Steel Dynamics 1Q17 Earnings Call Notes

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Mark Millet

Demand from auto remained steady

Demand from the automotive sector remained steady and construction continued to improve. Additionally, the energy-related demand improvement that we discussed on our January conference call actually strengthened further during the quarter. We received related orders both at Columbus Flat Roll Division and Engineered Bar Products Division. Additionally, there was an overall general demand improvement for our SBQ steel which typically suggests broader industrial sector momentum

Capacity utilization in 70s in long products and bar

“Although our consolidated quarterly production utilization rate was 95%, our Long Products division’s operated at 78%. While not as high as we’d like, it’s an improvement from last year’s average rate of 68%. The most significant change was seen in SBQ. Our Engineered Bar Products Division operated over 70% of its current capacity compared to just over 50% in 2015 and ’16. Not only did we see improved demand environment, but the Engineered Bar Division is also benefiting from the bulk and pull-through volume.”

Energy is rebounding

“Well, I think obviously, energy is a big focus and as the energy markets continue to rebound — and one has to remember, energy used to be, not too long ago, only 2 years ago, about 8% to 10% of steel demand in the States. And that is a big outlook for hot-rolled coil, certainly, for us at Columbus. So I think energy would be a principal focus there. And I think also, in the long products side of things, if you look at the heavy beam market recently, imports of what I call roll bar, just straight bar, have increased over the last few years. ”

Mexico is still strong and growing

“The Mexico market, at least from our perspective, is still strong and growing. They have — well, they’re still short in a big way down there. They will continue to need imports. Just with the current assets in place, you can argue whether or not people are going to continue to build that. I think they will. But nonetheless, just the current assets in place there, the consumption will — is strong and will continue to grow”

The administration has softened its stance on Mexico

“So I don’t see an issue with Mexico. I think the administration has softened or kind of moderated its stance. There’s a recognition that we need to be good trading partners. Maybe the NAFTA agreement should be modified. I think it’s been around for a long time and I think both parties will benefit from a new look at that, but I think it’s going to be a prudent, pragmatic review. So I don’t have any concerns, any issues with trade with Mexico. “