loved ones or who currently have someone fighting this terrible disease. Joining me in honoring these heroes at our call today are the members of Nucor's executive team including; Jim Frias, our Chief Financial Officer; Craig Feldman responsible for raw materials; Ladd Hall responsible for Flat-Rolled Products; Ray Napolitan, responsible for Engineered Bar Products, as well as Nucor's Digital initiatives; MaryEmily Slate responsible for Plate, Structural and Tubular products; Dave Sumoski responsible for Merchant Bar products; Chad Utermark responsible for Fabricated Construction Products; and Al Behr our most recently named Executive Vice President. And to our teammates listening in, your health and safety is our most important responsibility. Thank you for those of you who continue to work from home and those of you who are working to safely produce the products our customers need to continue to support essential projects across our nation. We will get through this pandemic by living our culture every day staying focused and taking care of one another. Currently over 40 states where we operate, our facilities are subject to either shelter-in-place or stay-at-home orders. In every one of these jurisdictions, Nucor has been deemed an essential manufacturing operation. Some of the essential projects that Nucor continues to produce field for include; the expansion of the Mayo Clinic in Arizona; the Henry Ford healthcare system in Detroit and many other hospitals across the nation in New York, California, Oregon and Minnesota. Our sheet mills recently received orders from hospital bed manufacturers. We prioritized those orders and got the material turned around in 1.5 weeks. Thank you to our team for making that happen. Military and defense applications, including two aircraft carriers being built for the United States Navy and several nursing homes, assisted living communities and critical infrastructure projects across the United States. Over these last several weeks, the spirit of Nucor's culture has been on full display. Our teammates are not only continuing to serve our customers, but they are living up to the deeply shared sense of responsibility to the communities in which we operate and we live. There have been numerous stories of our team members finding ways to help their communities during this crisis by exercising the entrepreneurial spirit that brought them to Nucor. For example, Nucor teams all over the country have been pooling resources and overnighting N95 masks and other critical PPE to medical units in need. Our team members in Seattle and Nebraska are utilizing personal and company-owned 3D printers to produce as many as 100 NIH-approved face shields per day. Our Vulcraft New York team has created and donated specialty hard hats with face shields to the local hospitals. Our Nucor, LNP team in Missouri has been delivering meals to local senior centers and one of our engineers at Nucor Steel Berkeley is producing intubation boxes to protect doctors and nurses in the operating room. These are just a few of the many stories that make me incredibly proud to work with the greatest team assembled anywhere in the world. In late February, we took several proactive steps to prepare for the COVID-19 pandemic, including establishing three task force teams to guide our response, a main COVID-19 task force to provide guidance to our general managers, who run each of the divisions, a pay-and-benefits task force focused on the financial well-being of our team members and a commercial task force to work with our customers to make sure that we provide uninterrupted customer service and that our customers continue to recognize Nucor as a sustainable and reliable supplier of choice. Turning to our first quarter performance. 2020 got off to a good start with an operating rate of approximately 90% at our steel mills and very strong earnings from our steel products businesses. Excluding the charges we took related to our Duferdofin investment, our earnings were just under the guidance range we indicated in our March 2019 news release. Order activity and backlogs remained strong well into March, reflecting solid underlying demand in nonresidential construction and other end-use markets. The coronavirus pandemic's impact to our overall business has been varied. Automotive and oil and gas end-use markets have been the most severely impacted, while demand for our nonresidential construction products continues to be quite strong. Our facilities serving these construction applications continue to operate at high utilization rates. We are well positioned to weather the economic downturn and emerge from it poised to grow again once it's behind us. Nucor is a low-cost producer in each of the diverse markets in which we compete and our businesses generate healthy cash flows throughout the ups and downs of the business cycle. Our strong balance sheet and good liquidity during these distressed business conditions continue to be a source of real competitive advantage. Finally, underlying demand going into this crisis was robust. As we see America reopen for business, we believe that demand is still there and it will return quickly in most end-use markets. However, as you might expect, we are taking steps to further enhance our liquidity position during this time of significant uncertainty. We will also continue to look for ways to enhance our competitive position through the strategic allocation of capital. Nucor is currently evaluating all of our capital projects across the enterprise to determine which projects will continue to move forward, which projects we will pause as we assess the depth and severity of the pandemic and oil crisis facing our globe; and finally those projects that we will readdress at another time. We're also aggressively managing all inventory positions including scrap with finished goods. We believe that these initiatives will allow Nucor to generate more than an additional $1 billion in free cash flow in 2020. I also want to note that we believe it's vital for Congress and the administration to move forward immediately with a significant infrastructure spending bill with strong made-in-America provisions that include melted and poured for the United States steel industry. Our domestic infrastructure needs have been neglected for too long. A large-scale infrastructure effort would not only generate the economic activity and jobs we need now but would also be an investment in our nation's future competitiveness. In closing, let me just note that we have faced crises before at Nucor and it is during these times when the strengths and sustainability of our company are most evident. As we move forward, Nucor will stay focused on the health and safety of our team, serving our customers and supporting our communities while preserving and growing shareholder value.

