Margins suffer at US steelmakers despite scrap drop

United States – Lower scrap prices failed to prevent a further squeeze on margins in this year’s second quarter for two of the USA’s leading steelmakers.

Steel Dynamics Inc. (SDI) talks of ‘unexpected metal margin compression’ in its latest earnings guidance statement, with steel imports remaining ‘much higher than originally anticipated’ to result in ‘average quarterly steel prices decreasing more than average quarterly scrap prices’. It adds: ‘The benefit of reduced scrap pricing was realized in the second quarter; but, the continued flood of steel imports thus far in 2015 continued to pressure steel product pricing to a greater degree.’

Meanwhile, Nucor experienced margin erosion in the second quarter ‘as the decrease in average sales prices slightly outpaced the decrease in the average cost of raw materials consumed’.

Pricing remained under pressure from ‘exceptionally high levels of imports that continue to flood the domestic market’, accounting for an estimated 32% of the finished steel market in the first five months of 2015 compared with an estimated 26% in January-May 2014.