Good day, ladies and gentlemen. Welcome to the Nucor Corporation First Quarter 2021 Earnings Call. As a reminder, today's call is being recorded. Certain statements made during the 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 that 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 relating 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 can 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 like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead.

Good afternoon and thank you for joining us for our first quarter earnings call. Joining me today are the members of Nucor's executive team, including Jim Frias, our Chief Financial Officer; Dave Sumoski, our Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Craig Feldman, responsible for Raw Materials; Doug Jellison, responsible for DJJ and Logistics; Greg Murphy, responsible for Business Services and General Counsel; Ray Napolitan, responsible for Engineered Bar Products; Dan Needham, responsible for Bar and Rebar Fabrication Products; Rex Query, responsible for Sheet and Tubular Products; MaryEmily Slate, responsible for our enterprise-wide Commercial group; and Chad Utermark, responsible for Fabricated Construction Products. I want to take just a minute to congratulate Ray Napolitan on his upcoming retirement in June. Ray has been an invaluable part of the executive leadership team, and I will greatly miss his leadership, strategic vision and keen insights. I wish him and his wife, Jody, a long, healthy and happy retirement. Thank you both for your commitment and sacrifices during your 25 years with Nucor. And on behalf of our 26,000 team members, thank you. Craig Feldman will also be retiring in June. Craig has been a part of The David J. Joseph Company in Nucor for over 30 years, and I'd like to thank him for his commitment, dedication to the DJJ team and Nucor for three decades. Craig, we wish you and Sherry a very long, healthy, happy retirement. And on behalf of our entire team, thank you. As we continue to work toward our goal of becoming the safest steel company in the world, we are maintaining our focus, especially as our operations have ramped up across the company in response to strong steel demand. Knowing where to focus our efforts can bring tremendous improvement in safety performance. Looking at our safety data, approximately 40% to 50% of our recordable injuries are hand-related. To address this, we held a company-wide Hand Safety Week at the end of February. We are optimistic that our increased focus in this area will enable us to make meaningful progress toward our goal. I want to thank all of our teammates for your commitment to improve the most important value in our company, the safety, health and well-being of our entire Nucor family. This past quarter was our best quarter in Nucor's history. I'd like to thank our customers for the trust you place in us with each and every order, and I'd also like to thank our team who make extraordinary results like these possible. Net earnings per share of $3.10 far surpassed our previous quarterly record of $2.31 set back in the third quarter of 2008. Robust cash flow from operations during the quarter allowed Nucor to return $425 million to our shareholders while maintaining our strong liquidity position. Demand for our products remains quite strong, with healthy volumes and metal spreads across our diverse portfolio of products. Capacity utilization at our steel mills increased to 95% for the quarter from 87% in the fourth quarter of last year. Many of our product groups are running at or near full capacity. We have had some spare capacity in long products. We are adding shifts in many of our steel product facilities to meet robust market demand. It's gratifying to see such strong performance across all of Nucor. We are clearly reaping the rewards from our prior investments and the more strategic approaches we are taking with our key end-use markets. Most of the end-use markets we serve remain strong, and inventories remain lean across supply chains. We have greater certainty today that the current favorable demand outlook will persist through the rest of 2021. We are benefiting from our strategy of intentionally targeting our product capabilities at attractive subsegments of our various markets. Our latest project announcements continue in this vein, namely the new tube mill we are building in Kentucky and the new insulated panel facility in Utah. We also see indications that the strength in nonresidential construction is broadening out beyond the warehouse, data center and cold storage subsectors. The ABI Index turned positive in February after 11 consecutive months of contraction, and the Dodge Momentum Index recently registered 151.4, which I believe is the highest reading since 2018. Also, backlogs across our steel product segments are all very strong. Our fabricating partner customers are reporting strong demand and strong inquiry activity in the construction and fabrication markets. I'm particularly excited