Electric arc furnace (EAF) steelmaker Steel Dynamics (SDI) expects customer destocking to abate because of low inventory levels.
Low inventories should reduce a long destocking trend and support steel prices, the steelmaker said today. The Argus US hot rolled coil (HRC) Midwest ex-works assessment has fallen by 27pc since its April peak to $880/short ton (st).
Orders remain "solid" from the automotive, construction, industrial, and energy sectors, the company said in a statement providing guidance on second-quarter results.
Some projects supplied by SDI's steel fabrication business have been delayed by supply chain issues and a lack of labor in the construction industry.
SDI expects second-quarter earnings to rise by 22-25pc from the first quarter, while EAF competitor Nucor said yesterday it expects profit to rise by 29-30pc from the prior quarter. Both companies expect the gains to be driven by wider steel mill margins.
Compared with a year earlier, Nucor's second-quarter guidance implies a 43-44pc drop, while SDI's guidance implies a 25-26pc drop. In the second quarter of 2022, the Argus US Midwest HRC assessment averaged $1,547/st, while first quarter 2023 prices were $909/st, and the average second-quarter price through 13 June has been $1,081/st.
So far in the second quarter, the spread between HRC and the #1 busheling ferrous scrap delivered US prices was $611/st, up by 24pc compared to the prior quarter and down by 10pc compared to the prior year's $679/st spread.
SDI expects its 3mn st/yr flat steel mill in Sinton, Texas, to be profitable in the second quarter as it continues to ramp up. The mill has had numerous issues with its operations since it melted its first coil in February 2022.
