[SMM Global Steel Enterprise Special Report] A Detailed Analysis of US "Steel King" Nucor: 100% Electric Arc Furnace Forging High Profits, Vertical Integration Mitigating Cost Fluctuations Nucor Corporation is a company incorporated in Delaware in 1958. The company and its subsidiaries are engaged in the manufacture of steel and steel products. It also produces and procures ferrous and non-ferrous metal materials, primarily for use in its steelmaking operations. Most of its operating facilities and clients are located in North America. Its operations include international trading and sales companies responsible for buying and selling steel and steel products manufactured by the company and others. Nucor is also the largest recycler in North America, using steel scrap as the primary raw material for producing steel and steel products. In 2025, it recycled approximately 20 million gross tons of steel scrap. Operating Performance Data source: Nucor Corporation Annual Report、SMM Reasons behind the performance changes: ① Decline in gross profit: The primary reason for the decline in gross profit in 2025 was the compression of profit margins in the steel products segment. Due to lower average selling prices, gross profits from the grating and decking, building systems, and rebar fabrication businesses under this segment all experienced significant declines. ② Steel mill segment growth: In contrast, gross profit in the steel mill segment increased, primarily driven by higher sales and improved steel industry spreads. ③ Investment expenditures: Over the past three years, Nucor invested approximately $9.73 billion in capital expenditures and acquisitions, aiming to expand its product portfolio and enhance operational flexibility. Segments, Major Products, and Marketing Nucor reports its results in three segments: the steel mills segment, the steel products segment, and the raw materials segment. The steel mills segment is Nucor's largest segment, accounting for 62% of the company's sales to external clients for the fiscal year ended 2025. It primarily sells its products to steel service centers, manufacturers, and fabricating enterprises located in the US, Canada, and Mexico. In 2025, the steel mills segment sold approximately 19,848 kt of products to external clients. Data source: Nucor Corporation Annual Report、SMM The Steel Products segment primarily produces high-value-added downstream construction and industrial components, holding leading positions across the U.S. in multiple sub-segments including steel joists, prefabricated metal buildings, and insulated metal panels. It accounted for 29% of the Company's net sales to external clients for the year ended 2025. In 2025, total sales of major products in the Steel Products segment were approximately 1.478 million mt, including approximately 658,000 mt of steel joists and joist girders, approximately 436,000 mt of steel deck, and approximately 384,000 mt of metal building systems. Although physical sales volume (tonnage) was far below that of the Steel Mills segment, the per-mt selling price and profit margin were much higher than those of basic steel, and the segment also ranked first in market share across the U.S. in multiple areas. Data source: Nucor Corporation Annual Report、SMM The Raw Materials segment is the cornerstone of Nucor's vertical integration strategy, primarily operated through its wholly-owned subsidiary The David J. Joseph Company (DJJ), and manages DRI production facilities in Louisiana and Trinidad. By blending DRI with steel scrap, it supports electric arc furnace (EAF) production of higher-grade sheets & plates while ensuring cost advantages and supply security of raw materials. It accounted for 9% of the Company's net sales to external clients for the year ended 2025. In 2025, approximately 20 million gross tons of steel scrap were recycled and processed. Data source: Nucor Corporation Annual Report、SMM Clients and Markets Data source: Nucor Corporation Annual Report、SMM Major Development Projects in Recent Years The vast majority (91%) of Nucor's capital was allocated to internal construction (CapEx), strengthening core competitiveness through technology upgrades (such as electric arc furnaces and micro mills); a small portion was used for strategic acquisitions to achieve "outward expansion" into high-margin downstream areas. Through acquisitions such as SWDP, the company quickly entered high-barrier, high-growth sub-segments including data centers and green energy, making its business structure more resilient to cyclical downturns. Data source: Nucor Corporation Annual Report、SMM Core Logic of Vertical Integration for Cost Reduction: Raw Material Supply Structure Data source: Nucor Corporation Annual Report、SMM Core Risk Factors The greatest risk facing Nucor is a combination of internal and external challenges — internally, cost fluctuations in steel scrap and energy; externally, the impact of low-priced imported steel resulting from global (especially China's) overcapacity. Specifically: 1. Core Industry Risks ① Severe global supply-demand imbalance: Global steel surplus capacity reached 704 million net mt in 2025 (8 times US annual production). It is expected to further increase to 795 million mt by 2027. ② Regional impact: China's annual production has exceeded 1 billion mt in each of the past 8 years, and Chinese steelmakers continue to invest in new capacity in Southeast Asia and Africa. ② Import shock: This surplus leads to a flood of low-priced steel into the US market, creating significant downward pressure on Nucor's product prices, sales, and profit margins. 2. Production Cost Risks ① Steel scrap price sensitivity: Nucor uses 100% electric arc furnaces (EAF), with steel scrap being the largest cost item. Steel scrap prices fluctuate significantly and are beyond Nucor's control. ② Supply chain uncertainty: Although Nucor has achieved a degree of self-sufficiency through its DRI plants and DJJ recycling system, pig iron and iron ore pellets still rely on international procurement, facing geopolitical risks (e.g., Ukraine, Russia, Brazil). 3. Operational Challenges ① Energy-intensive nature: Steelmaking relies on large amounts of electricity (for melting) and natural gas (for heating and DRI production). ② Cost pass-through: Energy prices are affected by demand, the regulatory environment, and transmission infrastructure (pipelines/power grid), and cost surges may erode profits. 4. Compliance and ESG Risks ① Emission reduction pressure: The steel industry faces intense scrutiny due to greenhouse gas (GHG) emissions. ② Policy risk: Although Nucor's emission intensity is far lower than its blast furnace peers, increasingly stringent environmental protection laws and regulations may increase capital expenditures or restrict operations at existing facilities. 5. End-Use Market Risks ① Industry cyclicality: The steel industry is highly correlated with the macro economy. ② End-use market fluctuations: Nucor's largest market is non-residential construction. If this sector (e.g., commercial offices, industrial facilities) contracts due to high interest rates or economic recession, it will directly impact Nucor's performance severely. Copyright and Intellectual Property Statement: This report is independently created or compiled by SMM Information & Technology Co., Ltd. (hereinafter referred to as "SMM"), and SMM legally enjoys complete copyright and related intellectual property rights. The copyright, trademark rights, domain name rights, commercial data information property rights, and other related intellectual property rights of all content contained in this report (including but not limited to information, articles, data, charts, pictures, audio, video, logos, advertisements, trademarks, trade names, domain names, layout designs, etc.) are owned or held by SMM or its related right holders. 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[SMM Daily Comment: Stronger Downstream Sentiment to Push for Lower Prices, High-Grade NPI Price Center Shifted Down] May 19 — The SMM high-grade NPI upstream sentiment factor was 3.16, down 0.09 MoM, and the high-grade NPI downstream sentiment factor was 2.16, down 0.08 MoM.

