Good day, everyone, and welcome to the Nucor Corporation Third Quarter of 2018 Earnings Call. As a reminder, today's call is being recorded. [Operator Instructions]. Certain statements made during this conference will be considered 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 these 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. These forward-looking statements made on this 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 like to turn the call over to Mr. John Ferriola, Chairman, Chief Executive Officer and President of Nucor Corporation. Please go ahead.

Good afternoon, and thank you for joining us for our third quarter earnings call and for your interest in Nucor. Other members of Nucor's executive team are also on the call today, including Jim Frias, our Chief Financial Officer; Joe Stratman, our Chief Digital Officer; Craig Feldman, responsible for Raw Materials; Ladd Hall, responsible for Sheet and Tubular Products; Ray Napolitan, responsible for Engineered Bar Products; Dave Sumoski, responsible for Merchant Bar and Rebar Products; Leon Topalian, responsible for Beam and Plate Products; and Chad Utermark, responsible for Fabricated Construction Products. I will begin today's call by sharing with you the highlights from our third quarter. Jim Frias will then provide you more details about our financial performance. Nucor's strong financial performance continued into the third quarter with net earnings of $2.13 per diluted share and first nine months earnings of $5.35 per diluted share. We are on pace in 2018 to have a record year for earnings. Our financial results are evidence that Nucor was primed and ready for this long-awaited upturn in the steel market. Our strategic initiatives, including capital projects, acquisitions and enhanced customer engagement as well as our active participation in industry trade actions have solidified our market-leading performance. Our extensive investments have grown our peak earnings power and enhanced our many competitive strengths. Our growth and earnings capacity has been achieved in all three of our business segments: steel, downstream products and raw materials. These diverse earnings streams power our long-term, industry-leading returns on capital. The continued strength of the U.S. economy is the primary catalyst for our earnings growth. Tax and regulatory reform, along with a robust domestic energy sector, are driving this economy. 23 of the 24 end-use markets we monitor are experiencing stable to increasing demand. During the fourth quarter, we continued…

Thanks, John. Nucor reported third quarter of 2018 earnings of $2.13 per diluted share. Our results included a noncash impairment charge of $0.26 per diluted share after-tax related to Nucor's investment in proved producing natural gas well assets. Excluding this charge, third quarter 2018 earnings were at the high end of our guidance range of $2.35 to $2.40 per diluted share, which did not include any estimate for the impairment, as noted in Nucor's September 14 news release. Impressive earnings growth through the first nine months of 2018 has been achieved across our broad portfolio, including engineered bar, merchant bar and rebar, plate steel, structural steel, flat rolled, tubular products, joist and deck, metal buildings, cold finished bars and our raw materials businesses. Teammates throughout your company have worked hard to position Nucor for the strong conditions we are experiencing. We are encouraged by our results so far in 2018, and our focus remains on continuing to deliver the substantial payoff we expect from wisely investing our shareholders' valuable capital. Our 2018 earnings are also benefiting from the tax reform legislation that became effective this year. Excluding earnings attributable to noncontrolling interests, Nucor's effective tax rate was 24.2% for the third quarter and 23.4% for the first nine months of 2018. All of this has translated into exceptionally strong cash flow. Through just the first nine months of this year, your company generated approximately $1.9 billion of cash from operating activities or almost $6 per diluted share. As a result, Nucor's financial position remains strong. With total debt outstanding of approximately $4.3 billion, our gross debt-to-capital ratio was 29.6% at the end of the third quarter of 2018. Nucor's robust liquidity includes cash holdings of $1.9 billion at the close of the third quarter as well as our $1.5 billion…

Thanks, Jim. I would like to conclude by saying a bit more about trade. As I mentioned earlier, the tariffs are having their intended impact by curbing unfairly traded imports. They are sending the message that the United States government is serious about achieving compliance with the rules of trade, but they are also having an important long-term impact. The tariffs are providing leverage to get other countries to the table to negotiate fairer trade agreements for the U.S. We see both of the recently concluded trade agreements with South Korea and the new U.S., Mexico, Canada agreement as clear indications that the Trump administration's approach is working. We believe this new agreement with Mexico and Canada is good for the United States steelmakers and U.S. manufacturing as a whole and has important provisions that can be a model for future trade agreements with other countries. Our government has a unique opportunity at this moment to improve our trading relationships. We hope the administration continues to make the most of it, particularly in its ongoing negotiations with China. We would now be happy to answer your questions.