to see the business momentum being generated by our Construction Solutions team. We formed this group last year so we can develop deeper strategic relationships in the construction market and better leverage our diverse product offering. The team regularly interacts with a broad set of influencers, including owners, developers, architects and engineers. We also recently launched a trademark high-strength beam product called Aeos, a grade A913 beam. Aeos beams are produced efficiently from sustainable, recycled steel at our Nucor-Yamato Steel plant and allow for faster and lighter construction. Nucor-Yamato is the only producer of these grade A913, high-strength beams in North America. We are already realizing attractive orders from this effort and are optimistic that we will see many more opportunities as we leverage the unique capabilities of the Nucor portfolio, including Aeos. We are also pleased that President Biden has put forward an ambitious infrastructure plan. We look forward to working with the administration and Congress and are confident our country can make a meaningful investment with sustainable funding to rebuild our nation's infrastructure. Action is long overdue as the recent grade of C minus by the American Society of Civil Engineers' U.S. infrastructure report card illustrates. In the last 5 years, Nucor alone has melted, poured and shipped over 130 million tons of steel rebar, plate, structural beams, sheet and countless other steel products. We are well positioned and ready to help our nation build back better. Turning to the automotive market. We expect the industry to produce approximately 16 million vehicles this year. The shortage of semiconductors, severe weather impacts and other issues have hurt recent production volumes in the auto market. We expect the difficulties to continue into the third quarter. Even with these disruptions, our mills have been running full-out to satisfy customer requirements from the auto sector. It's also worth noting that light vehicle demand is very strong, and inventories are quite low. We expect that sector will be running hard to get caught up with the demand for at least the rest of the year. We continue to see strong demand in the renewable energy market, and we believe that the steel needs of this sector will grow rapidly in the coming years. The Biden administration has set a goal of deploying 30,000 megawatts of offshore wind power by 2030. This could require as much as 8 million tons of steel. We look forward to supplying the requirements of the renewable power sector with steel and steel products that have much lower levels of embedded CO2 emissions than those of competitors and are a natural fit for the renewable energy applications. We have the right capabilities to provide steel products to this market, and executing power purchase agreements like the ones we have concluded with Ørsted and EDF helps us to develop constructive commercial relationships in this sector while lowering our overall CO2 intensity even further. In other markets, agriculture, trucks and other heavy equipment are all showing strength. The oil and gas market is improving, with rig counts climbing gradually from the depressed levels seen last year. The appliance market is benefiting from the economic rebound in direct payments people are receiving as part of the COVID relief passed by Congress. Now I'd like to give you a brief update on the progress of several of our strategic growth projects. Following a pandemic-related delay, commissioning resumed last fall at our galvanizing line JV with JFE in Mexico. The team there is busy trialing and qualifying product with automotive customers as well as shipping product for alternative end-use applications while this work proceeds. The commissioning of our new Gen 3 galvanizing line at Nucor Steel Arkansas is expected to occur in the third quarter, with prime production off that line to follow soon after. We are excited about the advanced capabilities this project will give the mill, and I think it is fair to say that our customers are excited as well. The expansion and modernization project at Nucor Steel Gallatin in Kentucky is on track to produce steel by the end of the year. To prepare for commissioning, the Gallatin mill will be shut down for 3 weeks sometime in the fourth quarter. We are anticipating a gradual ramp-up of the incremental capacity at Gallatin, expecting to achieve 1 million tons of incremental output from the upgraded facilities in 2022 and to achieve the full benefit of the added production capability of 1.4 million tons in 2023. We also remain on schedule with the construction of our new plate mill in Brandenburg, Kentucky. We see Brandenburg's commissioning time frame, which is scheduled for a start-up in late 2022, as ideally suited to serve the offshore wind market. Nucor Steel Brandenburg will be one of only a very few mills in the world capable of reliably supplying steel plate suited to offshore wind market applications and expectations.