SMM Morning Meeting Summary: Overnight, LME copper opened at $13,477/mt, dipped to a low of $13,436/mt in early trading, then the price center gradually shifted upward to reach $13,625/mt, and finally moved sideways at high levels to close at $13,590/mt, up 0.34%, with trading volume at 24,000 lots and open interest at 283,000 lots, an increase of 2,099 lots from the previous trading day, indicating bulls adding positions. Overnight, the most-traded SHFE copper 2606 contract opened at 104,480 yuan/mt, touched a high of 104,840 yuan/mt in early trading, then the price center shifted slightly lower to a low of 104,440 yuan/mt, and finally moved sideways to close at 104,590 yuan/mt, up 0.28%, with trading volume at 30,000 lots and open interest at 154,000 lots, a decrease of 3,110 lots from the previous trading day, indicating bears reducing positions.

[SMM Cast Aluminum Alloy Morning Comment: ADC12 Generally Stable with Slight Fall amid Tug-of-War between Sellers and Buyers] Last Friday, the ADC12 market overall operated in a generally stable with slight fall manner. Some enterprises followed with slight declines driven by weakening aluminum prices, while others maintained a wait-and-see stance with stable pricing due to high costs and tight compliant supply. Supply-demand structure perspective, demand side performance remained mediocre, suppressing price rise; however, the supply side saw marginal tightening due to factors such as invoice shortages, import contraction, and phased production cuts, providing certain support for prices. Against this backdrop, ADC12 prices are expected to continue to move sideways in the short term, with relatively limited downside room.

After pushing to fresh highs in early May, Chinese Nickel Pig Iron prices have begun retreating as every pillar that supported the late-April surge — refined nickel, stainless margins, and scrap economics — starts to weaken simultaneously.

SMM 10-12% high-grade NPI average price fell 4.5 yuan/nickel unit WoW to 1,146 yuan/nickel unit (ex-factory, tax included), while the Indonesian NPI FOB index average price rose 0.97 $/nickel unit WoW to 147.75 $/nickel unit. This week, the high-grade NPI market overall hovered at highs, with significant divergence between sellers and buyers. The price center shifted slightly lower amid the tug-of-war between cost support and weak demand, and overall market sentiment was subdued.

