NEW YORK A
capacity shortfall coinciding with low inventory levels and
increased end market demand is helping boost steel sheet
margins, according to Steel Dynamics Inc. (SDI) president and
chief executive officer Mark Millett.
"On the sheet side of
our business, automotive has been very, very strong for us.
Manufacturing is also good," he said during an earnings
conference call Oct. 17. "We have a lot of optimism in the
residential and HVAC (heating, ventilation and air
conditioning) sector. We see inventories still being incredibly
tight through the supply chain."
The Fort Wayne,
Ind.-based companys flat-rolled shipments increased to
740,279 tons in the third quarter, up 5.1 percent from 704,290
tons in the previous quarter and 15.9 percent higher than
638,776 tons in the same period last year.
The company shipped
about 295,000 tons of hot-rolled, 117,000 tons of pickled and
oiled, 26,000 tons of cold-rolled product, 127,000 tons of
hot-rolled galvanized, 52,000 tons of cold-rolled galvanized,
105,000 tons of painted material and 19,000 tons of
fabrication segment continued to be a bright spot, SDI said,
registering its sixth consecutive profitable quarter since the
downturn of the nonresidential sector. "Increased demand for
construction-related steel products is clearly visible on our
order backlogs," Millett said, noting that the companys
flat-rolled, construction-related products also have seen
However, the economy
is weaker than it should be, Millett said, particularly "under
the cloud of government shutdown" and the "fear of a financial
default" along with "political headwinds."
As a result, market
conditions have prevented the company from leveraging its full
production capacity, leaving some 1.5 million tons of steel
capacity not utilized in 2013, particularly due to a lackluster
nonresidential construction market. "We have greater leverage
in the construction sector than most," he added.
U.S. steel producers
have announced a round of sheet price increases in recent
weeks, with rumors of another hike around the corner. Company
executives recognize that while the market has tried to push
back, there has been some traction.
"Theres been an
upward pressure ... (but) needless to say, I think the market
is always pushing back," Richard Teets, SDIs president
and chief operating officer for steel, said.
Lead times for the
steelmakers hot-rolled product are around four weeks,
while coated products are "almost through the end of the year,"