Steel Mills

SDI sees lower Q4 earnings, but steel order activity 'solid'

Written by Ethan Bernard

Steel Dynamics Inc. (SDI) expects lower fourth-quarter earnings compared to the third quarter and to the fourth quarter of 2022, according to guidance released on Friday.

The Fort Wayne, Ind.-based steelmaker said it expected Q4’23 earnings to be in the range of $2.60 to $2.64 per diluted share. This is down from Q3’23 earnings of $3.47 per diluted share and from Q4’22 earnings of $3.61 per diluted share.

SDI said Q4 earnings at its steel operations were expected to be lower than Q3 results because of “metal spread contraction.” In other words, lower flat-rolled steel pricing in the quarter “more than offset lower scrap costs,” the company said.

Recall that spot prices for steel sheet moved sharply higher in Q4. But contract prices, which account for much of mills’ orders, follow spot prices on a lag.

What does that mean in practical terms? Low prices in Q3 flowed through to contract prices in Q4. The same dynamic means that higher spot prices in Q4 should lift contract pricing in Q1.

The good news? “Steel order activity remains solid as evidenced by extended order lead times and recent pricing increases heading into the first quarter of 2024,” SDI added.

SDI expects Q4 earnings at its metal recycling operations to be “comparable” to Q3. The company noted that scrap demand from US steel mills declined because of maintenance outages in Q4.

Regarding its steel fabrication operations, SDI expects a drop in Q4 earnings vs. the previous quarter. The company pointed to lower shipments, higher steel input costs, and lower selling prices.

One bright spot: SDI said steel joist and deck order activity improved during Q4 compared to Q3 and that “pricing has stabilized” in that segment.

The company plans to release Q4’23 and full-year earnings after market close on Tuesday, Jan. 23. A conference call will follow the next day at 11:00 am ET.

Ethan Bernard

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