Steel Dynamics' Profit Soars 92% Despite Steep Drop in Ferrous Scrap Prices

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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite a large drop in ferrous scrap prices, Steel Dynamics Incorporated (NASDAQ:STLD) (Fort Wayne, Indiana) announced on October 16 that its third-quarter 2008 profit jumped 92% to $193 million, compared with $101 million in the same period last year. The increase is attributed to strong revenues and the company's recent acquisition of Recycle South. In September, prime scrap prices dropped $300 per ton, which led to lower operating profit for Steel Dynamics, the company said in a statement. "It should be noted that had the steep decline in scrap prices not occurred, our third quarter could have, in fact, been a record quarter for the company, despite the difficulties of the U.S. economy," Chairman and CEO Keith Busse said.

The company is on schedule with capacity upgrades at three Indiana steel mills: Columbia City, Butler and Pittsboro. As part of the North American Project Database, Industrial Info is tracking all of these projects, worth a combined $121 million. Upon completion, the Columbia City mill will be able to cast and roll at least 2 million tons per year. The Pittsboro mill's capacity will increase to 750,000 tons per year, and the Butler mill's capacity will rise to 3 million tons per year. Steel Dynamics also said construction on the Mesabi Nugget plant in Hoyt Lakes, Minnesota, is progressing smoothly. Industrial Info has been tracking the project since 2001. The initial phase is expected to be complete in the fourth quarter of 2009, and phases II and III are expected to be complete in 2012 and 2014, respectively.

Busse said he expects the company to still feel the effects of the large decrease in scrap prices in the last quarter of the year. "Normal margins should return to health in the November-December timeframe, but volumes could be lower, with anticipated further improvement in the first quarter of 2009," he said in a statement. However, he said, "The bright side of this recent significant decline in ferrous scrap prices is that with lower scrap costs, raw material costs at our steel operations will be significantly lower."

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Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.