SDI says ferrous scrap prices stabilized, looks to aluminum to boost future operations

Operating income from Steel Dynamics’ (SDI) recycling operations clocked in higher in the second quarter than it did in the first, despite lower realized pricing, due to increasing volumes.

Recycling operations brought in $32.1 million, an increase over $22.6 million in Q1, but lower than the $40.3 million last year, the Fort Wayne, Indiana-based company said Thursday.

Barry Schneider, president and COO, credited demand from North American steel producers driving demand for ferrous scrap, which compensated for lower prices.

Still, customers hesitated to place orders due to price pressure, the company noted.

Overall, the steelmaker reported net earnings of $428 million in Q2’24, down 47% from $812 million a year earlier on net sales that slid 9% to $4.63 billion.

“We believe ferrous scrap prices have stabilized and should remain relatively stable through the rest of the year subject to seasonal moves,” Schneider said. “The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating customers.”

Schneider said the metals recycling team is “partnering even more closely with both our steel and aluminum teams to expand scrap separation capabilities through both process and technology solutions. This will help mitigate potential prime ferrous scrap supply issues in the future. It will also provide us with a significant advantage to materially increase the recycled content in our aluminum flat rolled products and increase our earning potential.”

SDI noted progress on its aluminum flat-rolled products mill construction in Columbus, Miss. That facility, with capacity of 600,000 metric tons, is expected to begin operations in mid-2025. The mill will be supported by a recycled slab center in Arizona and another in San Luis Potosi, Mexico.

“We want to reaffirm the total project costs at $2.7 billion, of which $1.5 billion has already been invested through June of 2024,” said Theresa Wagler, executive vice president and and CFO. “For the remainder of 2024, we expect to invest another $900 million in aluminum investments. And finally, in 2025, the remaining $250 million.”

In January, SDI had revised the project price tag upward from $2.2 billion due to rising costs.

SDI is the largest metals recycler in North America.

“From an investment premise perspective, I think the market environment today in aluminum is similar to the domestic steel industry when we started SDI 30 years ago,” said Mark Millett, chairman and CEO. “It has older assets that has heavy legacy costs, the mills are somewhat inefficient and high-cost operations.”

“Different though than the steel environment 30 years ago is that there’s an absolute supply deficit which exists in the market in North America, and that deficit is likely to grow,” Millett continued, noting the investments are “a high-return growth opportunity for us.”