[Operator Instructions]. And we will take our first question from Matthew Korn of Goldman Sachs.

A question on the DRI plant. If you could help us understand a little bit, what in the original plan was not working to the extent that you needed, that now you're going to be putting in this new equipment and with this capital? And then what caused the unplanned outage over this quarter? And whatever it was, is that related to the weakness in the system that these equipment upgrades are aimed at fixing?

Okay, Matthew. Good question. I'm glad you pointed that out. When you look at the money that we're going to be investing, it's about $200 million. And it could be split up just about equally between material handling and our processed gas heater. The -- let's start with the material handling. Basically, we had a failure in the domes that's been well reported. We've discussed it often. And it's taken some time for us to go back and reengineer the material handling without the domes to be more efficient. In fact, what we're going to be doing is modeling it very much after our Trinidad operation, which has been working extremely well for us. So about $90 million of the $200 million will be spent in the area of material handling. About another $85 million will be spent on the processed gas heaters, and as we've talked about many times, that's a separate piece of equipment. I often refer to it as a heating unit, an oven, that's been separate from us. We bought it off the shelf from an outside company. And just frankly, it was not a well-engineered product that we bought. We've had many problems with an engineered well because of the way the tubes land through the oven, through the heating unit. So we're taking the time next year. It will cost about $85 million to do this, to go in there and we've passed some refractory that's been damaged as a result of the failures in the past and to reengineer, redesign the tubes in a way that we believe will be more reliable going into the future, more similar to what we use in heating units, processed gas heaters in other parts of the chemical industry. Basically, I would say 90% of the failures that we've had over the years result of either material handling failure with the domes or in the processed gas heaters. Now you asked specifically about the failure that we had in the last quarter. That was an unusual failure. It was, frankly, a human error. One of our teammates just made a mistake while he was doing a preventive maintenance function. One of those things where we're going in and hooking up, replacing an electronic component as part of our preventive maintenance programs. And during the process, a mistake was made that caused the trip that shut down the unit. And in DRI operations, whenever you shut it down, it's just a long time to put it back up no matter how simple the repair is. In this particular case, because you have to cool it down and then reheat it in a very, very specific way to avoid doing more damage to the unit. Does that answer your question, Matthew?

Yes, that does. That's actually great detail.

Let me add one more point, Matthew, if I may, and that is this. As we look forward, we think that the changes that we're making will greatly improve the reliability of this unit. So we feel very confident about what we're doing. One of the highlights, the things that we feel positive about is we had concerns early on with when we had many failures that there was something in the technology itself that was not good, that was not going to work well, that was not going to be reliable. And as we've delved into this and we've focused, as we've talked about in the past, people, process and equipment, we've discovered that the technology itself, internal to the furnace, is better than we had anticipated at the beginning. So we feel positive about that.

John, that's very helpful. Let me then follow up on this, slightly different. You mentioned in your remarks that you've been very pleased so far with the execution of the 232 tariffs and with the government's approach overall on trade. Now the government has started to open up a bit the process by which some manufacturers can request exclusions to the 232 tariffs. We answered the quotas placed on certain countries. And there are some reports coming through, I think, even today on anticipation that we'll see some adjustments made on Canada and Mexico and how the tariffs will apply there. Is there any concern that you have that this could be weakening or be poised to weaken the 232 effect that you've been benefiting from so far this year?

