Steel Dynamics Sees Strong Domestic Demand in Third-Quarter 2014, Expects Growth from U.S. Shale Boom

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Dynamics Incorporated (NASDAQ: STLD) (Fort Wayne, Indiana), a leading U.S. steel producer and metals recycler, reported sharp improvement in third-quarter 2014 as a continued growth in domestic demand--especially from the improving automotive, energy and manufacturing markets--led to record volumes in fabrication and steel. The company also completed the acquisition of an Ohio flat-roll steel mill last month. Net income was reported to be $91.17 million, a 58.6% improvement from third-quarter 2013.

Industrial Info is tracking more than $211 million in active projects involving Steel Dynamics, including $165 million in expansions and improvements at the Mesabi iron ore mine and concentrator in Hoyt Lakes, Minnesota. The project involves restarting an open pit mine and constructing an onsite concentrator to supply iron ore concentrate to the Mesabi iron nugget plant, which is a joint venture between Steel Dynamics (81%) and Kobe Steel (19%) (Kobe, Japan).

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Net sales stood at $2.34 billion, a 22.35% increase from third-quarter 2013. The company's steel operations reported record quarterly shipments on the heels of automotive, energy and manufacturing market growth, as well as an improving nonresidential construction market, where shipments of structural and joist steel hit all-time highs. Steel Dynamics' metals recycling operations were negatively affected by lower nonferrous metals margins, particularly copper, although overall shipments in the segment grew.

Operating income in the company's fabrication businesses more than doubled. Among the products from steel operations to see stronger shipments were engineered steel (a 16% increase from the same period last year), rail (12%) and structural steel beams (8%).

In mid-September, Steel Dynamics completed its acquisition of Severstal Columbus LLC, a flat-roll steel mini-mill, for $1.625 billion. The deal boosted Steel Dynamics' annual steel shipping capacity 40% to 11 million tons.

"Price improvements were more pronounced for our flat-roll and structural divisions," said Theresa Wagler, the chief financial officer of Steel Dynamics, in a conference call. "Total [steel operations] shipments increase 13% over the second quarter [of 2014], hitting a quarterly record of 1.9 million tons, driven by improved long products shipments. We even would have achieved record volumes without the 175,000 tons of shipments from [Severstal] Columbus."

According to President and Chief Executive Officer Mark Millet, who also spoke in the conference call, forecasts for the major steel-consuming end markets are positive, with shipments to the automotive market expected to grow from 16.5 million to 18 million units annually over the next few years. The U.S. shale boom is also expected to boost demand for steel, as well as stalled growth in international markets like Europe, which is spurring some large energy companies to redirect spending to North America.

"We believe domestic rail consumption will continue to increase during the next three to five years, as both the replacement and new rail are required, as suggested by railroad investment forecasts, driven in large part by the U.S. energy sector," Millet said. "We plan on increase our rail shipments in parallel to this growth, and have told our rail customers that we are committed to this market and will supply up to 350,000 tons annually to meet their needs."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.