SDI profits to drop on lower steel, scrap prices

US steelmaker Steel Dynamics (SDI) expects lower pricing for its finished steel and metals recycling division to reduce profits in the third quarter.

The company said fewer shipments and lower average pricing impacted its steel sheet operations compared to the second quarter, outweighing the benefits from falling scrap prices, strong demand from the construction industry and steady demand from other sectors.

US hot-rolled coil (HRC) prices fell to an average of $577/st ex-works Midwest for the third quarter of 2019 to date, down from $630/st in the second quarter 2019. The Argus US HRC assessment averaged $875/st in the third quarter of 2018.

Lower scrap pricing also affected SDI's metals recycling business Omnisource. The company flagged reduced profits sequentially because of reduced nonferrous and ferrous scrap prices amid flat volumes.

The national average for #1 busheling ferrous scrap fell from $294/gt in July 2019 to $268/gt in September, as a $40/gt decrease in September eliminated a $20/gt bump in August.

SDI expects improved profits for steel fabrication operations because of higher shipments, steady metal spreads and robust demand, especially for non-residential construction.

Earnings per diluted share are anticipated to be between $0.66-0.70/share, down from $0.87/share sequentially and from $1.69/share in the third quarter a year ago.

SDI's guidance came the same week that fellow electric-arc furnace steelmaker Nucor said it also expects third quarter profits to decline and global recycler Sims Metal Management warned of a sharp drop in profits.