SDI expects Q3 profits to decline for metals recycling

Steel Dynamics Inc. (SDI), Fort Wayne, Indiana, is anticipating lower pricing for its finished steel and metals recycling division to reduce profits in the third quarter, the company announced in its third-quarter 2019 earnings guidance report.

Third-quarter 2019 earnings from the company’s steel operations are expected to decrease in comparison to sequential second-quarter results, SDI states in its earnings guidance report. The reduced earnings are primarily related to lower profitability from the company’s sheet steel operations, as shipments and average steel pricing declined in the quarter, more than offsetting lower scrap costs. Underlying domestic steel demand remains principally intact for the primary steel consuming sectors, with particular strength in construction, SDI reports.

Argus Media reports that U.S. hot-rolled coil prices fell to an average of $577 per short ton ex-works Midwest for the third quarter of 2019 to date, down from $630 per short ton in the second quarter of 2019. 

Lower scrap pricing has also affected SDI’s metals recycling business OmniSource. Third-quarter 2019 profitability for the company’s metals recycling platform is also expected to decrease when compared with second-quarter results. The company states this decrease is due to declining ferrous and nonferrous commodity prices coupled with steady shipments.

However, third-quarter 2019 earnings from the company’s steel fabrication business are expected to improve from sequential second-quarter results due to higher shipments and steady metal spread, as demand remains strong. The company continues to experience strong steel fabrication order backlogs and customers remain optimistic concerning nonresidential construction projects, SDI states in its report.