Steelmakers are accustomed to working under very high-pressure loads. Flat products are produced by rolling steel slab between cylinders ... exerting enormous pressure to squeeze out a thinner sheet of steel plate.
It follows logically, then, that the industry would take it in stride when its profit margins undergo a high-pressure squeeze.
Thanks to the company's vertically integrated, low-cost procurement of scrap iron, the nature of Steel Dynamics'
Impressively, even in a rising price environment for ferrous scrap metal, Steel Dynamics delivered a 4% sequential increase in its steel segment's operating income for the fourth quarter ... even alongside flat shipment volumes.
Zooming out to the company's consolidated outcome, however, we find the root causes of Steel Dynamics' lower sequential operating margin and anemic net profit of only $8 million ($0.04 per share) for the fourth quarter of 2010. Although the metals recycling and ferrous resources segment continued to bolster the profitability of Steel Dynamics' mills, that segment reversed to an operating loss from a modest third-quarter profit.
Continued challenges associated with the start-up of the company's 81%-owned iron nugget production facility in Minnesota led to a $13 million hit during the quarter, and affected full-year 2010 earnings by $42 million. However, with several modifications now in place, the company is turning increasingly upbeat about the facility's ramp-up process during 2011.
Longtime observers will have grown accustomed to persistent weakness in domestic demand for fabricated steel products. Severely impaired demand for construction-related items like joists and decking led competitor Commercial Metals
Joining a chorus of executives touting improving business outlooks for 2011, CEO Keith Busse welcomed a "favorable" outlook for his company's business in 2011. He expects demand growth from multiple industries and something resembling a bottom in that all-important construction-related demand.
Noting a recent contract to supply more than 28 tons of continuous welded rail for a RailAmerica