Thanks, Leon. I join Leon in offering my thoughts and prayers to everyone impacted by this terrible virus and also my tremendous gratitude to the heroes working on the front lines to stabilize and end the pandemic. The Nucor team has responded to this challenge, the way our company's met every difficult period we've faced over the years by focusing our talents and commitment on building an even stronger Nucor for each other, our customers, our shareholders and the communities in which we work and live. The resiliency and sustainability of Nucor's business model is built on these powerful attributes: our team-oriented culture built on a foundation of trust, a highly variable and low-cost structure, our market leadership positions across our highly diversified product portfolio, our robust cash flow generation through the cycle and a strong balance sheet. Nucor's balance sheet strength is evidenced by the fact that we hold the highest credit ratings of any steel producer headquartered in North America with an A- long-term rating from Standard & Poor's and a Baa1 rating from Moody's. We believe our financial strength is a key strategic advantage. It has been a critical underpinning of Nucor's ability to consistently grow long-term earnings power and reward our shareholders through seven U.S. recessions and nine steel industry cyclical downturns since we began steelmaking in 1969. Nucor's paid and increased its regular base dividend for 47 consecutive years. We expect to continue this practice through this difficult period as well. With regard to our first quarter performance, I echo Leon's comment that we had a good first quarter in terms of operating profitability. Our cash provided by operating activities exceeded $200 million for the first quarter even after we funded $160 million in profit sharing earned by Nucor teammates, as well as working capital expansion on the inventory receivables and payable line items, totaling another $194 million. Working capital expansion typically consumes cash during our first quarter. We expect this to reverse during the second quarter given the downturn in business conditions brought about by the pandemic. Working capital contraction can generally be relied upon as a countercyclical benefit for Nucor, enhancing our cash flow and liquidity in more challenging environments. For example, working capital reductions generated cash flows of about $1.2 billion in 2015 and approximately $620 million in 2009. As we enter this time of significant uncertainty, we are taking additional steps to maximize our financial flexibility. In addition to normal working capital adjustments, we are further reducing inventories to increase turn rates and maximize liquidity. We remain confident in our competitive position and financial strength in this environment. That said, we believe it's prudent to review our capital expenditures budget to identify projects that we can cut spending on or delay initiating, again with the goal of maximizing financial flexibility. As a result of this review, we've revised our full year 2020 capital expenditures estimate down to less than $1.5 billion from our initial projection of approximately $2 billion for the year. First quarter of 2020 capital spending was about $417 million. Our prudent approach means scheduled critical work such as engineering and permitting are continuing without interruption. Now, I'd like to update you regarding the strategic growth projects that have recently come online, but will begin operations later this year. Our Gallatin, Kentucky hot band galvanizing team doubled outside shipment tons in the first quarter of 2020 compared with the fourth quarter 2019. Our new 500,000 tons per year 72-inch wide galvanizing line is the widest hot-rolled galvanizing line in North America. The Gallatin team achieved nameplate capacity in March and now believe the Nucor capacity will approach 700,000 tons per year. Our new cold mill at our Hickman, Arkansas location continues to ramp up well. The team there delivered first quarter of 2020 production at our dual configuration reversing mill that was more than double the average output of the three quarters that had operated last year. The Hickman team is now taking advantage of the current marketplace disruption to run development orders for automotive advanced high-strength steels. We are ready to serve our growing base of automotive customers as they return to work. Our Kankakee, Illinois merchant bar rolling mill has completed construction and equipment commissioning is now underway. We expect to start shipping product during the second quarter. Kankakee's expansion is targeted to benefit from significant logistical advantages allowing Nucor to provide our customers with a full range of MBQ, light shapes and structural angle and channel out of one location in the heart of the attractive Midwestern market. Our Sedalia, Missouri rebar micro mill has successfully started operating its melt shop and rolling mill in a continuous process. Production ramp-up continues and output is receiving strong support from independent fabricators in the region. Our Frostproof, Florida rebar micro mill remains on track for completion later this year. Finally our galvanizing line joint venture with JFE in Mexico is not currently operating under the terms of the decreed by the Mexican government. The Mexican automotive industry and its supply chain has not been granted essential industry status at this point. We are hopeful operations can resume in the coming weeks. Before I turn the call back over to Leon, let me say that while these are very challenging times, I am encouraged by the extraordinary determination and performance delivered by the 27,000 men and women of Nucor. My confidence has never been greater that Nucor's best years are still ahead of us.

