Sign in

    STEEL DYNAMICS (STLD)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$129.92Last close (Apr 24, 2024)
    Post-Earnings Price$129.16Open (Apr 25, 2024)
    Price Change
    $-0.76(-0.58%)
    • Strong progress on the aluminum flat-rolled investments, with customer commitments supporting the first 12 to 18 months of ramp-up , and confidence in keeping the project cost at $2.7 billion despite inflationary pressures. The company expects the aluminum rolling mill to start operating in mid-2025 , and is optimistic about the EBITDA breakeven by the end of the first operational year.
    • Positive outlook for steel fabrication demand, with healthy backlogs extending through the third quarter of 2024 , stabilized pricing at historically strong levels , and expectations of increased volumes in the second quarter and beyond due to infrastructure spending and onshoring.
    • Successful start-up and ramp-up of new value-added flat-rolled steel coating lines, with all four lines contributing to increased volume and profitability in the second quarter and progressing through the year. This is expected to enhance margins and support higher through-cycle utilization.
    • Decline in long steel volumes: Steel Dynamics experienced a significant year-on-year decline in long steel product volumes in the first quarter of 2024 due to changes in market dynamics and seasonal factors.
    • Potential impact from U.S.-Mexico trade tensions: Worsening trade relations between the U.S. and Mexico, including talks of tariffs and retaliation, could negatively affect Steel Dynamics' operations and sales in Mexico.
    • Uncertainty in securing customer contracts for the aluminum project: The company has not yet secured definitive contracts with customers for its new aluminum flat-rolled products facility, posing risks to the project's success and financial returns.
    1. Aluminum Project CapEx and Breakeven
      Q: When will the aluminum project reach breakeven, and is CapEx guidance unchanged?
      A: We expect aluminum operations to start mid-2025, with early qualifications. We're confident in matching customer demand with our ramp-up. From an EBITDA breakeven standpoint, we hope to reach that position by the end of the first year of operations. Our CapEx guidance remains at $2.7 billion, with no expected expansion despite inflationary pressures.

    2. Fabrication Segment Outlook
      Q: What is the outlook for fabrication volumes and margins?
      A: Bookings increased in March and are up meaningfully in April, with backlogs around 6 months. We consider volumes to have reached a trough and expect an increase in Q2 and beyond. Despite slight price erosion, operating income remains strong at over $1,200 per ton, significantly higher than historical levels of $150 to $200 per ton, indicating a structural market shift.

    3. Sinton Ramp-Up and Costs
      Q: Will Sinton's ramp-up reduce conversion costs further?
      A: Yes, increasing production at Sinton, improving into Q2 and the second half of the year, will compress costs across the spectrum. We expect the conversion rate to continue reducing, though exact magnitude is uncertain.

    4. Long Products Volume Decline
      Q: Why did long steel volumes decline, and what is the outlook?
      A: The decline is largely due to seasonality and weather-related issues. We have a robust level of order input, and backlogs are healthy. We're confident moving forward for the rest of the year in this space.

    5. Mexico Trade Relations Impact
      Q: How do U.S.-Mexico trade tensions affect your business?
      A: We haven't seen any direct impact. We grew substantial market share in Mexico last year, shipping around 600,000 tons. It's a wait-and-see situation, but we believe issues will be resolved given the strong trade relationship between the U.S. and Mexico.

    6. Processing Lines Start-Up
      Q: What's the status of new paint and galvanizing lines?
      A: All four lines have run product. The paint line in Terre Haute is shipping prime product and ramping up through Q2 and Q3. The galvanizing line in Sinton started up in January and is contributing at a high rate. The second galvanizing line in Terre Haute and the new paint line in Sinton will progress operationally through the year. All four units will contribute soundly in Q2 and beyond.

    7. Carbon-Based Tariffs Outlook
      Q: What's your view on potential carbon-based tariffs?
      A: We don't see any meaningful change in U.S. policy on carbon border adjustments. Europe is proceeding with their plans, and after the election, we expect efforts to maintain trade with Europe. This development is positive for us due to our incredibly low sustainability position, positioning us to lead in such tariffs.

    8. CRC-HRC Spread Dynamics
      Q: What's driving robust CRC-HRC spreads?
      A: Coated products are gaining market share, with dynamic changes like the booming solar market consuming around 25 tons of coated product per megawatt. We supply over 300,000 tons annually into the solar market. Increased applications for coated products tighten the market and support higher spreads.

    9. Data Centers vs. Warehouses
      Q: How does data center build-out compare to warehouses?
      A: Each project varies, but generally, steel intensity isn't wildly different from warehousing. The data center market remains strong due to factors like artificial intelligence and cloud computing needs. We're actively providing solutions to stakeholders building these facilities.

    10. CapEx Timing Guidance
      Q: How will CapEx spending progress through the year?
      A: The largest portion of CapEx relates to the aluminum investment. We expect CapEx to increase in Q2 and Q3 as equipment arrives and milestones are met, with spending likely about equal in those quarters. In Q4, CapEx will likely decrease to levels similar to Q1.

    Research analysts covering STEEL DYNAMICS.