Steel Dynamics CEO Thinks Market Will Support “Good Prices”

SDI shipped 884,000 tons of HR and HRPO material, 141,000 tons of cold rolled and coated was 711,000 tons.

During the Question and Answer section of the call, SDI CEO Mark Millet told the analysts to focus more on the marketplace in North America and worry less about foreign steel imports. The one case he pointed to was the Circumvention case against Vietnam which he thought we would see some results in the June-July timeframe.

Mark Millet was bullish on the call regarding steel prices, “…there seems to be a commentary or view that the pricing peaked or softening is going to occur mid-year… I think the market dynamics in place is that they’re strong and they’re certainly going to support the current pricing environment, if not more.

“You’ve got a domestic market strength supply side driven today and is supported by strong and I think growing demand and it’s going to mitigate any softness in raw materials. We mentioned in on the demand side, automotive still remained strong. Yeah, it may had turned over a little bit, but it’s going to remain strong for the rest of the year.

“Non-residential construction is continuing to grow. Energy is coming back. All you have to do is look at the recent MSCI data, where shipments in March, which I think normally month over month it tends to lay [indiscernible] they increased I think significantly materially. And the inventory levels in the system are two months, if you look at sheet or flat roll, there are only 1.8 months, which is very, very, very, very low level. So supply chain inventory is very, very tight. You do have the import cases in place today and they’re going to be enforced in a much stronger vein going forward.

“Then you have an industry with lead-times stretching out. So, it’s – I think a very good positive marketing environment that’s going to support good pricing and good spreads through the rest of the year. And it’s – I would argue that we’re at a bit of a tipping point, I think inventories today at a very precarious position. The short inventory sort of maximize turn business model as a consolidating service center industry has been accommodated these past years by a challenged market mills with low utilization rates, lead-time short and they’ve been able to buy off the floor almost of the mills. And I think that’s about to change. So, I view the market is a very positive thing right now.”

As Steel Market Update expected the MSCI inventories numbers were on the top of Mr. Millet’s mind and he discussed why with the analysts, “the sheet arena I think just continues to be tight, it’s somewhat balanced I guess. You have a large sector of our industry not buying or hasn’t really been buying as a service center industry and hence inventories have shrank as their shipments have increased.

“So, I think generally there’s going to be catch-up there over the next few months. As I said earlier, I think the supply chain is in a precarious or at a precarious point. 1.8 months of [indiscernible] I mean it’s almost unheard of. And I would imagine the folks are going to need – if they’re going to support the OEM customer when demand continues to grow, that inventory needs to be restarted. So that until it’s up, is going to fuel additional demand.

“On top of that, just demand in general for us anyway continues to grow. We’re seeing market share growth in automotive. We’re seeing growth in the energy arena and I think it’s just going to continue to go over the next couple of quarters for sure.”

Mr. Millet also told the analysts that raw material pricing like scrap would have less of an impact on pricing going forward because we are in a “supply side driven environment” for steel products.

He also told the analysts that SDI was not “threatened” by imports as there is a natural need for “stuff produced in the United States.