Thanks, Leon. First quarter earnings of $3.10 per diluted share were at the high end of our guidance range. Nucor's record quarterly earnings were driven by strong performances across our broad portfolio of steelmaking, downstream and raw materials businesses and highlight the success of our 26,000 team members at building a stronger and more profitable Nucor. The performance of our steel products segment was perhaps the biggest surprise of the quarter as it delivered improved earnings over its very strong fourth quarter results, countering the normal seasonal trend and overcoming the impact of a temporary margin squeeze due to the quick run-up of steel prices. The just completed quarter included some initial returns from our multiyear growth investment projects. Our Hickman, Arkansas sheet mill's specialty cold-rolling mill is rapidly expanding its portfolio of high-strength, lightweight products increasingly demanded by OEM customers. The mill ran at 111% of nameplate capacity in the first quarter, with cash flow and profit contribution well ahead of the project's capital authorization budget. Our new Gallatin, Kentucky hot band galvanizing line production rate in the first quarter was 116% of its design capacity, with cash flow and profit contribution substantially exceeding our capital budget projections. Our Gallatin teammates are building a strong portfolio of automotive and other customers in the underserved Midwest heavy-gauge galvanized hot band market. The Sedalia, Missouri rebar micro mill completed its first year of production in February, with cash flow and profit contribution also significantly ahead of the project's budgeted performance. Sedalia's spooled rebar product continues to enjoy strong commercial success. Our second rebar micro mill, located in Frostproof, Florida, began production in December and achieved profitability for the month of March. We congratulate our Frostproof team for their incredibly fast ramp, achieving this significant milestone well ahead of schedule. Our Kankakee, Illinois merchant bar rolling mill completed equipment commissioning in December, product trials in February and achieved positive cash flow for the month of March. Further upgrades to Kankakee's melt shop are proceeding and on schedule for completion later this year. With its new capabilities, Nucor Steel Kankakee is well positioned in the heart of the Midwest MBQ market to serve our customers with a state-of-the-art mill and an unrivaled product portfolio. We are delighted with the successful ramp-up of these important new additions to Nucor's capabilities. We believe this validates both our strategies and the team's consistent focus on execution. We are confident in these projects' prospects to continue generating attractive returns with reduced volatility throughout the economic cycle. We again generated strong operating cash flow during the first quarter, enabling us to fund our CapEx and to post free cash flow of about $217 million for the period. Financial strength continues to be a critical underpinning to our company's ability to grow long-term earnings power. At the close of the first quarter, our cash, short-term investments and restricted cash holdings totaled just under $3 billion. Total long-term debt was approximately $5.3 billion. Gross debt as a percent of total capital was 31%, while net debt represented only 13% of total capital. We generally seek to keep net debt to total capital within a range of 18% to 23%. We feel this is consistent with the strong investment-grade credit rating that Nucor has strategically maintained through economic cycles over the years. At present, of course, we are somewhat underleveraged. This reflects our conservative approach in early 2020 when the economic outlook was more uncertain. We will continue to manage to this target capitalization and will adjust going forward by returning excess capital to our shareholders just as we have in the past. We took some steps in that direction during the first quarter. Cash returned to shareholders was 45% of net income or $425 million, including the repurchase of 5.4 million shares at an average price slightly above $56 per share. And with the payment of our February quarterly dividend, Nucor has increased its base dividend for 48 consecutive years or every year since we first began paying dividends in 1973. Our highest capital allocation priority remains investing in our businesses to ensure our continued growth and long-term profitability. We continue to estimate total capital spending for 2021 of approximately $2 billion. Approximately 80% of the 2021 capital spending is for improved product capabilities and cost savings projects. About half of the anticipated total 2021 capital spending is for our 3 remaining major projects: the expansion and modernization of the Gallatin, Kentucky sheet mill; the Generation 3 flexible galvanizing line at the Hickman, Arkansas sheet mill; and the greenfield Brandenburg, Kentucky plate mill. Turning to the outlook for the second quarter of 2021. As Leon mentioned, we are optimistic. We see improving or stable market conditions for the vast majority of the end-use markets served by Nucor. At the same time, inventories throughout the supply chain remain lean. Earnings in the second quarter of 2021 are expected to again set a new record for the company. The primary driver for this increase is further margin expansion at our sheet and plate mills. Our first quarter record performance reinforces our confidence in the value being created by our strategic initiatives. The opportunities ahead for the Nucor team are exciting. We have great determination to deliver increasing long-term value for our shareholders. Thank you for your interest in our company.

