Stelco Back in Black in Q1 on High Steel Prices, Increased Tons

Written by Michael Cowden

Canadian flat-rolled steelmaker Stelco swung to a profit in the first quarter and expects high steel prices and sales volumes to galvanize results for the balance of the year.

“All signs point to continued robust demand and strong pricing in the near term,” Stelco Executive Chairman and CEO Alan Kestenbaum said in a statement released with earnings data after the close of the market on Tuesday, May 4.

The integrated steelmaker recorded a profit of Canadian $119 million ($96.7 million) in the first quarter of 2021 versus a loss of C$24 million ($19.5 million) in the year-ago quarter on revenue that rose 49.4% to C$665 million ($540.5 million) over the same period, per first quarter earnings figures.

The jump back into the black came as average selling prices rose to C$959 ($789) per ton in the first quarter of 2021, up 36% from C$705 ($573) per ton in the first quarter of 2020.

Sales volumes were 675,000 tons in the first quarter of this year, up 8.7% from 621,000 tons in the same quarter last year. And gains were even more pronounced for higher value coated products, of which Stelco shipped 140,000 tons in the first quarter, up 25% from 112,000 tons in the first quarter of 2020.

The increase in tonnage sold came thanks in part to upgrades made to the “smart” blast furnace at Stelco’s Lake Erie Works in Nanticoke, Ontario. The investment resulted in higher hot metal and steel production, the company said.

Stelco also commissioned a new pig iron caster at its Lake Erie Works on Jan. 28, 2021, with annual capability of one million tons per year. The addition will allow the company to “re-shape the pig iron market in North America” by providing high-quality iron units to the region’s “expanding, but scrap constrained, electric-arc furnace steel (EAF) sector,” Kestenbaum said.

EAF mills have been adding capacity at a rapid clip in the United States, a development that some industry experts say could result in a shortage of prime scrap, the raw material needed to make high-quality finished steel products such as hot-rolled coil. Pig iron and other scrap alternatives such as direct-reduced iron (DRI) and hot-briquetted iron (HBI) could be used to help fill any void.

Stelco is also upgrading its coke battery while building a new electricity cogeneration facility, the company said.

“As we continue to generate cash, we are now beginning to turn our attention towards capital allocation decisions, which are available to us to continue to build shareholder value,” Kestenbaum said.

Given the forward curve for hot-rolled coil on the CME, Stelco could record adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of more than C$2 billion ($1.63 billion) in 2021, company Chief Financial Officer Paul Scherzer said.

“We have not historically issued guidance, other than shipments, but want to impress upon the market the earnings power of Stelco,” he said.

By Michael Cowden,

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