Thank you, Jim. Before we move to Q&A, let me just comment on the substantial charges we took related to our Duferdofin investment during the quarter. We acquired our 50% interest in Duferdofin-Nucor during the summer of 2008. Soon after the transaction closed we were faced with a dramatic shift in the regional economic outlook and the scope and severity of the global financial crisis became clear. We, our partners, and the Duferdofin teammates quickly turned to the task of positioning the business for sustainable success in a new environment. Over the years Duferdofin has made considerable progress at enhancing its capabilities and improving its efficiencies. But even as great strides were made within the business the regional economic environment has only become more challenging. With the advent of the coronavirus pandemic with particular severity in Northern Italy and some further changes in regional market dynamics, it's become clear to us that the investment was worth substantially less than its carrying value on our balance sheet. Operator we're now ready to take your questions.

Thank you. Our first question today comes from Chris Terry of Deutsche Bank.

Hi guys and I hope you're safe and well. A couple of questions from me. Just wanted to start on the CapEx just high level. So, the reduction to less than $1.5 million this year does that mean 2021 and 2022 etc? The total $3.5 billion of growth opportunities that you were seeking is that still the number? So we should look at that as basically a deferral or have you changed the next few years as well? Thank you. That's my first question.

Yes, this is Jim Frias. I'll start with that question and Leon if you want to add something you can. But quite frankly, what we're doing is taking an approach that gives us flexibility. So, depending on what our outlook is as we progress through the year we may end up spending more than $2 billion next year or less than $2 billion next year. We have flexibility to choose how quickly we put things back up to full ramp in terms of those CapEx projects. So, in 2021 it's too early to call. We'll make a decision on that by the end of the year.

Okay. And then just trying to square some of the cash items. I think you commented that you expect to still get over $1 billion in free cash flow. I wonder if you could comment on your cash tax rate which I think is quite a bit below your P&L tax rate and just some of the working capital improvements. I know you talked about 2009-2015, but just wondered if you could give some details behind the free cash flow number. Thanks.

Yes. Just to clarify I think I meant to read cash from operations not free cash flow in that portion of the script and that net working capital would add to cash from operations by roughly $1 billion. But let me walk you through some of the pieces when you come up with computing what our cash from operations will be and then after CapEx what free cash flow would be. So, you have to start with an earnings number. I'm not going to give you a forecast running through the year. We really don't know what earnings should be but certainly we're going to make money this year. Then you would add to that our depreciation and amortization, that's roughly $720 million. We think working capital the point that Leon was making is going to generate more than $1 billion of additional cash from operations this year. And then finally we are going to get a tax benefit that depends partly on how much money we make but the full potential is $350 million this year because of the accelerated depreciation, we're getting on projects that will start up this year. This has nothing to do with the deferred projects excuse me. And then over the next three to four years that tax benefit is likely to be $700 million to $750 million. So, does that cover it for you Chris?