Well, as I've mentioned many times in the past, we consider 232 a tailwind to our performance this year. What we really believe has been driving our performance this year, it was more tax reform, regulatory reform. The trade cases that we have successfully prosecuted over the last 2 to 3 years was, of course, will not be affected by any changes in 232 and the investments that we've made in our company, growing the horsepower of our company. So as we see changes coming down the pike, we don't believe that they will have a major impact on our business now, more specifically to what we think might be happening, particularly within NAFTA. You've heard me say many times that we were ahead of NAFTA. And to have this will be good for the U.S. economy, it's been good for the U.S. steel industry. We did believe that there was some improvements needed to be made to our 20-something, 23-year-old agreement, and those adjustments were made. At the end of the day, we think that there could very well be some changes to tariffs versus quotas, not only within NAFTA, but to other countries. But what we believe is that the tariffs are achieving their primary objective, which has been to bring other countries, including NAFTA countries with external to NAFTA also, bringing countries to the negotiating table to re-examine the way that we do trade and result in a more balanced trade policies and a more level playing field on which we compete. From day one, we have said the objective that we are hoping to achieve with 232 was to result long term in a more level playing field on which we can compete because we believe Nucor will do very well when we compete on a level playing field. And we think we see that happening. Now how it exactly shifts around going forward to get to that endpoint with tariffs or with quotas, I'm not in a position to say. But what I can tell you is that we continue to work with the administration to make sure that at the end of the day, we end up with an administration that supports free but fair trade as we go forward. We think, long term, if we establish trade relationships that are built upon a level playing field, you have a much longer-term positive effect than any short-term quotas or tariffs.

And we will take our next question from Seth Rosenfeld from Jefferies.

I just have a couple of questions on the outlook for kind of near-term steel demand and its implication for pricing in the U.S., given the recent volatility you've seen in the flat market. One of your peers earlier have noted, they've seen essentially a hiatus in demand for flat products during Q3 but that their order intake has meaningfully increased in recent weeks. Just provide us a bit of color on what you've recently seen for buyer appetite, and perhaps, what they can tell us about the reception to your most recent price hike for flat steels. Let's start there, please.

Well, what we saw in the end of the third quarter was pretty historical to what we see year-after-year. We always see some time around that period of dip, an order entry bias take a little bit of a timeout to kind of see what's going on. So we assess their inventory levels at the end of the year. And as we have seen in past years, it tends to be short term with order entry picking back up very quickly, and that's what we've seen this year also. So we also saw a dip in our order entry rate. We also have seen now a pickup, a resurgence in order entry rate on our flat products, both in sheet hot and cold band galvanized. Frankly, in our plate business, we were pretty solid all quarter. We did not see a historical dip that tends to occur. So I guess, at the end of the day, what I would say is that we still see strong demand. There is strength in the marketplace. We see pricing. It has come down a little bit. Our price increase that we've put in, I guess, it was about a week ago, was followed and seems to be sticking. So we feel good about that. So we -- and as I mentioned in the script, when we go out and look at our end markets, so the 24 end markets that we serve, 23 of them are either stable or on the uptick. And many of those that are on the uptick are just at the very beginning of the up cycle, which gives us confidence going into 2019 that we'll see the continued strength in both sheet and plate products.

Just to follow-up, given that you brought up plate as well. Can you just give us a bit more color on how you view the supply-demand dynamics in that product? Plate certainly seems to have stood out positively versus other flat products in recent months. Does it have to do with import penetration, domestic demand or just the behavior of your local peers in the U.S.?

I would say more of the first two than the third. Demand has been strong. Those markets that we sell into have been very strong. And energy, well, I can't say enough about energy. I was talking about earlier with the first question, the things that are driving our business, I negated to mention energy being so strong. That's what drives our business in sheet products, obviously, in oil country tubular goods. But it also has a major impact on our plate business. So with energy being so strong, we see demand in plate being very, very strong, and frankly, imports are down. So the imports are down significantly in plate. That's probably supporting the strength in our business. You've mentioned -- you touched a little bit upon our competitors. Some of our competitors have had outages during the third quarter, and that, of course, also helps the supply-demand equation. So yes, it's been strong. We see continued strength there. We see energy being strong going into 2019. And therefore, we see our plate business as well as the component of sheet that goes into energy being strong into 2019.

And our next question comes from Timna Tanners from Bank of America.

