NEW YORK While the steel
market is clouded by uncertainty, positive indicators in
construction and continued strength in automotive point to
brighter prospects for the future, the top executive at Steel
Dynamics Inc. (SDI) said.
"The macro drivers predicting
steel consumption ... (are) a reason for optimism in 2013 and
certainly in the years ahead," Mark D. Millett, president and
chief executive officer of the Fort Wayne, Ind.-based
steelmaker, said in an April 18 earnings conference call.
"Automotive growth momentum
remains very strong ... (and) residential construction appears
to have sustainability," he added. "This bodes well for future
non-residential construction as well ... (and) all of these
macro factors we view as positive to our fold."
Automotive builds and other
positive leading manufacturing indicators, as well as the U.S.
natural gas boom, will be bright spots, Millett said, adding
that a number of companies have significant cash positions,
which will eventually lead to fixed-asset investments.
But the link between raw
material costs, particularly scrap, and finished steel pricing
remains an uncertainty for sheet and long products.
The consumer trend has been to
boost buying ahead of a predicted scrap price increase and hold
back on purchasing ahead of a predicted decrease, Millett said,
causing increased volatility in the market (
amm.com, April 18).
"Consumers are keeping
inventories tight while taking advantage of short mill lead
times," he added.
The flat-rolled outlook is still
"a bit of a wild card," Millett said, adding that SDI has seen
more "consistency" in its other steel divisions. First-quarter
operating income for long products, for example, increased 16
percent sequentially, while that from its sheet operations fell
On the import front, Millett
said that while global overcapacity persists, the parity in
domestic and foreign pricing is preventing "meaningful import
SDI also noted that its steel
mill utilization rate rose to 89 percent in the first quarter
from 80 percent in the fourth quarter, a rise it attributed to
a "shift toward higher value-added products," particularly in
its special bar quality segment. This led to a $5 increase in
first-quarter average selling prices per ton shipped, to $789
The company clarified, though,
that its engineered bar product facilities were running at
"substantially lower rates," so the uptick wasnt
necessarily due to an increase in market share but rather a
recovery of the market.
Meanwhile, SDIs 81-percent owned Mesabi Nugget LLC
facility in Minnesota is on course to install additional oxygen
burners and undergo other equipment modifications this month.
Mesabi will ramp up production through the second half of the
year, with losses from the operation expected to decrease and
possibly disappear or hit the break even mark at year-end,