Yes, that's helpful. Thank you. And then the last one for me a number of companies have commented that non-res construction market is the one area of relative strength within the context of the demand for 2Q and heading forward. I just wonder, if you could comment on whether you believe that it's because there's a backlog, or because that industry will stay robust. Just hard to sort of differentiate between the three to four-month backlog that other companies have talked about? Thanks.

Chris, as we looked at construction, it's sort of a dichotomy in today's pandemic. And so what I would tell you is, I'm incredibly proud of our Vulcraft/Verco and Building systems teams all of which have set record profitability in the first quarter. But as we moved into Q2, their backlogs continue to grow and so there's a lot of resiliency in this market. And so, we're optimistic, but also looking to be very deliberate in how we spend, and as Jim mentioned, our flexibility towards capital allocation as we move forward. But that is the area that has shown great resiliency as we move through this current climate.

Great. That’s it for me. Thank you very much.

Thanks, Chris.

Our next question comes from David Gagliano of BMO Capital Markets.

Great. Thanks for taking my questions. So I just want to clarify something here. The press release reads to me, I think, it says that Nucor has decided to freeze spending on certain capital projects currently in process and then delay capital projects that have not begun. But the remarks it just sounded to me like, they indicated that the projects for 2020 start-up are actually basically still on pace to happen. And it sounds like 2021 and beyond pipeline really haven't been any decisions made as of yet. So my questions are, specifically, what projects are being deferred and frozen and for how long? And then, secondly, where does the $500 million reduction in 2020 CapEx come from specifically?

Okay, David. Thank you. I'll begin and Jim maybe some commentary at the end. So as we look at the projects that we've talked about for probably the last 18 months around that $3.5 billion of investment all of the long products, the micro mills in both Sedalia, which is running, Frostproof are going to move forward. The bar mill expansion, as Jim mentioned in his comments, in Kankakee is moving forward and now beginning to commission. Our Marion upgrades are up and running. So really the pause that we're taking on capital expenditures come both in Brandenburg and the plate mill as well as the Gallatin expansion. And both of those are a pause in timing, not strategy. We are very committed to producing plate and believe we're going to have a differentiated product offering in both Brandenburg and Gallatin and offering things that no other EAF producer can currently offer. So as we move forward, as Jim mentioned, it's too early to view any one landscape, but those projects will come back. It's just a matter of timing and when we execute them.

Yes, David, to add to that, we have several smaller projects that we haven't specifically announced, and we are investing in them where it makes sense. For some, we're committed until completion because stopping them wouldn't be practical. For others, we’re still in the early stages, and we could halt them without causing disruption to our equipment suppliers or the teams working on those projects. Additionally, for our larger projects, we continue to allocate funds to critical areas like engineering and permitting. This way, if delays occur, we can reduce their impact and be ready to accelerate spending again when we feel confident, aiming to get these projects up and running sooner.

Okay. That sounds good.

The other thing I would say in the long haul is maximizing flexibility.

Okay. Understood. I appreciate. That's helpful. So just a couple of quick follow-ups. On the plate mill and the Gallatin expansion, how much of the $500 million reduction is attributable to pausing those two projects specifically? And then, the second question is, the timeline in the previous presentation showed the Gallatin expansion mid-2021. And then the plate mill, obviously, the biggest project I think in the history of Nucor late 2022 start-up. What should we be thinking about sort of the time line now for both those projects? Thanks.

David, I'll begin with the latter question first and maybe Jim can comment to the specific or not. But as we think about Brandenburg as well as Gallatin, one of the things right now is, really too early to predict when we'd start back. What I would tell you in Brandenburg's case, the engineering is going to continue moving forward. And so, even if we pause for three or four months, that really won't have a material impact on the start-up because we'll be able to make that up as we move through construction, because quite frankly, our engineering will be that much further along. So, it really is a dependent factor on when do we unpause and when do we continue to move forward. And so, a little early to tell but we'll have more color on that in clarity as we move into the quarter.

Thanks. The other thing I'd say is, we don't really want to break down the detail of where the savings are coming from. But certainly Gallatin and as well as the plate mill in Brandenburg are big contributors to that reduction in CapEx.