So I wanted to talk a little bit more about your very high-quality problem of what to do with all this cash that you're generating. I know you've attribute -- you've alluded to it quite a bit. You announced a $2 billion buyback. But if we just look at your free cash flow generation, you could use all that authorization up within a year without much problem if you use a lot of it in one year. I just wanted to get a little bit more flavor of how you're thinking about the world right now with -- vis-à-vis M&A, buybacks, and of course, you do have your own organic growth projects. Listening to you talk about DRI and of course, natural gas, you couldn't have anticipated, but certainly, there has been some pitfalls with some big investments in the past. I'm wondering, like, how are you thinking right now vis-à-vis buying other assets, further organic growth and deploying this buyback program.

Well, I'm going to kick it off and talk a little bit about the first points of the cash that we are generating, and I'll turn it over to Jim and then ask him to turn it back to me and I'll address the last part of your question about how we're viewing organic growth and acquisitions in this part of the business cycle. But listen, you've heard us say this many times. Our first priority with our cash is to invest it in profitable, long-term growth, and that will be continued. That will continue to be our first and primary objective. Beyond that, if we don't have those opportunities, either through mergers or acquisitions or organic growth to invest profitably, then we will return it to our shareholders. Jim, do you want to kind of add some color to that?

Yes. I would just say, Timna, John talked about the significant number of capital projects that are organic in our pipeline. And typically, organic investment projects have the most predictable and reliable returns as a side comment. But next year's CapEx will be dramatically higher than this year's. So when we look at our cash position and our forecast of free cash flow, it's not just based on what it is today, but what it's going to be over the next 12 to 18 months. We would expect a continued return, 40% of our earnings to shareholders through a combination of dividends and share repurchases. And we meet with the board quarterly and show them what our total liquidity profile is, both in the short term and in the -- as well as what our outlook is for those things. And we have a good debate and discussion about whether it's appropriate to do something additionally for shareholders beyond just the 40%, and that process will continue. John?

I'd like to address your last comment or question about organic growth and what else we might be doing with our cash, in addition to returning some of it to shareholders, as Jim has mentioned. And as you know, it would not be appropriate, and I will not make any specific comment to any specific acquisition opportunities. But I'd like to make just some general comments. And we said this consistently before that we are always on the lookout for opportunities to strategically grow our business. We look for opportunities that fit well with our five drivers of profitable growth. And we look to be opportunistic when it comes to valuing and acquiring those assets. And when we look at investing in long-term, profitable growth, you've got to consider different times of the business cycle, which present different opportunities. And we weigh those opportunities to invest capital in our existing facilities, as what we've announced at Gallatin, against opportunities to add new greenfield operations, such as our micro mills that we've announced, and against opportunities to acquire existing businesses from others. And this should come as no surprise, but in strong markets, sellers are proud of their assets and they value them accordingly. That's why when you look at our history, we historically grow organically during the stronger markets. Now that said, we are always on the lookout for opportunistic buys, and we will continue to do that. In the end, Timna, the way I would like to say it is this, we deploy capital at whatever point we are in the business cycle in a way that creates the greatest long-term value to our shareholders. And that was a very vague and kind of long answer to the question, but we've been getting that question a lot lately, so I wanted to take the time to kind of talk about that in relation to your question about what do we do with our cash.

Okay. I appreciate it. It's a little bit of all the above. And I think that with the amount that you're generating, you have a lot of options. And I like your point about, in strong markets, organically, you have grown more in the past than the acquisitions. Well, that's interesting. Can I -- this is my second question. If I could drill down a little bit more and try to understand how to think about the raw materials segment. And I know that you just spent -- telling us about some of the projects that need to be completed at DRI, Louisiana. But it's been years of different projects, and I'm just struggling to think about, in the longer term, when do we consider that you get to the -- when will these projects finally get us to a good run rate? And how do we think about that run rate? Was the first half of the year EBIT a good run rate until the recent hiccups at your current capabilities? Is there upside to recent numbers? And when do we expect we get to that more normal operating environment?

