Steel Mills

Steel Dynamics Reports Record Income in Q3
Written by Sandy Williams
October 18, 2018
Steel Dynamics announced record financial results for third-quarter 2018. Sales for the quarter totaled $3.2 billion for a net income of $398 million compared to prior-year third-quarter sales of $2.4 billion and net income of $153 million.
“Our third-quarter 2018 income from operations of $532 million and adjusted EBITDA of $626 million were both record highs for the company,” said Mark Millett, President and CEO. “Our strong financial performance was the result of record steel shipments, average steel selling price improvement, and resulting metal spread expansion across our steel operations. Underlying domestic steel demand remained strong. There was some temporary hesitancy in flat roll order activity based on customer sentiment and increased hot roll coil import levels. However, demand from major steel consuming sectors was steady, including construction, automotive, and energy.”
Steel fabrication saw record shipments and improved selling values, but was offset by continued high steel input costs. Operating income declined by $1 million from the second quarter to $13 million. Fabrication backlogs were at a near-record high moving into October, said CFO Theresa Wagler.
Earnings in the metals recycling division declined to $18 million from $26 million in the second quarter, due primarily to lower shipments and pricing in the nonferrous operation. A ban by China on certain grades of recycled material also negatively impacted nonferrous sales volume.
Integration of the Heartland flat-rolled acquisition is going well, the company said, and SDI expects to reach an annual run-rate of about 800,000 tons by mid-year 2019.
The new $140 million galvanizing line at Columbus Flat Roll is expected to begin operating in mid-year 2020. The diversion of some of the painting and coating capability to value-added products at Columbus reduced volume available to existing galvanized customers, justifying the addition of the third line. Additional investments at Columbus will increase the range of complex grade capabilities and improve the process control needed to produce advanced high-strength steels for the automotive and energy market, the company said.
Long product steel operations will see an investment of over $80 million to utilize excess melting capacity at the structural rail division that will add 240,000 tons of rebar to the annual production.
“We remain confident that macroeconomic and market conditions are in place to benefit domestic steel consumption in 2019,” said Millett. “Based on strong domestic steel demand fundamentals and customer optimism, we believe steel consumption will continue to be strong.”
Millett said during the earnings call that he was confident that the market will be able to absorb new capacity from Steel Dynamics and its competitors, particularly with the reduction in imports due to U.S. trade measures.
During the earnings conference call Millett said he believed that the Section 232 measures are working and providing the domestic steel industry with a more level playing field. Steel imports levels are expected to continue to erode. When asked if SDI has a preference toward tariffs or quotas for Canada and Mexico, Millett said quotas would be preferable because they support the manufacturing base. The U.S. still requires some imports and quotas are a better way of controlling the volume entering the country.

Sandy Williams
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