SDI Posts Record Profits (Again!) in Q3 on High Steel Prices

Steel Dynamics Inc. (SDI) posted yet another new quarterly profit record on record-high flat-rolled steel prices.

And the Fort Wayne, Ind.-based electric arc furnace (EAF) steelmaker thinks that the record times could roll into the fourth quarter as well.

“Domestic steel demand remains solid in our automotive, construction, and industrial end markets. We believe this momentum will continue and that our fourth-quarter consolidated earnings could represent another record performance,” SDI Chairman and CEO Mark Millett said in comments released with earnings data after the close of markets on Monday, Oct. 18.

All told, SDI recorded net income of $990.8 million in the third quarter, up 41% from $702.3 million in the second quarter on sales that rose approximately 14% to $5.09 billion sequentially.

Third-quarter profits were also nearly 10 times higher than net income of $100.1 million in the third quarter of 2020. The new quarterly record is significantly more than the $550.8 million SDI made for the entire year in 2020 and more than the $671.1 million it made for the full year in 2019.

“Higher realized steel selling values drove significant metal spread expansion and were again most prominent within our flat roll steel operations,” Millett said.

Metal spread refers to the difference between steel selling prices and raw material costs.

SDI recorded average steel selling prices of $1,550 per ton ($77.50 per ton) in the third quarter of 2021, up nearly 20% from $1,292 per ton in the second quarter and more than double $734 per ton in the third quarter of last year.

Raw material gains were more modest.

Average ferrous costs per ton melted were $489 per ton in the third quarter, up $50 per ton from $439 per ton in the second quarter – or well below the $258-per-ton gain in steel selling prices over the same period.

“Ferrous scrap prices moderated in August and September after rising early in the quarter. The company anticipates ferrous prime scrap pricing indices to increase slightly for the remainder of the year, after also declining in October,” SDI said.

But while flat-rolled steel prices were up sharply in the third quarter, shipments were down modestly.

SDI’s flat-rolled steel mills in Butler, Ind., Columbus, Miss., and Sinton, Texas, shipped 1.44 million tons in the third quarter of 2021, down 4.6% from 1.52 million tons in the second quarter, and down 4% from 1.50 million tons in the third quarter of 2020.

On the operations side, SDI continues to expect that the hot end of its new steel mill in Sinton will start before the end of 2021. The company estimates that shipments from Sinton will be approximately 2.0 million to 2.2. million tons in 2022.

SDI has also decided where to locate a $500 million investment in four flat-rolled steel coating lines – comprised of two paint lines and two galvanizing lines with Galvalume® capability. One set will be placed at the new mill in Texas, and the other two will be located at SDI’s Heartland flat-rolled steel processing operation in Terre Haute, Ind.

All four lines are scheduled to begin operating in mid-2023, the company said.

By Michael Cowden, Michael@SteelMarketUpdate.com