NLMK USA Q2 Earnings Surge on High Prices, Steel Shortage

NLMK USA’s skyrocketing profits came as revenue surged to $699 million in the second quarter of this year, up 73% from $403 million in the first quarter and nearly three times higher than $238 million in the second quarter of last year, according to earnings data released on Thursday, July 22.

The stellar showing by NLMK’s U.S. division echoed similarly strong results across NLMK Group’s global operations.

“In Q2 2021, steel prices continued to grow across all key markets. In the U.S. and the EU, prices hit new highs,” NLMK Group Chief Financial Officer Shamil Kurmashov said in a statement. “The outstripping growth in steel consumption relative to production led to a decrease in inventories to all-time lows, which brought about a further increase in prices.”

Prices globally have been bolstered by government-supported infrastructure spending and by social support programs rolled out during the pandemic that had the effect of increasing consumer spending on durable goods, NLMK said.

As for NLMK USA, demand was so strong that its parent company increased slab shipments to its U.S. subsidiary by 111% quarter-over-quarter despite Section 232 tariffs – 25% in the case of semifinished goods from Russia – remaining in place. The company had previously shifted much of the slab sourcing for its U.S. operations to Brazil, which is subject to a Section 232 quota and so exempt from the 25% tariff.

NLMK USA operates an electric arc furnace (EAF) steel mill in Portage, Ind., a hot strip mill and cold reduction mill in Farrell, Pa., and a coating facility in Sharon, Pa. It relies on foreign slab to supplement what it produces domestically.

U.S. demand was also broad based. It wasn’t just hot-rolled coil that saw improved demand, so did value-added products such as galvanized. And the trend held across all key steel-consuming sectors – automotive, construction and machinery, NLMK said in a presentation released with earnings figures.

The result was a “steel shortage,” although that shortage was less pronounced toward the end of the second quarter, the company said. And while NLMK expects U.S. prices to remain elevated, it predicted that the shortage would ease on increased imports and new capacity coming online in the fourth quarter.

NLMK did not mention any specific new capacity projects. But Steel Dynamics Inc. (SDI) expects the hot end of its new steel mill in Sinton, Texas, to start in the fourth quarter. And hot-rolled coil expansions at Nucor’s steel mill in Ghent, Ky., and at North Star BlueScope’s mill in Delta, Ohio, are slated to come online after that. In Mexico, meanwhile, ArcelorMittal remains on track to start a new hot strip mill in the fourth quarter, a company spokeswoman told SMU. Ternium has already started up a new hot strip mill outside of Monterrey. (Details are in SMU’s new capacity table.)

All told, NLMK Group recorded profits of $1.36 billion in the second quarter, up 75% from $775 million in the first quarter, and up more than 17-fold from $77 million in the second quarter of 2020.

By Michael Cowden, Michael@SteelMarketUpdate.com