Steel Dynamics Reports New Records in 2014

Adjusted net income for Q4 was $97 million on net sales of $2.5 billion. However, impairment charges at the Minnesota Operations and post-acquisition charges contributed to a net loss of $45 million for the quarter.

“As we enter 2015, we remain optimistic that the broader U.S. economy will continue to improve,” said Chief Executive Officer, Mark Millett. “However, we are facing a challenging first quarter. The instability of global growth and continued decline in global oil prices weigh on general sentiment. The combination of high import levels and a seasonally slow December resulted in higher levels of customer inventories, and consequently has resulted in decreased selling values. We believe this overhang can be resolved during the first quarter of 2015. The U.S. economy continues to improve, and there continues to be strength in several key steel-consuming end markets, including automotive, manufacturing and nonresidential construction. The non-service sector portion of U.S. GDP will continue to strengthen, and is capable of growing at a higher rate than overall U.S. GDP, which is a positive for steel consumption in 2015 and the out years.”

Overcapacity of recycled shredding locations, low scrap prices, and decreased scrap exports reduced SDI’s metals recycling operating income by 31 percent, totaling $44 million in 2014. During the company conference call, Millett said he expects to see “scrap hit the reset button in March.”

The Columbus operation has been impacted by low energy prices and OCTG imports with 20 percent of steel production designated for oil country products. Although 20 percent exposure is about right for Columbus, SDI plans to diversify the product mix at Columbus to better react to market demand and volatility.

Imports data is somewhat “disingenuous,” said Millet, because the true price of imports should reflect the costs of getting to the U.S. and from the ports. For trade from China one needs to add $40-50 additional cost to get to our ports and another $40-50 to reach the Midwest, he said. Millett suggests erosion of the margin spread between foreign and domestic “will dissipate the attraction of import orders.”