Canadian steel producer Stelco reported stronger sales in the second quarter despite market headwinds, posting revenue of $411 million. Net income was nil compared to a net profit of $1 million in Q2 2019 and a net loss of $24 million in Q1 2020. Adjusted net income was $10 million, up from $6 million a year ago. (All figures are Canadian, 1 CAD equals 0.75 USD.)
Revenue decreased 4.0 percent year-over-year due to a decrease in average selling prices that was partly offset by a 6.0 percent jump in shipping volumes to 576,000 tons. Average selling price was $700 per net ton in Q2. Shipments of value-added cold roll and coated products were up 44 percent to 124,000 net tons compared to a year ago.
Compared to the first quarter of 2020, revenue fell 8 percent due to a 7.0 percent decrease in shipping volumes and a 1 percent decline in average steel selling prices.
The company began a 75-day upgrade reline of its blast furnace at Lake Erie works on July 17 that is expected to improve cost structure and increase steelmaking capacity by 300,000 tons annually.
“The completion of this project will represent the third strategic milestone that we have reached in 2020,” said Executive Chairman and CEO Alan Kestenbaum. “To date we have successfully increased our penetration in downstream, value-added markets and, as we announced last quarter, we secured [from U.S. Steel] a long-term supply of competitively priced high-quality iron ore as well as an option to purchase a 25 percent ownership interest in the Minntac Mine – the largest and lowest cost iron pellet mine in our region.”
Stelco has resumed work on the installation of a pig iron casting facility that is expected to be running by year end. “We are undertaking this project due to what we see as a strong market for iron units and our expectation of additional hot metal capacity through the blast furnace project,” said CFO Paul Scherzer.
Additionally, the company entered into an agreement with DTE Energy Service to develop, construct and operate a 65-megawatt cogeneration facility at Lake Erie Works. The facility will consume byproduct fuels from the blast furnace and coke battery reducing Stelco’s greenhouse gas footprint and electricity costs, said Kestenbaum.
“I am exceptionally proud of what the Stelco team has been able to accomplish during these unprecedented times,” added Kestenbaum. “Once again, we expect to be sold out in the third quarter, benefiting from increased demand from almost all of our key end-markets, albeit at about half of our normal shipping level due to the blast furnace upgrade project. We expect to complete this project by the end of this quarter, positioning us for substantial growth in the fourth quarter in terms of production.”
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