That's a good question, Timna. I'm glad you asked it. When I was talking about the DRI, I should have done -- gone a little further into the projects, the restructuring of the raw material side and of the processed gas heater to point out the timing of this event. It will take most of this year of -- -- excuse me, 2019, to get it ready with the engineering and the equipment. We're working on it now. Engineering is done. The equipment is being built. We will be taking a 60-day downturn. Sometime towards the end of the third quarter or the beginning of the fourth quarter of 2019, we will complete the work upon the material handling side. We will complete the work in the processed gas heater. Our objective, our intention is to come up after that. We think we'll be much more reliable. Our target is to achieve 8,000 hours, which would rival our performance in our Trinidad operation. I'd like to say that when you look at the quality of the product coming out of Louisiana, it rivals the quality of the product coming out of Trinidad. So we're there in terms of product quality. We need to get there in terms of reliability. We believe that these two projects will get us there. We've actually named this endeavor project 8,000 to keep people's minds focused on the fact that we need to get to 8,000 consistently, an 8,000-hour consistent run rate. And I want to take this moment to just give a shout-out. It's not exactly to your question. But I've got to give a shout-out to our team in Trinidad. They operated 137 days in a row, which is a record, okay, for a Midrex operation. And frankly, the only thing that stopped them from going further, Timna, was an earthquake, okay? An earthquake stops them, shuts them down, and then they turned right around. And the recovery they made after that earthquake was just nothing short of amazing and got back up and operating much quicker than I anticipated. And just well done, team in Trinidad, and thank you for doing such a great job and doing it safely. Jim, did you want to add something?

No, you did it well, John. Thank you.

End of 2020, is that what you're thinking?

No. At the end of -- yes, 2020. At the end of 2019, we will come back online with what we believe will be a very reliable DRI operations in Louisiana.

And our next question comes from Alex Hacking of Citi.

I just wanted to follow up on Louisiana DRI again. You mentioned that some of the equipment is going to be modeled on Trinidad. If I remember correctly, Trinidad was built on Midrex technology, and I don't know if Louisiana was built on Midrex technology. I don't think so. Are you involved now with Midrex at Louisiana? Are they part of the solution there?

Alex, let me clarify a point you might have misheard or I misspoke. When I was referring to that, what we're modeling after our Trinidad operation is simply the material handling end, okay? We had originally had domes to store and had a conveyor system to move our material handling in Louisiana. When the domes collapsed, we went to a more manual system, and that's what we have been using for the last couple of years while we've been in the process of deciding, which is the best method to use to handle material. That is not a Midrex design. It's not an HYL design. That's a Nucor design that we've used in Trinidad for, I don't know, 10, 15 years or something like that. So at the end of all of the studying, we've decided that the way that we've handled the material in Trinidad has been very effective, and we've decided to model Louisiana's material handling after Trinidad's material handling, nothing to do with Midrex or HYL technology.

Okay. And then the second question, how concerned are you about -- like a macro question. How concerned are you about the amount of flat-rolled capacity that's coming into the U.S. market over the next 3 to 4 years? It's one of the biggest questions that we get from investors. Between your plants, your competitor's plants and a couple of restarts, there's a lot of capacity alive and people are concerned that there might not be sufficient demand. Maybe you could comment.

Well, it's interesting that you say you get that question a lot from investors. So do we. We keep hearing that in terms of what other people are doing and also, frankly, in terms of what we are doing. So let me start by talking a little bit about what some of the things that we are doing. I'd be very specific in saying, look, we're not adding capacity. We said this in the script. We don't add capacity simply to add capacity. And we're investing in our company to better serve our customers, to strengthen our competitive position and frankly, to reinvest and position our divisions for the next decade. So all of our expansion plans are being made with very, very specific, strategic objectives. So let me start with that point. Now I'm going to spend a little bit of time on this because we do get it so often. We hear from many of our investors. So let me just talk a little bit about some of the things that we're doing, why we're doing them and what we're looking to accomplish. I hear a lot about our long products plans in rebar and merchant, and this, are we concerned about that we're adding 700,000 tons of rebar to the market and 400,000 tons of perch into the market. When you look at that, you'd say, "Well, we're adding 1.1 million tons of long products into the market." But the reality is that we're realigning our position in long products and reassigning some divisions into new products, into new areas. So when you look at how we're shifting things around, okay, we are moving 400 tons of the rebar, of our current rebar, into long and SBQ, into new divisions, into new products and new divisions. At the end of the day, when you look at how we've restructured our long products in rebar and merchant bar, what we're actually adding is about 500,000 tons, okay, and actually shifting about 70% of the added milled capacity will be directed into new or higher value-added products, specifically long and SBQ. So when you look at what our long products' strategy is, we're not just simply adding into the -- additional tons into the market. We're realigning our production to better meet our customer demand in the markets. And I can't give you a better example of that than Sedalia. So let me just talk about Sedalia for a minute, okay? Sedalia is located in the middle of 900,000 rebar market, 900,000 tons. Of that 900,000 tons, 700,000 of that 900,000 tons in that market, Sedalia will have between a 350-mile and 400-mile freight advantage in shipping to their customers. That is not insignificant when you look at costs. And when you add to that fact that we are surrounding Sedalia with David J. Joseph's scrap operations that are literally within 50 miles...

