Stelco Reports Improved Shipments, Revenue in Q3

“I am pleased to report that we were able to increase our shipments by 20 percent quarter-over-quarter, including a 31 percent increase in our sales of cold-rolled and coated sheet products,” said CEO David Cheney. “This is validation from our customers that our capital investment to install state-of-the-art batch annealing and tempering capabilities was what the market demanded.”

Stelco expects to increase cold-rolled and coated shipments, including galvanized, in the fourth quarter. Shipments are expected to total 1.3 million tons for the second half of 2019.

As part of Stelco’s strategic growth plan, a new pig iron making facility will be constructed at the Lake Erie Works facility. Completion of the new facility is expected to coincide with a blast furnace reline scheduled for Q2 2020. Stelco already has a letter of intent for sale of a “meaningful portion of the first two year’s output,” said Cheney. When completed, the facility will have an annual production capacity of one million tons of pig iron.

Stelco’s move into pig iron production is not a matter of diverting metal away from the hot strip mill, Cheney said. “Having pig casting gives us incredible flexibility in how we operate our assets, how we arbitrage the market between utilizing scrap and hot metal in our production mix, as well as how we manage our maintenance programs. So, having this outlet for hot metal offers a number of benefits operationally, for tactical flexibility and from a marketing perspective.”

Stelco has managed to lease about 28 percent of the space in the surplus buildings at the Hamilton facility, with some rented by a surprising tenant, the film and television industry. “Our property has served as an attractive location for the film and television industry and as such we have generated revenue for utilizing our property as a location for content creation,” said Cheney. “We expect this revenue source to grow and, importantly, to attract land developers who see Hamilton, and our land in particular, as a prime location for development of content to satisfy industry wide shortages of quality studio space, among other uses.”

Stelco also expects increased business in the auto sector next year. “We have been very active with automakers and we have secured more contracts for next year both north and south of the border,” Cheney said. “You can expect to see our participation in that high end of the market increase.”

Cheney expressed optimism that product diversification and growth, combined with continued efforts to lower costs, will allow Stelco to remain strong through 2019 and into 2020. The company’s order book is completely sold out for Q4 and well into January. “We are very optimistic around the continued strong demand for steel. Broad economic indicators are favorable, trade tensions are moderating, employment statistics are positive. And this all points to continued economic growth contributing to demand for steel.”

Note: 1 Canadian dollar equals U.S. $0.75