We'll take our first question from Carlos De Alba with Morgan Stanley.

Congratulations on the impressive results. Could you comment on the ramp-up of the plate mill? I understand it's still a bit down the line, but it's quite significant for the company. With the strong demand we might see from offshore wind turbines, how do you envision the ramp-up of this mill and the volume contribution in the upcoming quarters and in the years following 2023?

Okay. Carlos, yes, thank you for the question, and we appreciate the congrats. We're really proud of our team's execution to continue to take care of our customer base, and we're incredibly excited about our facility in Kentucky. The Brandenburg plate mill, we believe, ideally positions Nucor to be the strong market leader in plate in the largest plate-consuming region in the United States. The team has done a phenomenal job there, but I'm going to turn the rest of the question over to Al Behr, our EVP of Plate Products, and give you a little more detail and background on the start-up and how that team has maintained its ramp-up in spite of the challenges of 2020 and into '21. Al?

Yes. Thanks for the question, Carlos. Appreciate the opportunity to talk about that project. It's on budget. It's on track for a start-up in late 2022. So everything is going just exactly as we would plan. You mentioned the offshore wind market. That's obviously something we're watching very carefully and very excited about. As Leon mentioned, the positioning of Brandenburg within that market is truly ideal. There are many things about the capability of that mill that generate competitive advantage for us. One of them is the width. With the capability up to 14 feet, that's an advantage within the offshore market as well as many others. The exceptional quality capabilities out of that mill create advantage for that market as well as the grade and chemistry range. It's got an outstanding grade range, and it's really squarely aimed at the offshore wind market. So we are watching that very, very carefully. The timing of the mill coming up at the end of '22, based on the information we have about planned projects, announced projects, permitted projects, all offshore wind, is really just ideal. So it's a very, very exciting project for us. We're excited to get it running. Appreciate your question about it and the chance to talk about it.

And could you comment maybe what is the production that you expect to see out of that mill in 2023?

Carlos, I want to emphasize that we anticipate a rapid ramp-up. As the team works through the commissioning challenges, we expect 2023 to be a robust year. While I can't provide specific numbers, I believe we will reach about 75% to 80% of our nameplate capacity by the end of 2023.

Perfect. Maybe I missed it, but what is the outlook for CapEx in the coming years, particularly in the second half of this year and 2022?

We're going to spend about $2 billion this year. That's what our interim projections say. Roughly $1 billion is going to be spent over the next 3 quarters on our 3 big projects that are coming near completion, different phases of completion: the Gen 3 galvanizing line at Hickman; the Gallatin expansion; and, of course, the Brandenburg plate mill. We've not made any comments about 2022, but with Gallatin essentially complete and the cold mill at Hickman complete, unless we come up with some new projects, it's probably going to be lower than the $2 billion that we're going to spend this year. But we've not actually put together a budget yet for the 2022 expansion. But we're a strong free cash flow company. And so we're going to have plenty of liquidity to invest in at least that much if we wanted to.

We'll take our next question from Emily Chieng with Goldman Sachs.

My first question is about the current demand in the construction market, particularly in the non-residential segment. It appears your order books remain quite full. Are you gaining market share from competitors? Is this a result of supply chain restocking, or does it indicate genuine demand growth? Additionally, if there are any segments aside from warehousing that you think might exceed expectations, I would appreciate your insights.

Yes. I'll kick us off, Emily. Thank you for the question. And maybe ask Chad Utermark, our EVP of our Fabricated Construction Products, Vulcraft/Verco and our building systems, to answer as well. And so what I would tell you is approximately 46% of Nucor's products move into the construction sector. As I mentioned in my opening comments, we're really excited about our launch of the Construction Solutions team. What that team is doing is really positioning Nucor differently to better utilize the breadth and the capabilities of Nucor. We are not about getting bigger in capacity. We are about enhanced capabilities to serve our customers. By launching the Construction Solutions arm and the branding of products like Aeos, it truly differentiates us in the marketplace. As you think about the backlog, the strength of the nonres construction market, all of those indicators that we track are very, very strong. But again, as we think about how we leverage the breadth of that market, it's something that we spend a great deal of time on. I'm very proud of the Construction Solutions team and what MaryEmily and her team have done in that market. But Chad, maybe just provide a little more color and backdrop into the segments that you're responsible for.

Yes. Thanks, Leon, and thanks, Emily, for the question. As you know, we have many downstream businesses, and they touch many aspects of the nonres construction market. As we've been mentioning for several quarters, we are really excited about the resiliency of the nonres construction market. As we look out forward, we believe nonres construction will remain solid through 2021 and into 2022. Our quoting activity has been and continues to be very robust. Furthermore, most of our businesses have very strong backlogs. In some of our downstream businesses, we have all-time record backlogs. As we move through Q2 and into the second half of the year, we do expect to see significant earnings from these businesses. You asked about specific markets. Obviously, warehouses, distribution centers, data centers are driving this demand. But it's really across almost all sectors we're seeing solid demand. ABI just came out and talked about residential, commercial, industrial institution. So the nonres industry is firing on most all cylinders.

Great. That's helpful color. And if I can follow up with one question. Across the steel industry globally, clearly, decarbonization is a big theme to look forward to. We also saw one of your peers come out yesterday with a net-zero target for the longer term. I guess clearly, Nucor being an EAF operator and recycler has a big advantage here. But aside from the PPAs that you're signing, is there anything that we should be focused on from an ESG perspective that you'd highlight to come?

Yes. Absolutely, Emily. As we've discussed in the past, Nucor is the largest recycler. We're committed to sustainability. We believe today, we're one of the most sustainable steelmakers on the planet. The things like the PPA agreements that we've signed are just part of the steps that we're going to continue to take to make sure we're on the very leading edge of the cleanest, most sustainable steelmakers in the world. In the coming months, you're going to see Nucor launch a very open and public conversation about releasing our Scope 1 and 2 emissions as well as setting very clear targets for our improvements and the expectations we expect to see in the coming years. So again, stay tuned. That's going to come out again in the next few months where we're going to highlight and make some very strong commitments to what we think is already best-in-class to become even better.

