Market Segment
SDI Expecting Strong Market Dynamics
Written by Sandy Williams
September 18, 2018
Steel Dynamics is expecting third-quarter profitability to exceed second-quarter results, based on strong underlying demand and meaningful metal spread expansion. Average price for steel products is outpacing scrap costs for the quarter resulting in increased profitability for SDI’s sheet and long product steel operations.
“Based on strong steel demand fundamentals and customer optimism, the company believes steel consumption and market dynamics will remain strong,” said Steel Dynamics in its third-quarter guidance.
Metals recycling profits are expected to decline from the second quarter as a result of lower shipments and scrap pricing. Third-quarter ferrous scrap volumes and metal spreads are expected to remain stable based on steady domestic steel utilization.
Steel fabrication results will be in line with second-quarter results. Increased shipments and higher average prices in Q3 will be offset by higher steel input costs. Orders remain strong for steel fabrication, said SDI, and backlogs continue to increase.
SDI forecasts earnings in the range of $1.60 to $1.64 per diluted share and will be impacted by an estimated charge of $13 million associated with the company’s acquisition of Heartland. In comparison, second-quarter earnings were $1.53 per diluted share and $0.64 cents per diluted share in Q3 2017.
Steel Dynamics also announced on Tuesday the completed purchase of Kentucky Electric Steel. The currently idled rolling mill near Ashland, Ky., has an annual capacity of 250,000 tons. SDI plans to reopen the mill in November 2018 and operate it as part of the Steel Dynamics’ Steel of West Virginia operations. The acquisition will add flats and specialty alloy bars to SWVA’s portfolio.
“KES has been a loyal customer of our SWVA and Roanoke Bar divisions,” stated Glenn Pushis, Senior Vice President, Long Products Steel Group. “We believe that the complementary product offerings will provide value to our customers. We currently anticipate that roughly 100,000 to 150,000 tons of billets will be shipped each year from our long products steel mills to be further processed at Ashland, providing additional value-added capability and higher through-cycle utilization for our steel mills.”
Sandy Williams
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