Steel Mills

SDI Posts Q3 Profit Drop on Lower Steel Prices

Written by Michael Cowden

Steel Dynamics Inc. (SDI)

Third quarter ended Sept. 3020232022% Change
Net sales$4,587.1$5,651.7-18.8%
Net income$577.2$914.3-36.9%
Per diluted share$3.47$5.03-31.0%
Nine months ended Sept. 30
Net sales$14,561.9$17,434.5-16.5%
Net income$2,026.6$3,227.8-37.2%
Per diluted share$11.98$17.21-30.4%
(in millions of dollars except per share)

Steel Dynamics Inc. (SDI) reported a drop in third quarter profits on lower prices for flat-rolled steel as well as for fabricated products.

The Fort Wayne, Ind.-based steelmaker posted net income of $577.2 million in the third quarter of 2023, down nearly 37% from $914.3 million in the same quarter last year.

Net sales fell approximately 19% to $4.59 billion over the same period, according to earnings released on Wednesday after the close of markets. (See chart above.)

Sinton Unplanned Outage Hits Shipments

SDI’s sheet mills – one each in Butler, Ind.; Columbus, Miss.; and Sinton, Texas – shipped 1.74 million tons in the third quarter of this year, down 1.7% from 1.77 million tons in the year ago quarter.

The dip stemmed in part from an unplanned outage at Sinton in July, which resulted in approximately 90,000 tons of lost production, the company said. That is more than the 50,000-70,000 tons SDI initially expected to lose from the outage.

SDI predicted that Sinton would reach approximately 65-70% capacity utilization by the end of the year. In July, the company said Sinton would reach an 80% run rate by year end.

Sheet Prices Stabilized in Sept.

On the price front, SDI recorded average external sales of $1,191 per ton ($59.55 per cwt) in Q3’23, down 13.8% from $1,381 per ton in Q3’22. Note that average includes not only flat-rolled steel but also long products such as rebar and rail.

Despite those headwinds, demand was steady and shipments (Sinton outage aside) consistent. The quarter also benefited from low customer inventories and steel prices that stabilized in September, SDI chairman and CEO Mark Millett said in commentary released with earnings figures.

SMU data reflects both trends. Service center inventories were lower in September, even if material on order was high. And prices bottomed out in September following a sheet price hike announced by SDI competitor Cleveland-Cliffs and quietly followed by other sheet mills.

Sheet prices have continued to tick upward since. SMU’s average hot-rolled coil price stands at $725 per ton, up 12.4% from a September low of $645 per ton. Note also that the low end of our range dropped as low as $600 per ton last month.

Millett said higher prices have been supported by “customer concerns over potential lack of flat-rolled steel availability in the fourth quarter.”

SDI Bullish on Long Term, Aluminum Mill on Track

Looking forward, SDI remains “constructive” on North American steel market dynamics. “Customer order entry activity continues to be solid across our steel operations, as demand continues to be steady and customer inventories remain at low historical levels,” he said.

The coming years should also be positive for steel demand and for steel prices. That’s thanks to supportive long-term trends such as reshoring and infrastructure spending, Millett said.

SDI should in addition benefit from increased demand for steel produced with fewer carbon emissions, something that should result in lower imports, he added.

On the operations front, SDI continues to make progress on its new flat-rolled aluminum mill and related slab-casting facilities. Orders for all “critical equipment” for the rolling mill have been placed, Millet said.

SDI will build the aluminum rolling in Columbus, where it also operates a sheet mill. Ground for the facility was broken earlier this year. It is expected to start operations in mid-2025 under the name Aluminum Dynamics.

Michael Cowden

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