Worthington Steel maintains cautious optimism through market uncertainty

“Our team deserves high praise for their ability to collaborate with our suppliers and customers this quarter as they manage through potential supply chain disruptions due to the idling of several mill locations,” he commented. “They worked hard to ensure an uninterrupted supply for our customers.”

Market share gains in automotive

Worthington Steel shipped 982,000 tons in the quarter, down 5% year over year (y/y). Sales declined 9% to $833 million, primarily due to lower prices and softer tolling volumes.

“Customers continued to navigate uncertainty during the quarter,” remarked CFO Tim Adams.

Still, the company noted that automotive was a standout, with shipments to the sector up 5% from the previous year.

Gilmore attributed the strength to market share gains.

“We picked up significant market share in automotive,” he stated. “And we will continue over the next few quarters to see that additional market share trickle in.”

Adams said the additional automotive volumes more than offset the challenges currently facing one of its Detroit Three OEM customers.

“We continue to be optimistic the OEM is making progress towards optimizing their commercial strategy, leading to a more normal build schedule later in calendar 2025,” he added.

Heavy truck volumes also increased in the quarter, driven by gains in market share.

The y/y gains in automotive and heavy trucks, however, were offset by a 5% decline in construction volumes and a 40% drop in agricultural volumes amid “expected softness” and heightened competition, Adams said.

Galvanized market shifts

Gilmore said galvanized vs. HRC spreads remain compressed as demand softens and supply increases. Indeed, according to SMU’s calculations, the spread this past week was only slightly higher than the lowest levels of the past two years.

“Demand has been a bit muted across several markets that use a lot of galvanized,” Gilmore commented. He also noted the increased supply, with elevated import levels and 4.5 million tons of new galvanizing capacity.

Things could be changing, though.

While the previous 25% tariffs had little impact on imports or pricing, according to Gilmore, the new 50% rate could be different. “Raising that to 50% certainly will [have an impact],” he said.

Additionally, he believes imports will be further limited by the ongoing coated steel trade case.

Adams noted that, “With the recent announcement of 50% tariffs on imported steel, we may see additional upward pressure on steel prices.”

He said the company expects to realize inventory holding gains of $5 million to $10 million in the current quarter, tied to lagging index pricing.

Outlook

Looking forward, Gilmore is cautious but upbeat.

“Our base business has never been stronger,” he said. “As we work through some of the headwinds that we faced, we are well-positioned to take advantage of any opportunity in the growth that’s coming.”

He reiterated the company’s “cautiously optimistic” stance, with the expectation that infrastructure spending, tariff clarity, and an automotive recovery will support better spreads and volumes in the coming quarters.