75, 80 miles.

75, 80 miles of that operation, and I think we have about 10 -- 8 to 10 processing plants within...

11.

11 to be exact, okay, within 70 or 80 miles, look at the advantage that we could have from a cost perspective. And I bring this up because when we talk about overcapacity, the way to survive in an overcapacity market, if there is one, is to be the low-cost producer. So the investments that we're making on the long products side will lower our costs, bring us closer to the customers, okay, and that's a very strategic objective that we have on long products. So again, I'm going to be just very brief. I'll be quick, okay? All right. I've got my CFO, who's shaking his head at the length of my answer. But this overcapacity issue comes up over and over again. So I want to make sure that people understand. When we talk about we're adding capacity at Gallatin in hot band, it's a very specific type of hot band that we're adding, okay? It's wire, all right? It's -- we're starting out with a thicker tested slab going into it. And why is that important? Well, that gives us different physical properties. And very specifically, it allows us to move into the, what we call, the X grades, okay, which gets us into the pipe market. So the investment that we're making in Gallatin gets us into a new market, okay? The galvanizing line that we're putting in at Gallatin, it's going to be the widest hot-band galvanizing line in North America. That opens up a world of new markets for us. So I'm not going to go through every one of them or I think my CFO will hit me over the head, okay? But if you look at every specific organic growth investment that we are making in this company, it is being done…

And we will take our next question from Phil Gibbs with KeyBanc Capital Markets.

I have a question on DRI just from a slightly different angle. So this $200 million that you're spending relative to today, what type of return are you expecting to get with that capital? And then sub-question, what would it take for you to consider a second module in Louisiana?

Jim, do you want to take a shot?

Well, Phil, the return metrics are really about getting the plant to be stable and predictable and operated at 8,000-ton rate. So if we compare operating it at an 8,000-ton rate to where they've been the last 2 or 3 years, the return is tremendous. It's extremely high.

And can I add to that, Jim?

8000 hours, sorry. Thank you. My mistake, I misspoke.

And Jim makes a very good point. In addition to that, as we have more reliability in our DRI, it allows us to more strategically approach how we buy obsolete and prime scrap both, okay? So the value -- everyone tends to look at, well, what's the return on the DRI plant itself. And that's -- there's going to be a good return. But more -- I believe, more importantly, it's the value that it's bringing to the rest of the, I don't know, 18 million tons of scrap that we buy, somewhere in the neighborhood with this year, 18 million tons.

So it's actually a bit more than that. It's probably -- total metallics are probably closer to 20 million.

More. And when you look at the pig iron, okay, that we buy, that's another 3 million, 4 million tons, it allows us to strategically place our buys with a greater deal of reliability. And that's where you get the real value out of a more reliable DRI plant in Louisiana.

Yes, about our Phase 2, John.

On Phase 2? Well, we've continued to look at that. We have the infrastructure in Louisiana. At this time, we have no plans to put a second unit in. But as you heard me say in the past, I personally believe that there is going to be more of a need for alternative iron units as we continue to move up the value chain and also as the existing prime scrap continues to degrade, as it continuously recycle through the process. As I've mentioned many times before, you cannot get copper out. And the amount of copper that has grown in prime scrap is, it's up like 300% since we've began tracking it in 1990 -- somewhere in the 1990s. So between the fact that it's degrading, between -- you add the fact that manufacturing is leaving the United States, this is where we get most of our prime scrap and that with the computerization of nesting, you get less scrap even in the manufactured products within the United States. For all of those reasons, I think prime scrap is going to continue to be challenged, and pricing will continue to increase and the value of DRI will increase also.

