SDI execs detail April outage at Sinton, address 'robust' HR-CR spread

“Among other things in the outage, we resolved certain transformer limitations, which will allow us to access 100% of our melting capacity vs. the previous 80%,” Schneider said.

The company had discussed power issues on the the “primary side” of the mill last year. That included replacing some transformers. “And that equipment has very long lead times,” he said.

The new equipment should be fully utilized “somewhere between now and the end of May,” he said.

“This April outage was key to give us the opportunity to get the construction done to work on the high-voltage bus. It required the whole plant to have the power off,” Schneider said.

The outage was “unfortunate.” But SDI has “remedied the situation that we believe contributed to it. So we’re very excited this problem will be behind us here shortly,” he said.

Before the April outage, Sinton averaged around 70% capacity utilization in the first quarter – thus “breaking monthly utilization records across the lines in March,” Schneider said.

Sinton has had grappled with a variety of issues since starting up in early 2022. Among them was a one-month outage last summer because of problems with a caster shear.

Additional lines

SDI Chairman and CEO Mark D. Millett said four new flat-rolled steel coating lines are now online and in various modes of startup.

Recall that two new lines are at SDI’s Heartland flat-rolled processing mill in Terre Haute, Ind. The other two are at Sinton.

“Sinton should see a step-function improvement in operations and profitability as those two new lines ramp up after the April maintenance,” Millett said.

The four lines add about 1.1 million tons of “higher-margin” product to the company’s portfolio, he noted.

“All four units will be contributing soundly in the second quarter,” Schneider said, adding that progress would continue into the the third and fourth quarters.

Coated renaissance

SDI executives were asked about spreads between hot-rolled (HR) coil and cold-rolled (CR), which one analyst described as “robust.”

SMU’s HR price stands at $815 per short ton (st) on average. Our CR price is at $1,130 per ton. That equates to a spread of $315/st. (You can access our pricing here.) That’s significantly higher than a HR-CR spread of approximately $200/st that has characterized much of the post-pandemic domestic market.

“Coated products are gaining more and more market share just generally,” Millet said. And “some pretty dynamic changes within the marketplace” are furthering that trend, he added.

One example: the expanding solar market. “You’re consuming around about 25 tons of coated product per megawatt,” Millett said said. “So there are more and more applications being served by coated products today. It’s a tight market, and it’s supporting the higher spread.”

Echoing Millett, Schneider said “we continue to believe that the spreads between coated and hot roll will be attractive.”

Note that base price for cold-rolled and coated products tend to trend together.

“It’s an area where we’ve really invested quite a bit of money over the last several years to make sure we have the right capabilities at our disposal and the right supply chain solutions for what the customers are asking for,” Schneider added.