Texas, Louisiana final choices for new SDI mill

Indiana-based steelmaker Steel Dynamics (SDI) says its narrowed its choices down to Texas and Louisiana for its new 3mn st/yr, $1.8bn flat-rolled mill.

Chief executive Mark Millett said the new mill will have a $30/st or more cost advantage over other domestic US steel mills for the steel markets in Arkansas, Louisiana, Oklahoma and Texas. He added that the mill would be aimed to take market share away from steel imports coming into Houston, and bid into Mexico's growing steel market.

The new mill will be able to make flat-rolled steel up to 84 inches wide and one inch thick.

SDI said it was working on its environmental permits for the Texas site, which is located near Corpus Christi, and expects those permits to take one year to complete. Millett said on an earning call today the company was "still actively pursuing sites" in both Texas and Louisiana, but no details were forthcoming regarding a possible Louisiana site.

The company had earlier also been considering New Mexico as a possible site.

The company expects spending on the new mill to total $300mn in 2019, $850mn in 2020 and $650mn in 2021.

Millett also said the company will be spending $140mn on a new 400,000st hot-dipped galvanized (HDG) line at its Columbus, Mississippi, operation. The company expects the new HDG production to reduce overall hot-rolled coil (HRC) production at Columbus by 400,000st, but that it will be made up by the new flat-rolled mill in either Louisiana or Texas.

Millett said HRC lead times are into the end of May, while cold-rolled coil (CRC) and HDG lead times are longer, at between six and eight weeks. He expects the energy industry to remain bullish as more oil and natural gas infrastructure needs to be built out, including natural gas projects in the southwest.

Oil and gas production has continued to increase in Texas, where multiple companies are building more than 2mn barrels/day of oil pipeline capacity out of West Texas' Permian Basin oil field and natural gas prices in the region recently dipped into negative territory as more gas was produced than could be transported out of the region. Almost all of the energy infrastructure being constructed requires steel pipe.

In SDI's first quarter results, increased prices and shipments failed to outweigh rising costs as SDI's first quarter profit fell by 10pc.

Prices for steel rose $80/st year-over-year to $902/st, will ferrous scrap prices rose $17/st to $321/st.

Flat rolled shipments in the first quarter rose by 6.5pc to 1.86mn st from 1.74mn st in the same period of 2018. Long product shipments increased by 4.5pc to 827,000st compared to 791,000st in the first quarter of 2018.

Total shipments increased by 5.9pc to 2.68mn st, up from the 2.53mn st from the same period of last year. First quarter external shipments increased by less than a percentage point to 2.35mn st from 2.33mn st, while SDI's steel production increased to 2.75mn st, up 5.5pc from the 2.6mn st in the first quarter of 2018.

Costs of goods sold rose to $2.38bn, an 11pc increase compared to the $2.14bn in the first quarter of 2018.

First quarter pricing was down $38/st from $940/st in the fourth quarter, while ferrous scrap pricing slipped $5/st from $343/st.

The company's first quarter profit fell 10pc to $204.3mn from the $227.6mn it earned in the same period of last year.