We'll take our next question from Seth Rosenfeld with Exane.

I've got two separate questions. First, on raw materials and then secondly, on working capital, please. The raw material segment obviously had really remarkable performance this past quarter. Can you walk us through the drivers of that, either with regards to scrap recycling or the DRI business? And with increasing expectations for potentially kind of a tighter-for-longer prime scrap market, can you give us some update on how your DRI volumes are progressing? And any upside to that looking forward? I'll come back on working capital, please.

Okay. Yes. Well, actually, I'll turn this over to Doug Jellison and let him begin and maybe chime in at the end. Doug?

Thank you for the question, Seth. The team did an excellent job navigating a challenging quarter. We faced increased demand, short-term weather issues, and transportation difficulties. However, we prepared extensively for these challenges, and our execution this quarter demonstrated that preparation. Our recycling yards recorded their highest volume ever, and our direct reduced iron (DRI) production was solid. Financially, there is a delay as markets rise while our raw material costs are lower as we start. Therefore, the first quarter is expected to be our strongest, but we anticipate solid performance for the remainder of the quarter. The DRI operations have been performing well, and we expect that to continue. We do have scheduled maintenance outages in May and December, which will slightly affect volumes, but those adjustments are planned and expected.

You had a question about working capital?

Yes, please. Obviously, very significant investment in working capital in Q1. That would be a record for your business. Can you walk us through what we might expect looking through Q2 and into the back half of the year? Do you think there's a need for further cyclical investment in working capital? Have you been able to reset the value of inventories, for example, after that big Q1 move?

Yes. So receivables were up a fairly large percentage, and it was driven by a combination of volume, which was up 13.5%, and prices, up like 21%. And so we would think next quarter, volumes will be close to the same. And so we're going to just have a price driver. We will see some increased pricing. So how much receivables go up will depend on how much pricing goes up. We generally collect receivables in about 30 days. So what's outstanding on our balance sheet is roughly 30 days of sales to our outside customers. Relative to inventory, our inventories went up in the neighborhood of 6%. Of course, the cost per ton went up a significant amount because of scrap and pig iron and DRI prices being up as well. And so inventories are, again, likely not to go up in volume next quarter. I think they're going to be relatively flat. And so we shouldn't see quite the same increase in inventories that we saw in the first quarter, should be much smaller. And receivables will be less too, but maybe closer to the same just because we're going to have another big increase in pricing in Q2 compared to Q1.

We'll take our next question from Timna Tanners with Bank of America.

I wanted to probe a little bit more. The first quarter, as expected, sheet volumes up, makes sense. But some of the long products, although they were better than your second to fourth quarter, run rate were still below year ago levels. So just wanted a little color on that and if we should expect that to go up going forward based on the comment just now on kind of flatter volumes. So kind of wanted to get a little color on that. And then if I could, on top of that, can you comment on why utilization has seemed to barely budge in the industry, given the volume improvements and restarts that we hear about and customers clamoring for supply? I'd really like to hear your take on that.

Yes, I'll start with the last point. While I can't comment on our competitors' overall utilization rates, moving from around 85% to over 95% this quarter is a significant improvement for us. Much of this increase is seen in plate and sheet, but our structural mills and rebar mills also experienced notable rises in utilization rates. We are observing very strong backlogs at Nucor-Yamato Steel and Berkeley beams, indicating strong demand in the structural market. Although I may not have fully grasped your question about structural aspects, the demand and backlogs we see are not historic but very strong, likely the strongest we've seen in the last decade. Looking ahead, we anticipate that this sector and the markets they serve will remain robust throughout the year. Al, do you have anything to add regarding the structural side?

Yes. Just a couple of things. Timna, you picked up on it, right, We were slowing up a little bit in the first quarter. There's a couple of things in the beam group. One was the winter storm that came through and impacted Texas and Arkansas. That impacted our Arkansas beam mill to some extent. And the other thing was a project from the fourth quarter that we highlighted, a significant modernization upgrade of that mill. That was tremendously successful, but it's got such a broad product range that it stretched into January before we had fully shaken out the entire product cycle. So that mill today is running as efficiently as it ever has. That's been a very successful upgrade. So to your point about Q2, no, we expect Q2 run rates to be excellent. Leon made the point about backlogs. They've improved significantly, even just in the last couple of weeks and are at an all-time record. But the year-over-year number ticked down just a little bit, as you pointed out, and those are the reasons why.

