QUOTE AND NEWS
Market Intelligence Center  Sep 29  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Steel Dynamics Inc (STLD) that should provide a 5.36% return in just 110 days. Sell one Jan. '15 call at the $23.00 level for each 100 shares...
SeekingAlpha  Sep 25  Comment 
By Wall Street Playbook: Over the past three months, shares of Steel Dynamics (NASDAQ:STLD) have soared 37%, beating the 2.7% gain in the S&P 500 during that same span. Part of the resurgence was due to Steel Dynamics having completed its $1.65...
Benzinga  Sep 22  Comment 
In a report published Monday, Jefferies analyst Luke Folta reiterated a Buy rating on Steel Dynamics, Inc. (NASDAQ: STLD), and raised the price target from $25.00 to $29.00. In the report, Jefferies noted, “Per our analysis, we see N.A....
Benzinga  Sep 18  Comment 
Steel Dynamics, Inc. (NASDAQ: STLD) shares gained in the extended trading session after the company said third-quarter results will exceed Wall Street's expectations. Strength in steel markets related the automotive, manufacturing, energy and...
newratings.com  Sep 17  Comment 
WASHINGTON (dpa-AFX) - Steel Dynamics, Inc. (STLD) said Wednesday that it expects third quarter earnings of $0.34 to $0.38 per share, which includes estimated pre-tax charges of $34 million related to the acquisition and financing of Severstal...
TheStreet.com  Sep 17  Comment 
NEW YORK (TheStreet) --aSteel Dynamics was gaining 2.4% to $25.44 after-hours Wednesday after announcing its third quarter earnings guidance and cash dividend. The steel producer announced that it expects earnings of 42 cents to 46 cents a...
Benzinga  Sep 17  Comment 
Auxilium Pharmaceuticals, Inc. (NASDAQ: AUXL) +44% - Following a bid from Endo International plc for $28.10 per share on Tuesday, analysts at Mizuho reiterated a Buy rating and noted the $28.10 bid is below valuation. Republic Airways Holdings...
newratings.com  Sep 16  Comment 
WASHINGTON (dpa-AFX) - Steel Dynamics Inc (STLD) said Tuesday it has completed the acquisition of Severstal Columbus LLC, a new and technologically advanced mini-mill in North America. As previously announced, the purchase price for Columbus was...
Benzinga  Sep 3  Comment 
Morgan Stanley issued a very strong view on United States Steel Corporation (NYSE: X) and Steel Dynamics, Inc. (NYSE: STLD) Wednesday morning. Viewing the steel industry as "Attractive," the bank increased its price targets by nearly 40...
Benzinga  Aug 28  Comment 
Analysts at Bank Of America raised price targets on AK Steel (NYSE: AKS) to $13 from $11 and Steel Dynamics (NASDAQ: STLD) to $26 from $23. The firm also reiterated Buy ratings on both companies. Analysts lifted steel forecasts for H214, but...




 

Steel Dynamics (NYSE:STLD) is the fifth largest manufacturer of carbon steel products in the United States. STLD operates steelmaking mini-mills in the Southeast and Midwest regions, and the company has an annual steel making capacity of 6.3 million tons.[1] The company produces steel for numerous industries, including the automotive, construction, commercial, transportation and industrial machinery sectors. The company earned $3.9 billion in revenue and incurred a net loss of $8 million in 2009.[2]

As a mini-mill producer, the company produces steel using scrap metal as opposed to iron ore. This gives Steel Dynamics some advantages compared to integrated competitors, especially after the company's acquisition of its own steel scrap and iron ore sources, since it is not as sensitive to volatility in the price of iron ore. Compared to the integrated steel mill model used by competitors such as US Steel (X), the mini-mill model is traditionally less energy and labor intensive. Furthermore, there is usually less preparation time demanded from mini-mills, thus allowing quicker shifts to different projects as well as the exploration of niche markets.

Company Overview

Steel Dynamics produces a variety of different types of steel, with flat-rolled steel accounting for roughly 50% of shipments. The company ships a total of 4.8 million tons of steel. By manufacturing steel in mini-mills through the recycling of steel scrap, the company saves significant amounts of capital compared to integrated competitors, such as US Steel (X). Furthermore, the mini-mill model allows significantly more flexibility than does the integrated model, allowing Steel Dynamics to pursue smaller, highly-specialized projects.

