SDI still bullish on Sinton and a steel-short Mexico

Mexico

The Mexican market has been very receptive to having a regional supplier and a local supply chain, according to Barry Schneider, SDI’s president and COO. He said the company is “selling quite a bit of tons into Mexico,” much of which is heavier, high-strength steel that the market lacks.

Two new coating lines at the Sinton mill were recently commissioned and are now operating. The new galvanizing and painting capabilities will allow the mill to further penetrate markets that didn’t previously have a local supplier, Schneider said. This will support increased volumes and margins.

“We remain really bullish on what the capability in the market is to absorb high-value tons from a regional source,” Schneider stated.

Steel-short Mexico

Mark Millett, SDI’s chairman and CEO, added that Mexico will have incredible demand growth in the coming years, fueled by “onshoring, reshoring, transhoring.” Whatever you want to call it, he called it “absolutely phenomenal.”

SDI doesn’t foresee changing trade dynamics with Mexico in the short or longer term, despite recent activity reinstating 232 tariffs for some products and proposed legislation to curtail imports.

“There’s certainly been some noise and perhaps short-term aggravations going back and forth,” Millett commented. But longer term, steel demand growth in Mexico will be “considerable,” he said.

“They’re going to be steel short and, in the big picture, I don’t see a material problem,” he remarked.

Schneider also noted a steel shortage in the Mexican market. He did not specifically mention the ongoing labor strike at ArcelorMittal’s Lazaro Cardenas mill in southwest Mexico or AHMSA’s absence from the market since December 2022. But because of outages in that market, SDI will “continue to take advantage of opportunities where it makes sense,” Schneider said.

Sinton mill outages

The Sinton mill took two four-day outages in Q2 to install additional safety circuits and restore electrical capacity. Schneider noted a “slight delay with the hurricane situation in South Texas,” as the company did not want to tinker with a high-voltage electrical system in the winds of Hurricane Beryl.

Now that the root cause has been addressed, SDI can “access 100% of our melting capacity versus the previous 80%,” he explained. The mill’s production and profitability should improve as a result.

Note that Sinton’s EAF has an annual steelmaking capacity of 3 million short tons, according to SMU’s EAF Status Table.

“I think there needs to be a recognition that we’re developing the next-generation technology down there. … It’s what the world is going to be using going forward,” Millett noted.

“The technology is absolutely there. All we have to do is simply increase the utilization of that facility,” he added.