Okay, that's very helpful. I'd like to ask another question, shifting focus to the green steel topic. As you mentioned, Nucor has always been committed to sustainability, which is part of your history. Could you provide some insight into how many of your customers are actively seeking green steel? Is there a way to quantify that? Also, regarding renewable energy, I understand you mentioned 8 million for wind, and I've heard New Jersey being referred to as the potential hub for wind energy. There's significant opportunity here. Is that 8 million tons a cumulative figure expected over time, or does it involve multiple producers? Can you give us a clearer picture of that and the opportunities in solar energy as well?

Yes, there are two significant shifts. As we consider the wind sector, there are currently two large-scale offshore wind projects that have received approval, and we will begin production on those in 2022 and 2023. The development period is expected to extend from 2022 to around 2026, 2027, or 2028. The 8 million tons will be produced over several years, likely three to five, although we don't have an exact timeline yet. We believe that with the President signing an executive order for 30,000 megawatts of offshore power, there will be a surge in activity beyond these two projects. As a result, we anticipate the volume could increase moving forward. The Brandenburg startup in late 2022 places us in an excellent position to fully leverage this market opportunity. Regarding solar, similar to what we mentioned in the Construction Solutions team, I’ll let MaryEmily provide more details on our solar go-to-market strategy and what we are doing in that space.

Absolutely. Thanks for the question, Timna. Solar is definitely a target market alongside construction, and we view it as a growth area. We expect to see growth over the next few years, particularly with the change in administration. The announcement regarding a large portion of production from that mill being directed toward the solar industry for torque tubes is significant. The Gallatin galvanizing line will enhance the efficiency of the supply chain feeding that mill. Similar to Construction Solutions, we have a team collaborating with those companies as they expand to provide solutions that help them reach the market more effectively and quickly.

And Timna, maybe the last comment I'd make is I appreciate that we have been green. I've been part of our company now for 25 years. I can remember when I started with Nucor at Berkeley, when we were building it, making decisions to put equipment in, that wasn't regulated, that wasn't required by state or federal law. We did it because it was the right thing to do. One of the things we've not done as good a job on is actually telling that story much more proactively, much more offensively minded and sharing our data much more openly. You're going to see a significant step for Nucor to do that. In the coming months this year, to be very transparent, again, not just verbally, but through the commitment of sharing our full Scope 1 and 2 emissions and how that impacts because we believe we can stand up to anyone in the world and also helping the industry to say, hey, we've got to do better, and we think we can.

We'll take our next question from Andreas Bokkenheuser with UBS.

I want to follow up on Seth's question regarding the scrap market, particularly for prime. I'm sure you've seen various opinions, with some suggesting a very tight prime market that could lead to higher costs for EAF producers moving forward. I think I know the answer, but what is your stance on the possibility of a tight prime market and any potential for supply relief? Additionally, from a technical perspective, if the prime market becomes very tight, do you have the capacity to use other feedstocks like DRI or pig iron in the furnaces to mitigate any tightness in prime prices?

Yes, let me start with your question, Andreas. Regarding the product mix, we do have flexibility. We primarily use various forms of prime scrap and substitutes, such as pig iron, DRI, and HBI, predominantly at our sheet mills, though some can also be utilized at our plate mills. Our supply chain is quite flexible due to many of our larger mills being located at deepwater ports, allowing for efficient shipments from both domestic and international suppliers. We regularly adjust our mix of feedstocks based on availability and costs, which is a key part of our strategic business plan. As for the long-term tightness in prime scrap markets, we anticipated this a few years ago and began constructing DRI plants, currently operating two that provide us with supply chain options. We maximize HBI usage when feasible. A common follow-up question is whether we should build more DRI plants. Currently, we don't see a need for that. Excess DRI could depress prime scrap prices, inadvertently benefiting our competitors through our own capital investments. If prime scrap prices are tight, we can leverage our DRI plants for a competitive advantage against other mini mills producing sheet steel. I suggest looking at our profits and comparing them to those of integrated mills to evaluate if we genuinely have a cost disadvantage.

No, no, no, please. I was just going to really reiterate the exact point Jim did. Let our results speak for themselves, and you can decide where the cost structure is in terms of our delivery and our performance.

