US steel producer Nucor saw an uptick in its third-quarter earnings due to improved profits in its sheet and direct reduced iron divisions, but the company expects a significant downturn in the fourth quarter.

Nucor posted a net profit of $270 million on sales of $4.29 billion in Q3, up from a profit of $233.8m on sales of $4.25 billion in Q2. In Q3 2015, Nucor recorded a profit of $227.1m on sales of $4.23 billion, Kallanish notes.

“The profitability of our sheet mills improved due to higher average selling prices, which benefited in part from contract sales that are priced on a lagging quarterly basis,” Nucor says. “Demand for cold-rolled and galvanized sheet products remained robust, while demand for hot-rolled sheet products has weakened since the first half of the year.”

The company adds that some of the operational profits gained from its direct reduced iron facilities partially offset gains in sheet due to margin compression.

That margin compression is expected to worsen in Q4.

“Earnings in the fourth quarter of 2016 are expected to decrease notably compared to the third quarter of 2016 primarily due to lower margins in the steel mills segment, with the most significant impact being on the sheet mills,” Nucor says. “We expect the raw materials segment to return to a loss position due to the impact of lower transfer prices at our direct reduced iron facilities in the fourth quarter. The performance of our steel products segment is expected to decrease due to end of year seasonality that is typical in the fourth quarter.”