SDI Posts Record Q2 Profits, Sees Strong Demand into ’22

Written by Michael Cowden

Steel Dynamics Inc. (SDI) kicked off steel earnings season by posting record second-quarter sales and record profits on ballooning metal spreads.

And the Fort Wayne, Ind.-based electric arc furnace (EAF) steelmaker anticipates another record performance in the third quarter as well as strong demand into 2022.

“We remain confident that macroeconomic and market conditions are in place to support strong domestic steel demand in 2021 and beyond,” SDI Chairman and CEO Mark Millett said in comments released with second quarter earnings results after the close of markets on Monday. “We continue to see strong steel demand coupled with extremely low customer steel inventories throughout the supply chain,” he added.

SDI recorded profits of $712.2 million in the second quarter of 2021, up ninefold from $78.8 million in the same quarter last year on revenue that more than doubled to $4.47 billion in the same comparison.

The stellar performance was driven by SDI’s steel mills, where record prices for both flat-rolled steel and long products more than offset higher ferrous scrap costs.

The company posted average sales prices of $1,292 per ton ($64.60 per cwt) on steel sold to external customers in the second quarter of 2021, up 71.1% from $755 per ton in the year-ago quarter. Average ferrous scrap costs were $439 per ton in the second quarter of this year, up 65% from $266 per ton in the same quarter of 2020.

SDI does not break out prices by product, but it does provide shipment data for its flat-rolled steel mills in Butler, Ind., and Columbus, Miss. They shipped 1.51 million tons in the second quarter of this year, up 11% from the same second quarter of 2020.

“The automotive sector continues to be strong, despite the electronic chip shortage, and other sectors such as construction, equipment and transportation remain solid,” Millett said.

On the operations front, SDI is hot commissioning the paint line at its new steel mill in Sinton, Texas, and the Sinton galvanizing line is expected to be operational in August. But the hot end, as Millett told SMU earlier this month, will not start until “mid-fourth quarter” because of heavy rains in Texas.

The Sinton mill is expected to ship 100,000 tons in 2021 and approximately 2.2 million to 2.4 million tons in 2022, SDI said.

SDI invested $1.9 billion in the Sinton mill, which has the potential to make 3 million tons per year. The company plans to spend another $450 million to $500 million on two paint lines and two galvanizing lines with Galvalume capability. Two lines will be located in the southern U.S. to support Sinton, and two will be located in the Midwest. All four lines are slated to begin operations in the second half of 2022, the company said.

SDI’s earnings call will take place on Tuesday morning. The next big round of earnings announcements for steel will be on Thursday – when Nucor, Cleveland-Cliffs and Reliance Steel & Aluminum report earnings.

Nucor, an EAF producer, is the largest steelmaker in the U.S. Cleveland-Cliffs, an integrated mill, is the largest flat-rolled steel producer in North America. And Reliance is the largest metals service center in North America.

The raft of earnings reports comes amid what might be the best spot market for flat-rolled steel ever, or at least in recent decades.

Steel Market Update’s benchmark hot-rolled coil prices stood at $1,820 per ton ($91 per cwt) when this article was filed. That’s up 85% from $985 per ton at the beginning of 2021 and up nearly fourfold from $460 per ton in July of last year.

The nearest comparable price cycle was in the summer of 2008, before the financial crisis, when hot-rolled coil peaked at $1,070 per ton, according to SMU’s interactive pricing tool.

By Michael Cowden,

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