Recovery in Ferrous scrap market boosts steelmaker’s earnings

SPOKANE (Scrap Monster): Fort Wayne, Indiana-based steelmaker Steel Dynamics Inc. (SDI) has announced that the recent recovery in ferrous scrap market conditions has helped the company to post better earnings during the second quarter of 2016. The press release issued by SDI stated that import tariffs coupled with rebounding ferrous scrap market has aided the company’s bottom line performance during the quarter.

Steel Dynamics Inc. announced a net income of $142 million during Q2 2016 on net sales of $2 billion. The net sales during the corresponding quarter a year before had stood at $2 billion. However, the adjusted net income stood lower at $53 million, excluding certain inventory valuation adjustments and other costs primarily related to idling of the company’s Minnesota ironmaking operations located in Chisholm and Hoyt Lakes. SDI had generated net income of $63 million on sales of $1.7 billion during the first quarter of 2016.

According to Mark D. Millett, SDI’s president and CEO, the sequential consolidated operating earnings increased by nearly 94% to $256 million. This was mainly on account of the continued positive momentum in the flat rolled steel supply environment. The inventory levels are currently balanced with market demand. The flat rolled steel imports have dropped by almost 25% during the initial six-month period of the year, noted Millet. He further added that the domestic steel market outlook continues to remain relatively unchanged, mainly on the back of projected demand growth from automotive and construction sector.

The company’s scrap recycling operations reported good quarterly performance during Q2 2016. The metals recycling platform registered improved volumes and profitability. Ferrous scrap demand witnessed significant improvement, thereby resulting in huge volume growth. The price recovery in ferrous scrap led to meaningful improvement in profits from recycling operations. The ferrous metal margins surged higher by nearly 30%. The shipment volumes too registered considerable rise during the quarter. The operating income from metals recycling operations was $15 million during Q2 2016, as compared with $6 million in the first quarter of the year.

The company's flat roll shipments increased eight percent, and metal spread also expanded, as price improvements outpaced increased scrap costs.  Operating income from long products increased 25%, as shipments improved 14%. The company's steel production utilization rate was 95% in the second quarter 2016, compared to 88 percent in the sequential quarter. It must be noted that the domestic industry utilization rate during this period was less than 75%. Also, fabrication operations reported decline in operating income sequentially from $32 million to $24 million.

SDI’s first half consolidated operating income soared higher by 76%, mainly on the back of improved earnings from steel operations.

Steel Dynamics, Inc. is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with annual sales of $7.6 billion in 2015, approximately 7,500 employees, and manufacturing facilities primarily located throughout the United States