And Jim, would it be crazy to think that the spend could be a 2 to 3 year payback, given that dramatically increased uptime potential?

Yes. I think it's probably closer to two years. They've routinely -- at least they say it's the figure on pricing market. When that plant runs well, that had real strong contributions per month, which makes me feel like that could be a two year payback versus when they have problems.

That's perfect. And I just have another -- I have kind of a somewhat of a modeling question and then a strategic question. On the modeling, should we expect any further cost pressures on refractories or electrodes moving forward? Or has the bulk of that been felt or at least the majority of that have been felt already?

I think the majority of this have been felt already, particularly when we talk about electrodes. In fact, I think as -- maybe not so much in 2019 but beyond 2019, as the needle coke situation has been resolved, production starts to come back up, I think you'll see a gradual weakening in the pricing of electrodes, refractories. We've seen some increase in pricing, but that's been relatively stable over the last 4, 5 months.

And then my -- the last question, John, is just on the strength of the cycle. Right now, I think you said 23 or 24 markets flat or increasing. What's the one right now that's been lagging out of that bucket?

Marine transportation products. For us specifically, barges. We do sell some of our plate and some structural into barge market, and that has been weak. Marine transportation is the one general market that we feel is weak.

And our next question comes from Derek Hernandez of Seaport Global Securities.

I just wanted to ask on your forward view into the end of the year in 2019 on scrap pricing for prime and obsolete.

You mean 2018?

Well, through the end of 2018 and possibly how it may evolve.

And into '19, okay. Okay.

Yes.

I would say that as we -- as is typical, towards the end of the year, you see moderate increasing in scrap pricing as seasonal issues come up. And depending on the weather, it will determine just how severe it is. So I would say we'd see a general increase in scrap pricing over the next several months through the first part of 2019. And then typically, as we see in this plan, it begins to moderate. I don't see anything radical. Barring any unusual events in the world, I don't see a major change, maybe in the neighborhood of $20, $25 on the upside over the next several months.

And if I could follow up quickly on your customers' inventories. Now that you've spoken about people coming back to market following the pricing increase last week, is there any additional detail you could give there?

When we look at -- the way I typically answer that is to refer to the months on hand with our service-side customers. And when you look at months on hand in virtually every one of our products, they are low. Not critically low, but they are lower than -- they are low. And then frankly, over the last 4 to 5 months, they have been decreasing, which is not unusual. So we feel pretty good about where the -- where our customers' inventories are at this point. We don't see a year-end oversupply in their inventories that are going to cause any problems on order entry.

And we will take our final question from Curt Woodworth from Crédit Suisse.

Yes. So I'm wondering if you could just expand a little bit more on some of the CapEx moving pieces next year. You had a comment that you think CapEx will be dramatically higher. So could you just frame some of the buckets? And would you think the bulk of the DRI spend is completed next year? In order of magnitude, are we thinking up 40% to 50% year-on-year? Just help us frame the moving parts.

We're not. We don't have a breakdown CapEx in terms of by project. We've told you what the overall -- each project individually is going to be when we announce them. But I would just say that next year's CapEx is probably going to be more than 40% higher than this year's.

We've got a lot of projects coming on. We're entering into the pace of the project where a lot of costs are incurred with equipment purchasing and so forth.

And with no further questions, I would like to turn the call back to Mr. John Ferriola for any additional or closing remarks.

Okay. Thank you. And to our customers, I'd like to say that we appreciate the trust that you place in Nucor, and we will continue to earn it with every order. To our shareholders, thank you for your continued confidence and support. And to my 25,000 teammates, I'd like to thank you for another solid quarter. The team in Charlotte appreciates the hard work you do every day to build a safer and more profitable Nucor. Thank you all for your interest in Nucor. Have a great day.

And this concludes today's conference. Thank you for your participation, and you may now disconnect.