Steel Dynamics operates in three segments:

  • The Steel Operations division manufactures a number of different types of steel, including flat-rolled, structural, rail, engineered bar products, merchant shapes, and other finished products.
  • The Fabrication Operations segment manufacture a variety of steel building components, including joists, girders, and trusses intended for the non-residential construction market.
  • The Steel Scrap and Scrap Substitute Operations process metal scrap for sale and for use in the company's electric furnaces for steel making.

Business Growth

FY 2009 (ended December 31, 2009)[2]

  • Net sales decreased 51% to $3.9 billion. The company attributes the decrease to the economic environment which has decreased the company's sales prices an sales volume. The company's gross margin fell 500 bps to 10% of net sales.
  • The company incurred a net loss of $8 million compared to a gain of $463 million in the prior year.

Trends and Forces

Steel Dynamics' mini-mill model offers advantages over integrated competitors: Integrated steel producers, such as US Steel (X), manufacture steel primarily from iron ore, requiring immense amounts of energy and consequently making production generally more expensive. Mini-mill producers instead recycle steel and metal scrap in electric arc furnaces, usually a less energy-intensive and capital-intensive process which many times leads to a better operating margin for mini-mill producers. However, both iron ore and steel scrap are traditionally volatile materials, changing in price drastically from one period to the next.

The cyclical nature of the steel industry may negatively affect STLD's short-term revenues:Over the past few years, the steel industry has enjoyed unprecedented success, with many companies posting record profits from year to year. A large part of this success is due to increased international demand for steel from emerging markets, a force that has resulted in skyrocketing steel prices. However, the domestic steel industry is traditionally cyclical. Because its success is tied to some of the biggest industries in the nation, such as the automotive and construction industries, the state of the steel industry usually reflects the current state of the general U.S. Economy. The steel industry will have to cope with ongoing turbulence in the domestic automotive industry and the subprime lending crisis' effects on residential construction. Concerning the domestic automotive industry, George Bush recently signed a law requiring higher fuel economy for automobiles, a move which may hurt the domestic steel industry as the auto makers attempt to improve fuel economy in any way possible, including the use of non-steel materials that are lighter. Since slightly more than half of Steel Dynamics' shipments are for the automotive and construction industries, further trouble in these sectors may prove detrimental to the company.

Emerging global competition in the steel industry may cut into STLD's market share: With the rise of the demand for steel in recent years, global production has increased dramatically as well. Much of the growth in both demand and production has come from China and other emerging economies. This rising demand is not set to decline in the near future; expectations consist of increases of 4.9% annually through 2010.[3] Along with this soaring demand, production is growing, with China expected to become a net exporter in the near future. However, the sagging dollar has insulated the domestic market recently from massive foreign imports and for many companies in the domestic steel industry has led to increased international demand for their products.

STLD depends on the domestic residential construction industry: Steel Dynamics is heavily exposed to the U.S. construction industry. In fact, customers in the domestic construction sector comprised almost half steel shipments. The company's products are focused mostly towards the commercial construction industry which is more resilient compared to the residential construction industry.

Competition

Steel Dynamics operates in the highly competitive domestic steel industry and is the fifth largest manufacturer of carbon steel products in the U.S. As a mini-mill producer, Steel Dynamics has notable cost advantages compared to certain integrated steel makers like US Steel (X). These advantages traditionally include lower energy and raw material input costs as well as lower labor costs. After the company's recent acquisition of Omnisource, a major steel scrap processor, the company may also have a more favorable market position compared to other mini-mill producers, such as AK Steel Holding (AKS), because of the resulting stability in Steel Dynamics' cost structure. Furthermore, because of the company's brief lifetime (it was incorporated in 1993), its steel facilities are generally newer than its competitors and thus require less lead time than competitors, allowing Steel Dynamics to explore high-margin niche markets. Steel Dynamics also has certain local and smaller advantages, such as its claim as the only producer of structural steel in the Midwest, which is one of the largest structural steel consuming regions in the U.S. The company competes with:

References

  1. STLD 2009 10-K "Our Company" pg. 2
  2. 2.0 2.1 STLD 2009 10-K "Selected Financial Data" pg. 41
  3. American Iron and Steel Institute
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