That makes a lot of sense. I appreciate the answer. And maybe one follow-up question on the technical side. I mean, is there any way of saying how low you can go on prime consumption? I realize every furnace is different and so on and so forth. But I mean, can you go to 0%? Can you go 20%? Is there any way to kind of think about that going forward? Could you exclude prime altogether if you wanted to?

Yes, this is Dave Sumoski. The product mix will be very dependent. On the bar side, we typically use zero prime in almost all cases. For the sheet side, we can adjust that accordingly, but you will generally need to remain in the 30% range, although we can make some variations.

Yes. We can use substitutes at around 50%, with 30% prime and 80% of prime against 20% of obsolete.

That's very clear. I appreciate that. And then final question, just shifting gear as well. Obviously, steel prices continue to go up. Any updated kind of thoughts on capital allocation in terms of dividends, share buybacks, so on and so forth versus your commentary during the fourth quarter?

Yes. In my comments, I mentioned that for the first time we have published our targeted net debt to capital range, which is 18% to 22%. This is a new disclosure that I hope people have noticed. Currently, our net debt to capital stands at about 13%, so we are technically underleveraged. I expect that we will continue to buy back stock as the year goes on. We will be very profitable for the remainder of the year, and we will generate plenty of free cash flow, so we don't want to become more underleveraged.

We'll take our next question from Phil Gibbs with KeyBanc Capital Markets.

Question just here on the intercompany eliminations. They were obviously sizable. And I know that tends to move around. And with the inflation that we saw intra-quarter, that clearly was something that produced an outsized number. Jim, where do you expect that to shuffle as the year goes on? Did we see peak intercompany eliminations in Q1?

We did. Just a moment while I find my notes to provide you with more details. Total intercompany eliminations, specifically corporate eliminations, were $451 million. This included intercompany profits of $183 million, which is $175 million higher than the first quarter of last year and $125 million more than the fourth quarter of last year. This was a significant amount, and we anticipate it will decrease in the second quarter, although we are not targeting a specific figure. Profit sharing, which is 10% of pretax profits, was notable at $123 million, and we expect to earn more next quarter, which will increase this figure. Based on your projections, you should reallocate more funds to that pool. Other incentive compensation not related to profit sharing rose by $50 million to $60 million, and that is likely to remain in a similar range; however, in the second quarter, we grant stock compensation RSUs, which typically incurs a $20 million to $30 million expense due to timing. This expense just registered in the second quarter, so it will be an additional factor. Other corporate expenses increased by about $40 million, and I expect them to remain flat next quarter. Interest expense was $41 million, and I anticipate it will be the same next quarter.

Okay. And then as it relates to nonresidential construction, some of those leading indicators that you guys said are pointing to some growth. In 9 to 12 months, you have the lagging indicators. Well, actually, there are some that are leading as well. The starts data got hit hard last year. There are clearly parts of the nonres market that are better, to your point, deck and joist was up a lot, but rebar fab was down a lot. So I mean, help us just kind of put this together, a lot of mixed signals out there right now.

Yes, Phil, this is Chad again. You are correct. We have a portfolio of downstream businesses that cater to various markets, and some are experiencing stronger demand than others. However, overall, in our joist, deck, and building systems businesses, I see that we have record-high backlogs through the remainder of this year and are already looking ahead to next year. We are optimistic about the future in this segment. As the company starts to reopen, people are already returning to restaurants and events as more get vaccinated. I believe the commercial sector, which was strong for a long time, will rebound. I'm not certain it will return to previous levels, but there is much discussion regarding an infrastructure bill. While I'm unsure if it will actually occur, we are hopeful that it will strengthen the nonresidential market.

Yes. Phil, the only other thing I'd add is I think that your comment is accurate, but it's also relative. As you look at the restructuring Nucor has done over the last couple of years with our fabricated construction projects groups, while we don’t break out the individual profitability of certain segments, I would just tell you that their profitability and what they've contributed to Nucor is as strong as it's been maybe ever. So they're realizing some very strong returns in their businesses. Again, we expect that to continue.

Chad, I wanted to ask about rebar fabrication. We had an excellent profit quarter in that area. Although the volumes might have decreased, I believe that was mainly due to timing. Dan, could you elaborate on the strength in the rebar fabrication market?

I can certainly do that, Phil. This is Dan Needham. I appreciate the question that you gave. But actually, right now, we're sitting on record backlogs for our rebar fabrication. So the outlook in terms of demand and projects coming about is looking very good for us at this point.

