September 28, 2022

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Steel Dynamics boosts expectations, US Steel on track after Nucor . warning

Steel Dynamics boosts expectations, US Steel on track after Nucor . warning

steel dynamics (STLD) said Thursday that third-quarter earnings follow above analyst estimates. It follows the guidance of Nokor (NEW) who warned on Wednesday that earnings estimates will be delayed.

US Steel (X), who also updated business trends on Thursday, said earnings were slightly less than analysts’ expectations amid “market headwinds that accelerated” during the third quarter.

Arconic (ARNC), which makes aluminum products for the aerospace, automotive and industrial markets, from guidance late Wednesday amid production problems in the United States and hurt by lower demand and higher energy costs in Europe.

STLD stock rose 1.25% early Thursday stock market work, after a 9% rise on Wednesday. Nucor slipped another 2.5% after falling 11.3% the day before. US steel fell 0.4%, following Wednesday’s 8.6% drop. ARNC stock fell 14.25%.

Steel dynamics boost production

Like Nucor, Steel Dynamics has highlighted lower steel prices. The big difference is that Steel Dynamics said its production is rising from second-quarter levels, while Nucor shipments will be lower than expected.

“Lower average pricing for flat rolled steel is expected to offset lower raw material costs and higher shipments,” Steel Dynamics said in a statement.

The day before, Nucor attributed the lower-than-expected earnings to a “shrinking metal margin and lower freight volumes especially at our sheet and panel plants.”

Short-term hot-rolled coil futures fell to about $800 from about $915 when Nucor reported second-quarter earnings on July 21. This may have contributed to narrowing profit margins.

Nucor may feel the effects of oversupply from the steel industry, which was one reason for caution in 2022. This may explain why freight volumes appear to be lower than expected. Nucor has not mentioned any indication that production will be discontinued.

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Meanwhile, Steel Dynamics is ramping up production at its new plant in Sinton, Texas.

American steel idle capacity

Also, imports seem to add to the supply. US Steel said in its update that it has discontinued a blast furnace and a tin line at its Gary Works complex, citing market conditions and soaring imports.

US Steel also pulled a 30-day maintenance outage for its Mon Valley furnace and a 60-day outage for its European blast furnace.

“We rapidly adjusted our integrated steelmaking operating footprint to better match our order book and expect our tubular segment to deliver another quarter of profit growth,” CEO David Burrett said in a statement.

Adjusted steel earnings forecast

Steel Dynamics said it expects third-quarter profit of $5.33 to $5.37, excluding start-up costs of 40 cents for the Centon plant. Analysts expected $5.03.

US Steel said it was on track to earn $1.90-$1.95 a share in the third quarter versus expectations of $2.09, according to FactSet.

Nucor now expects earnings of between $6.30 and $6.40 per share, well below estimates of $7.56 per share from analysts polled by FactSet.

In its second-quarter earnings statement, Nucor said it expects results to decline sequentially in the third quarter after posting record quarterly earnings of $9.67 per share. The company had already expected lower expected shipment volumes and prices, but it may have been surprised by how weak it was.

“Broad base steel demand and corresponding demand activity from the automotive, construction, industrial and energy sectors remain unchanged,” Steel Dynamics said.

The company said its earnings from its steel manufacturing operations should beat record second-quarter results, based on continued strong volume and increased margins.

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Nucor said its steel products segment is expected to have “another strong quarter,” with earnings roughly in line with the second quarter of 2022.

Profits in the raw materials segment are also expected to be similar to the second quarter of 2022. Nucor said it is still on track to achieve its most profitable year ever. This suggests that things may be stabilizing at a lower level, rather than escalating.

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