Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Steel Dynamics (SDI) has updated its earnings guidance by 2.1pc for Q1 2021 as a result of stronger expected profitability against Q4 2020. 


The rise is driven by the expectation that stronger demand and higher prices for flat-rolled steel will offset the higher scrap prices in the period and increase shipments in Q1 2021 compared to the preceding quarter.  In Q4 2020, SDI shipped 2.7mn nt (2.45mn mt) of finished steel and 163,000nt of fabricated steel. 


HRC prices in the US domestic market are at $1,367-1,410/mt fob ($1,240-1,280/nt) in March, rising almost three times from August 2020 and up by $243-242/mt against the January prices. Prices for HRC are expected to remain firm through H1 2021 on strong demand and pent-up supplies, though they may begin to soften with new capacities coming online towards the second half of the year. Imports continue under Section 232 and are not expected to increase substantially. 


Ferrous scrap demand is also expected to continue strong in Q1 2021, SDI indicated. The first quarter’s earnings from the recycling division could be higher than Q4 2020 based on increased volumes as well as improved metal margins. 


On the other hand, earnings from SDI’s steel fabrication operations are expected to be lower than Q4 2020 due to higher steel input costs and order backlog. The lower estimates also consider the matching of older orders to present higher prices on raw materials. The division is a smaller portion of the company’s earnings base. 


SDI has updated its earnings guidance by 2.1pc from $1.88 to $1.92 per diluted share. The company expects Q1 2021 earnings to be in the range of $1.94-1.98 per diluted share excluding any cost impacts from the Sinton, Texas Flat Rolled mill. 


In 2020, steel operations shipments tallied at 10.7mn nt with 3.1mn nt of long steel and 7.6mn nt of flat-rolled products. The year’s shipments were only 0.1mn nt lower than the record high of 10.8mn nt achieved in 2019. However, the commissioning of the Sinton Texas Flat Rolled mill is expected to have a positive net effect on total shipments. 

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