Okay. Great. And then just last piece, the Gallatin start-up time line, it was mid-2021. Now, what do you think it's going to be?

Look, we haven't revised that yet David again quite frankly because we just don't know how long that pause may be. It could be another month and we're executing and we didn't delay it all. But we'll have to just wait and see as we assess the length and the depth of this pandemic and oil crisis.

Okay. That’s helpful. Thank you very much.

Thank you.

Our next question comes from Seth Rosenfeld of Exane BNP.

Good afternoon. Thank you for taking the questions. If I may with regards to the steel products business, I wonder if you can give a little bit more color with regards to the fabrication backlog and how you see those develop over recent weeks. And when you think about how your steel products business intersect with the mills, should we think about that as being an increasing bit of a buffer as perhaps third-party sales in the mill divisions fall in Q2? Do you expect to increase your internal sales going into downstream fabrication steel products? And then lastly maybe some color with regards to margins and how you expect it to progress going into Q2 assuming a reduction in scrap input costs for steel products? Thank you.

Okay. Thank you, Seth. If we don't get all three parts of that question, let me know. Chad Utermark, why don't you start out on the first part of the question regarding backlogs in our products businesses?

Yes. Thanks, Leon. In both our joist and deck and Nucor buildings group as well as rebar fabrication, our backlogs are strong. They're actually up year-over-year. This is led by a large commercial and warehouse projects data centers. And quite frankly, COVID-19 has had a very small impact. We have had some regional delays and stop work orders, but we would expect as states come back online for those projects to start again. This continued solid and steady non-res construction market I think leads us well into Q2 and Q3. Now historically, when there's economic downturns, our businesses will lag six to nine months and we'll see a little bit of a pause. With this self-induced economic downturn, I think time will tell whether that impact will be the same. But we have a strong backlog right now. We're pretty excited about Q2 and Q3.

Thank you, Chad. Jim, do you want to comment?

Yes. The internal tons consumed we think of that as an important strategic advantage our position there because roughly 20% of our steel typically goes into those downstream businesses. In 2019, that was roughly four million tons if we just count our holding and subsidiaries. If we include fuel technologies which we own half of it would have been 4.5 million tons in 2019. In the first quarter, just counting the Nucor wholly owned subs, it was 1.15 million tons. So again, a significant amount of the steel that we sell gets to go to businesses that we own and that's a key component. It will not change dramatically in the second quarter. We don't buy very much steel from outside sources. We pretty much self-supply wherever we can already. So, there's not going to be a shift in that mix as we go forward. And I can't remember the third part of your question.

Yes. Was your last question about scrap pricing?

I made a mistake. I apologize; my comment was about margin expectations for steel products in Q2. The question isn't about scrap but rather concerning the steel input costs and assumptions related to steel margins in Q2. Thank you.

This is Chad, Seth. Yes, our margins are strong and we don't anticipate those falling much. Obviously, you know what's going on in the scrap market and steel pricing. And again demand drives our business and right now demand is healthy.

Great. Thank you, very much.

Thank you.

Our next question comes from Timna Tanners of Bank of America.

Good afternoon and thank you for the update. I hope everyone is doing well. I would like to get more clarification on how you are approaching the current situation now that we are in April, one-third of the way through Q2. It appears that most of the impact will be on the flat-rolled side. You mentioned in your release that there have been some closures and supply disruptions. Could you provide a clearer picture of how the product performance has been so far this quarter? Is it primarily the flat-rolled products that have been affected, with some impact on plate and SBQ, while long products are maintaining their volume? I would appreciate any further insights you can share.

Sure. Thanks, Timna. And as we look at it yes, the flat side of our business particularly the hot band has probably been impacted along with the engineered bar for the oil and gas segment. So those are the two areas of our business portfolio that have probably been the most impacted. As we think about the longs and construction segments those continue to run at fairly high utilization rates 75-plus in some areas and even stronger in some others. And so but even as we think about the sheet side our value-added product in the cold-rolled and galvanizing are at 80% or better in most of our plants and some running near capacity. So again, it's a little bit of a mixed bag, but overall the automotive and engineered bar would be the most directly impacted for us.

