SMU Steel Summit: Millett Sees “Good Times Ahead” for the Industry

Steel Dynamics’ top executive said he remains very optimistic about the market’s outlook, especially for the balance of 2021, but expects the trend to carry well into 2022.

“I’m really bullish,” said Mark Millett, SDI’s president and CEO, during a fireside chat at SMU’s 2021 Steel Summit on Tuesday in Atlanta. “We’re booking for December and seeing today’s prices. Strong demand will carry into 2022, there’s no shadow of a doubt.”

Millett argued that pricing will not be impacted by the added capacity coming online in the domestic market, including SDI’s new mill in Sinton, Texas. The new capacity will only offset the six million tons of integrated capacity that was permanently removed. Additional price pressure will be seen in the fourth quarter due to maintenance outages, he said.

Integrated mills have announced several outages, and some EAF mills as well, said Millett. “The outage profile will more than offset any potential seasonal demand loss or imports ticking up through the end of the year. Prices will be incredibly strong into next year. We see good times ahead.”

SDI’s new hot strip mill in Sinton, Texas, will come online in November, reaching an 80% run rate of its 2.5-million-ton capacity by the end of 2022. The paint line is fully operational, and the coating line will be running in September, Millett said.

“It’s a colossal project and our team has been fantastic,” he added. “The hot strip mill did encounter some obstacles that impacted our timeline, but we are on schedule for a November hot side start.”

Of the mill’s three million tons of annual capacity, SDI plans to sell two million in the U.S. and one million in Mexico. The steelmaker’s 2022 distribution will 30% to the spot market and 70% contractual.

Millett was unwilling to speculate on pricing, but said “the new norm” is more likely to be in line with current levels than levels seen at the beginning of the pandemic. He expects demand to be even stronger than it is now.

An already cost-effective producer, SDI’s Sinton mill will roll hot band at a lower cost than the steelmaker’s Columbus, Miss., and Butler, Pa., locations, he said.

“Our cost to melt, cast and roll is a real low number, and I would suggest that it’s $10 per ton cheaper at Sinton,” Millett said. “That’s principally a savings on alloy costs. The technology we are using at our Texas mill is a combination of electric-arc furnace and hot-strip mill. Our setup will allow us to get higher strength grades without using chemistry alloys to do it.”

Millett said that higher raw material costs, specifically scrap, tend to support finished steel pricing, and that availability will not be a problem. SDI was able to innovate and cut the prime scrap needs in its mix to 40% from 60%, saving a half million tons per year. “Just because you theoretically need four to five million tons of prime scrap, that’s not necessarily the case,” he said.

As the conversation shifted to decarbonization, Millett noted that the U.S. has by far the cleanest steel industry in the world, driven by the fact that 70% of domestic production is EAF-based. SDI has pledged to reduce its CO2 emissions by 50% by 2030, on the way to being carbon-neutral by 2050. “For SDI, 2030 is not an aspirational date, it’s not a target, its definitive,” said Millett. “We will definitely achieve that.”

Long lead times and logistical delays are still impacting business, but SDI is working to catch up on deliveries, said Millett. “By year end, we’ll be somewhat caught up…but it will be tight for some time to come,” he concluded.

By David Schollaert, David@SteelMarketUpdate.com