I appreciate that. About 10 to 15 years ago, there was a significant increase in the use of steel 2x4s and similar products when lumber prices surged during the housing boom. Are you observing any resistance to steel in relation to wood? Would you consider switching to steel as lumber prices continue to rise dramatically? I understand that wood has captured some market share in various applications over the past 5 to 6 years, but I'm curious about your conversations regarding the challenges with lumber in the short term.

Phil, this is Dave Sumoski again. I'll start that one off. All commodities are going up in price. So the cost to build buildings with both wood and steel would be rising. And it’s going to take some time to switch back. We haven't seen any switchback yet, but we talk about it a lot and try to understand that there are some opportunities either way.

Phil, one last comment I just want to make. In the ABI, you see the numbers, and obviously, I think Leon mentioned those in the script that 55.6, one of the highest indexes we've seen since '07. But there's another marker that they published, and it's the pace of inquiries. That number is almost 67, and that is the highest number they've seen since 1999. So just the amount of inquiries coming in is a pretty strong signal to us that there is this pent-up demand to build things and to expand across many different platforms. Yes, there are certain markets that may be a little weaker or a little stronger. But overall, the view I see is it's pretty strong.

We'll take our final question in the queue from David Gagliano with BMO Capital Markets.

I would like to shift the discussion to our long-term capital allocation strategy. We have effectively addressed the immediate opportunities for restart. The greenfield pipeline is clearly outlined and is now lagging slightly behind industry standards. Nucor has adopted a more aggressive growth strategy in recent years, particularly in expanding steelmaking capacity. My question is, given the current market landscape, should we anticipate that Nucor will continue to significantly expand its steelmaking capacity similar to what we have seen with Gallatin and Brandenburg? If so, when can we expect to learn more about those plans?

Yes. David, thank you for the question. I'll kick it off. And Jim, if there's anything you want to add. Number one, we're coming off a capital campaign over the last several years of over $4 billion. Our #1 focus today is to safely and reliably bring that capacity online, which culminates with the start-up of Nucor Brandenburg in late 2022. So our very short-term focus is to execute really well and return significant amounts of capital back to our shareholders. At the same time, David, we're a growth company. We're not satisfied with the position where we're at today. So I and our team are challenged to think about where do we grow. I can tell you that we're looking hard to continue to invest in our downstream operations to position us well for the future. As I mentioned earlier, our investment strategy isn't to get bigger by volume. It's to add strategic capability and how we differentiate ourselves from our competition by doing so. Our investment in Hickman, Arkansas, to be the only EAF producer anywhere to make a full Gen 3 product for the automotive industry, is going to be a differentiator for Nucor. So we're going to continue to look hard on how we continue to grow for the long term. The investment in Brandenburg isn't a 1- or 2-year play. It's a 30- or 40- or 50-year play. As we think about the opportunities before us, again, it begins with executing really well in culminating and finishing the $4 billion sort of campaign we've been on. Then how do we think about growth and where does that need to include? I won't give much more detail other than to tell you we're looking really hard and continuing how to position Nucor for the future.

The only thing I'd add, Leon, is it's going to dovetail with what MaryEmily talked about, the idea that we have commercial strategies like serving renewables, like serving certain sectors in the marketplace. It's going to be driven partly by where we see those opportunities to better serve customers and leveraging to those markets with a portfolio that gives them a more complete solution than they can get any place else.

Okay, that's helpful. From a timing perspective, these are significant lead time projects, so when should we expect to hear more from Nucor? If there are major greenfield projects in the works, when can we anticipate more updates from Nucor?

I don't want to get too specific, but when we're ready to announce those, you'll be the first to know. We need to think through our strategy. All of our executives are focused and committed to driving growth in their areas. I am optimistic about our future and the discipline we've shown in our capital strategy, which will continue as we progress. We will be intentional, but we won't remain stagnant. We will keep growing.

Ladies and gentlemen, this concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Leon Topalian for any additional or closing remarks.

Thank you. Before we sign off, let me just say that Nucor has been preparing for years to thrive in economic conditions like the one we're experiencing now. I want to again thank my Nucor team for all you do and the focus on keeping all of our facilities running safely and smoothly so that we can all benefit from the market opportunities available to us today. Thank you to our customers for the opportunity to serve you and your needs both today and tomorrow. Through the challenges presented by the pandemic last year, we learned how resilient our company and business model are. We said repeatedly that we wouldn't just come out of this crisis. We would survive this crisis. We would thrive coming out, and here we are. I want to thank everyone for your interest in our company. We truly appreciate the support from our shareholders, customers, suppliers, communities and team. Thank you, and have a great day.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.