Thank you. I'd like to take a broader perspective on how you might manage overhead costs. It seems you are not as concerned about this downturn as you were during the global financial crisis. In 2008 and 2009, you reduced SG&A expenses by $300 million. If we face similarly tough times, should we expect similar SG&A reductions, or can you offer more detail on how much you anticipate being able to cut overhead? Thank you.

Yes. I'll begin and maybe ask Jim to think through some of the tail-end of your question regarding the SG&A. But Timna, I want to make sure we're very clear. There's no Pollyanna-esque about our approach and where we see the markets today. The pandemic facing our lives is bigger than just our industry and steel. It's affecting the global markets worldwide. It's affecting families and businesses, small and big. And so part of the reason you've heard us take a very deliberate move and pausing Brandenburg, which again strategically makes all the sense in the world and we will move forward on is to really understand just how significant and how long this pandemic and oil crisis may stay with us. And so when Jim alluded to a comprehensive review of every project, we've looked across the spectrum of the enterprise on every capital dollar being spent to maximize our financial levers and the liquidity position as we move forward. Jim, any specifics on the...

Yes. I think when you think about SG&A a big component of that is profit sharing and other incentive comp. And when we make less money we have less profit sharing and less incentive comp. Now as you may recall we went into 2009 with a significant overhang a very expensive figure. We're not carrying that load this time. So we're entering this down cycle with a better position in terms of the assets we're carrying in our balance sheet. And so profit sharing probably, won't go down by quite the same amount. Remember profit sharing is the bonus that goes to our employee global level of Vice President. The 10% of pre-tax profit is going to pool and get split amongst all those employees every year. But all of our incentive comp plans will be flexing down and that's where most of those savings will come. And the other thing is as we've sheltered in place across our company even though we're still operating. We are sheltering in place. We have most of our teammates working from home. We're not on the road of making the calls on customers or visiting vendors or doing a lot of the activities that we normally do. So a lot of our SG&A spending will come down too. I don't have a hard number to give you but we are being very thoughtful about saying, okay, let's reduce spending everywhere. Our maintenance teams are doing everything they can to reduce our reliance on contractors as an example of one of the places we're trying to reduce spending. And that's not SG&A that's an operating expense. But we're looking to reduce spending wherever it makes sense in a way that doesn't hurt the business. But at the core of Nucor's philosophy and culture is to value the team. We're not laying off the Nucor teammates at our stables, our fab businesses. That's not part of how we're saving costs.

Okay. Great. Thanks, guys.

Our next question comes from Andreas Bokkenheuser of UBS.

Thank you very much. I have a quick question regarding the current oil price. How do you view it considering the current levels? Specifically, do you see any benefits in terms of reduced costs for the second quarter, or are you concerned about potential demand destruction? Additionally, could you clarify the extent to which you are hedging your oil exposure, if at all? I would appreciate your overall thoughts on how a price like $20 per barrel impacts your business. Thank you.

Yes, Andrew, I wish I could give you a clear picture. It's difficult to predict oil prices over the next month as everyone's opinions vary. However, I can share some certainties. Nucor has a diverse product range that allows us to succeed in the construction sector, where we are quite strong. We aren’t heavily involved in oil and gas, with only about 10% of our overall business tied to that sector. While we've certainly felt a significant impact, it’s hard to determine how long it will last or when we will fully recover. What I do know is that our teams are incredibly resourceful in managing our mills and serving customers in sectors that continue to perform well, such as HVAC, agriculture, and heavy equipment, as well as through our service centers.

Yeah. Let me add to that Leon with just an idea from our cost perspective. Oil itself is not a primary cost driver for Nucor. Our biggest cost is raw materials. Our next biggest cost is energy. But that's mostly electricity. Obviously, we have a lot of mobile equipment. And we have an overworked fleet at some of our businesses that delivers product to our customers. But oil gasoline diesel fuel costs, they're not insignificant if you just think about that number. But as a percentage of overall costs they're fairly insignificant. And we don't hedge those excuse me I meant to mention that as well.

Okay. That's very clear. Thank you very much.

Thank you.

And our final question today comes from Phil Gibbs of KeyBanc Capital Markets.

Hi. Good afternoon.

