Steel Dynamics boosts outlook, US steel on track after Nucor warning

Steel dynamics (STLD) said Thursday that its third-quarter earnings are above analyst estimates. It followed guidance from Nucor (NUE), which on Wednesday warned that the profit will be behind estimates.

US Steel (X), which also updated business trends on Thursday, said the result came in slightly below analysts’ expectations amid “market headwinds that accelerated” during the third quarter.

Arconic (ARNC), which makes aluminum products for the aerospace, automotive and industrial markets, cut guidance late Wednesday due to production problems in the U.S. and a hit from both lower demand and high energy costs in Europe.

STLD stock was up 1[ads1].25% early Thursday, after a 9% knock on Wednesday. Nucor fell another 2.5%, after falling 11.3% a day earlier. US Steel fell 0.4% on the heels of Wednesday’s 8.6% dive. ARNC stock fell 14.25%.

Steel Dynamics increases performance

Like Nucor, Steel Dynamics highlighted lower steel prices. The big difference is that Steel Dynamics said production is rising from Q2 levels, while Nucor shipments will fall even more than expected.

“Lower average flat-rolled steel prices are expected to more than offset lower raw material costs and higher shipments,” Steel Dynamics said in a statement.

A day earlier, Nucor had attributed weaker-than-expected earnings to “metal margin contraction and reduced shipping volumes, particularly at our sheet and plate mills.”

The short-term hot-rolled coil futures contract has retreated to around $800 from around $915 when Nucor reported second-quarter earnings on July 21. This has probably contributed to reduced profit margins.

Nucor may be feeling the effects of increased supply in the steel industry, which was one of the reasons for caution in 2022. That may explain why shipment volumes are apparently lower than expected. Nucor did not mention production shutdowns.

Meanwhile, Steel Dynamics has ramped up production at its new plant in Sinton, Texas.

Capacity for idle in American steel

Imports also appear to increase profits. In its update, US Steel said it idled a blast furnace and tin line at the Gary Works complex, citing market conditions and increased imports.

US Steel also highlighted a 30-day maintenance outage at a Mon Valley blast furnace and a 60-day shutdown at a European blast furnace.

“We have quickly adjusted our integrated steelmaking operating footprint to better match our order book and expect our pipe segment to deliver another quarter of revenue growth,” CEO David Burritt said in a statement.

Revised earnings outlook for steel

Steel Dynamics said it expects Q3 EPS of $5.33 to $5.37, excluding 40-cent start-up costs for the Sinton mill. Analysts expected $5.03.

US Steel said it is on track to earn $1.90-$1.95 cents a share in Q3 vs. expectations of $2.09, according to FactSet.

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

In its second-quarter earnings report, Nucor said it expected results to fall sequentially in the third quarter after a record quarterly profit of $9.67 per share. The company was already expecting lower expected shipment volumes and prices, but may have been surprised by the extent of the weakness.

Steel Dynamics said: “Broad underlying demand for steel and corresponding order activity remains intact from the automotive, construction, industrial and energy sectors.”

The company said profits from its steelmaking business should top record second-quarter results, based on continued strong volume and rising margins.

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

The commodities segment’s revenue is also expected to be flat in the second quarter of 2022. And Nucor said it remains on track for its most profitable year ever. It suggests that things may stabilize at a lower level, rather than snowball.

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