Steel Dynamics Texas Mill Outage Could Take $45M Bite from Earnings
Steel News | 2023-07-11 12:05:30
Sinton had achieved a utilization rate of ~56% as of Q1 results, and management has been targeting an average 2023 utilization rate of ~80%, which would indicate utilization pushing above 80% in H2.
By Paul Ploumis
SEATTLE (Scrap Monster): Steel Dynamics' (NASDAQ:STLD) unplanned outage at its flat roll steel mill in Sinton, Texas, may cause a $45M hit to segment EBIT, J.P. Morgan analyst William Peterson said Monday.
The outage, expected to last 3-5 weeks, comes "during a pivotal time in the steel price cycle where mills in late June attempted price hikes to 'stop the bleeding' after benchmark hot rolled coil fell 27% since April's peak of $1,175/ton," Peterson said, noting the mill has faced numerous production issues during its lengthy ramp.
Sinton had achieved a utilization rate of ~56% as of Q1 results, and management has been targeting an average 2023 utilization rate of ~80%, which would indicate utilization pushing above 80% in H2.
J.P. Morgan continues to rate Steel Dynamics (STLD) at Underweight with an $82 price target, seeing the stock as a premier company in the steel space but with a view of weakness in its largest end market in non-residential.
Peterson thinks earnings could remain strong through Q2-Q3 but with 2024 likely facing declining free cash flow and shareholder returns, as well as a correction in Steel Fabrication outperformance.
Courtesy: www.seekingalpha.com