Good afternoon, Phil.

Just a question on the raw materials side, one what's the May outlook for scrap as of right now best you can tell? And then secondarily when should we expect your DRI operations to begin production? I know Trinidad was shut down and there was press about Louisiana being shut down as well.

Certainly, I'll start and then maybe ask Craig Feldman to provide some additional insights. In terms of scrap, we're noticing some tightening. We are observing international developments, but we also believe that May will show an increase. The obsoletes will significantly drive demand, and we have good flexibility regarding the availability of prime due to the auto plant shutdown and our Louisiana DRI plant coming back online. It is currently producing prime. I'll let Craig share more details on that. As we navigate this market, the tightness around prime and the value-added products we provide to our customers makes our DRI operations a valuable advantage moving forward. Craig, would you like to add anything?

Sure. Regarding the scrap market, there is a significant amount of availability globally, and we are involved in both scrap and substitutes, including pig iron. While there may be some limitations on domestic prime scrap, I believe it will quickly reach an equilibrium. There may be a delay in the supply of prime scrap due to the shutdown of automotive producers, but as they resume operations, availability will increase, finding a good balance rather swiftly. Additionally, our sourcing strategy offers us unique flexibility in our raw material approach. We can adapt between pig iron from the seaborne market, our own two DRI plants, and our DJJ scrap yards. So we have the capability to shift effectively. Concerning our DRI plants, they are currently down due to a government order; however, we anticipate resuming operations soon, and our team is ready to get back to work as soon as the order is lifted. The flexibility of the DRI provides us with a distinct advantage in the marketplace.

Thanks, Craig.

And Leon, the comments that you made on infrastructure, specifically in your prepared remarks, is that something that you're advocating as a good idea just because obviously it would benefit the steel industry, or is that something you feel like is gaining support for some eventual outcome in the next 12 months? Because obviously this can has been kicked for a couple of decades.

Yeah. Look I think it's both. I like my predecessors with John Ferriola and Dan are going to be a tireless advocate for fair trade in the United States, but it's bigger than that. One of the things that the global overdependence of the supply chain into China has done to the American people is it's opened our eyes not just in manufacturing and steel but in pharma our overdependence in medical devices and PPE and equipment. It is time for our nation to be a nation that builds and makes things in the United States again. And quite frankly with more than 25 million Americans out of work today, a strong $1 trillion, $1.5 trillion, $2 trillion infrastructure bill will put hundreds of thousands if not millions of American workers back to work. It is something we need in this country desperately Phil.

I appreciate that. And then lastly, I think you also mentioned in your prepared remarks that you're taking some time at Hickman to progress on advanced high-strength steels with your customers. Is this downturn specifically allowing you to accelerate those efforts? And trying to just gauge how that's being received and when we might be able to see some commercial success. Thanks.

Yeah. Look, short answer is yes. It is allowing us to do some of those things. The team at our Hickman facility has done an amazing job of bringing that cold mill complex up and online. We're continuing to progress the galvanizing line that again will be the first EAF producer to produce a generation three steel for the auto industry. The fact that we serve all the major OEMs as a Tier 1 direct supplier gives us great access so those trials are ongoing. I couldn't be more excited and optimistic about the work that our team has done in positioning Nucor for the future supplier of choice in that sector.

Thanks very much.

Thank you, Phil.

That concludes the question-and-answer session today. At this time, I'd like to turn the call back over to Mr. Leon Topalian for any additional or closing remarks.

I'd be remiss in not taking a moment to thank Ladd Hall for his nearly 40 years of service to Nucor. Ladd on behalf of the 27,000 men and women of Nucor, we would like to thank you Sally and your entire family for your dedication, service and sacrifice to our company. And while our nation faces this crisis and times of uncertainty, there are a number of things that our investors, customers and team can be certain about: Nucor has the greatest manufacturing team assembled anywhere in the world, and we have the financial strength and discipline not just to survive this crisis but thrive coming out of it, allowing Nucor to steward our valuable shareholder capital and to serve our customers as the North American supplier of choice. Thank you for your interest in our company.

And this does conclude today's call. We appreciate everyone's participation today, and you may now disconnect.