[SMM Stainless Steel Scrap Market Weekly Review] Weak Futures Dragged Down Stainless Steel Scrap, Cost Advantages Underpinned the Market This week, prices of 304 stainless steel scrap off-cuts in east China pulled back, with the quotation range at 10,600-10,700 yuan/mt; prices of the same-spec stainless steel scrap off-cuts in Foshan held steady, with the price range at 10,400-10,700 yuan/mt. From a raw material production cost perspective, the cost of producing stainless steel entirely from stainless steel scrap was approximately 14,821.71 yuan/mt, while the cost of production entirely using high-grade NPI reached 15,173.94 yuan/mt. Stainless steel scrap prices declined and pulled back this week. SS futures were generally in the doldrums, with futures continuously under pressure, which in turn transmitted to the spot market, driving spot stainless steel finished product prices to pull back in tandem. The alternative raw material high-grade NPI also declined simultaneously, but its own raw material fundamentals remained relatively firm, limiting the price drop. As stainless steel spot prices trended downward, steel mills still retained certain smelting profits, production willingness stayed high, and steel mill production schedules showed no reduction. Meanwhile, with the limited decline in high-grade NPI, the cost advantages of stainless steel scrap relative to high-grade NPI became more prominent during the week. Even though industry tax invoice issues persisted, they did not affect steel mills' procurement pace, and procurement demand for stainless steel scrap with better cost advantages remained solid. Overall, the stainless steel scrap market this week exhibited a pullback pattern characterized by "weak futures, resilient raw materials, and demand underpinning." Bearish futures dominated the short-term trend, but rigid demand and cost price spread advantages formed strong support. Tax invoices...

[SMM Analysis] Macro Sentiment Weighed on Futures, Stainless Steel Profits Narrowed Amid Raw Material Divergence Stainless steel production costs pulled back this week, and steel mill profits narrowed, with profit divergence driven by differing raw material inventory costs. Using 304 cold-rolled as the calculation benchmark, the profit margin based on current raw material costs was 1.87%, while the profit margin based on low-level inventory raw material costs was 4.48%. Overall industry profitability remained moderate, steel mills maintained high production schedules, and operating rates stayed stable. Nickel-based raw material costs: Nickel-based raw material prices came under pressure this week, largely driven by futures sentiment. SHFE nickel and stainless steel futures declined consecutively, pulling high-grade NPI market prices down in tandem. However, cost support in the NPI industry remained strong, with widespread firm-pricing sentiment across the market. Additionally, high-grade NPI sources with higher nickel content were scarce within the industry, resulting in structural price divergence in NPI, with prices for high-grade NPI above 12% grade remaining firm. As of this Friday, mainstream 10-12% grade high-grade NPI fell 6 yuan per nickel unit, closing at 1,145 yuan/nickel unit. Stainless steel scrap market: Stainless steel scrap prices pulled back this week. SS futures trended weaker, dragging spot prices lower in tandem. Although high-grade NPI also declined, the drop was limited, highlighting the cost advantage of stainless steel scrap. Steel mill smelting profits remained moderate, production schedules stayed high, and procurement demand remained solid. The overall picture showed "weak futures, resilient raw materials...

[SMM Daily Comment: Tight Supply Supported Prices, Weak Demand Formed Resistance] On May 15, the SMM high-grade NPI upstream sentiment index was 3.34, down 0.03 MoM, and the high-grade NPI downstream sentiment index was 2.3, down 0.03 MoM.

[SMM Stainless Steel Daily Review] Macro Disturbances Dragged SS Futures Lower; Low Inventory Pressure and Rigid Demand Supported Stainless Steel Spot Prices SMM, May 15 — SS futures continued to be in the doldrums. Non-ferrous metal futures extended the previous day's decline, and SS also fluctuated downward in tandem. As of the morning close, the most-traded SS contract was quoted at 14,825 yuan/mt. Spot market side, dragged by the persistently weak SS futures, stainless steel spot prices pulled back in tandem. However, stainless steel social inventory has been on an overall downward trend recently, and traders faced relatively small shipment pressure. Market confidence remained stable, and price declines were relatively limited. The most-traded SS contract fell and pulled back. At 10:15 AM, SS2605 was quoted at 14,890 yuan/mt, down 60 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area were in the range of 380-680 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi remained flat; for cold-rolled untrimmed 304/2B coils, the average price in Wuxi fell 100 yuan/mt, and the average price in Foshan fell 100 yuan/mt; cold-rolled 316L/2B coils in the Wuxi area held steady; hot-rolled 316L/NO.1 coils were quoted stable in Wuxi; cold-rolled 430/2B coils in both Wuxi and Foshan held steady. The stainless steel market was dragged by the weak and volatile futures, with notable downward pressure, but overall spot price declines remained limited, highlighting the divergence between futures and spot. Downstream end-users adopted a cautious wait-and-see stance due to macro uncertainties, with no concentrated restocking observed. However, rigid demand purchases remained solid, and the resilience of rigid demand provided a foundation for spot prices...