QUOTE AND NEWS
SeekingAlpha  Jul 18  Comment 
ByHeather Ingrassia: Now that we're smack in the middle of earnings season, I wanted to take a closer look at the upcoming earnings for one particular company in the steel sector and share my thoughts on what needs to happen in order for Steel...
Forbes  Jul 18  Comment 
Wall Street is expecting higher profit for Steel Dynamics when the company reports its second quarter results on Monday, July 21, 2014. The consensus estimate is calling for profit of 30 cents a share, a rise from 13 cents per share a year...
Wall Street Journal  Jun 17  Comment 
Steelmaker and metal recycler Steel Dynamics it expects higher per-share earnings for the current quarter than the year-ago period, citing a pickup in residential construction.
newratings.com  Jun 16  Comment 
WASHINGTON (dpa-AFX) - Steel Dynamics, Inc. (STLD) announced that it expects second quarter earnings to be in the range of $0.28 to $0.32 per share. Analysts currently expect second quarter earnings of $0.32 per sahre. Further, the company's...
Motley Fool  Jun 14  Comment 
Steel Dynamics is a domestic steel company, but Russia's energy aggression could cause it problems.
Market Intelligence Center  Jun 12  Comment 
Wednesday’s trading in Steel Dynamics Inc (STLD) gives options traders an opportunity for a 29.03% return. By selling the Jan. '15 $17.00 call and buying the Jan. '15 call at the $15.00 level for a net debit of $1.55, traders will book a profit...
StreetInsider.com  May 21  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Economic+Data/ABI+Data+Viewed+as+Negative+for+Steel+Group+-+Wells+Fargo+%28AKS%29+%28X%29+%28STLD%29/9512485.html for the full story.
TheStreet.com  May 15  Comment 
NEW YORK (TheStreet) -- Shares of Steel Dynamics Inc. are up 1.60% to $18.14 in pre-market trading on Thursday following a ratings upgrade to "outperform" from "perform" at Cowen & Co. . The firm said it raised its rating on the U.S. steel...
Market Intelligence Center  May 13  Comment 
After closing Monday at $18.25, Steel Dynamics Inc (STLD) presents an attractive opportunity to get a 6.82% return in just 193 days, which is an annualized return of 12.91% (for comparison purposes only). To enter this trade, sell one Nov. '14...
Market Intelligence Center  Apr 28  Comment 
Steel Dynamics Inc (STLD) closed Friday at $18.38 and technical indicators recently have been bullish. Based in part on those numbers, MarketIntelligenceCenter.com's patented algorithms have identified a couple of attractive trading opportunities...




 

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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