Steel Dynamics kicked off a big week of steel earnings after Monday's close. STLD stock fell slightly Tuesday morning after rebounding Monday with other hard-hit steel stocks. While Steel Dynamics, in its earnings statement, said signs point to strong demand in 2022, it didn't have much to say about the outlook for steel prices.
Wall Street will listen closely to STLD's conference call on Tuesday at 10 a.m. ET for hints about how steel prices will shake out in 2022 amid higher supply.
Steel Dynamics, which recently launched a new Sinton, Texas, flat roll steel mill, said that Covid- and supply-related challenges will keep it from being fully operational until February. The company still expects the Sinton mill to ship 2.0 million tons of steel this year. That compares to 11.2 million tons STLD shipped in 2021.
Extra supply already is cooling off steel prices that sizzled into the fall. Imports also will be important to watch after President Joe Biden reached a deal with the European Union last year over steel tariffs imposed by the Trump administration. Now a 25% tariff won't apply until after the first 3.3 million metric tons of steel imports.
The near-month Midwest hot-rolled coil contract topped $1,900 per short ton in August and hung around $1,800 through mid-November. But it has since tumbled close to $1,400. Forward pricing indicates it's heading south of $900 by summer.
Nucor earnings follow early Thursday and U.S. Steel's after Thursday's close. All three firms updated guidance in mid-December, with NUE and STLD expecting record earnings in Q4 and U.S. Steel seeing some seasonal softness, but otherwise sounding upbeat.
STLD Earnings
Estimates: Steel Dynamics earnings were expected to surge to $5.73 a share from 97 cents a year ago. Revenue was seen up 101% to $5.22 billion, according to Zacks Investment Research.
Results: Steel Dynamics earnings came in at $5.78 a share with revenue at $5.31 billion.
The company was upbeat on steel demand. "We believe the market dynamics are in place for domestic steel consumption to further increase in 2022 when compared to 2021," said CEO Mark Millett. "Based on domestic steel demand fundamentals and customer confidence, we believe North American steel consumption will experience steady growth, supported by the construction, automotive, and industrial sectors."
Millett didn't offer 2022 specifics on earnings, sales or industry pricing.
STLD, Steel Stock Analysis
STLD stock fell 1.5% to 53.87 Tuesday morning. Shares rebounded from intraday losses on Monday, closing up 4.3% to 54.70. But that's after Steel Dynamics stock plunged 15.7% last week, crashing through its 200-day moving average.
STLD stock's relative strength line, which tracks its progress vs. the S&P 500, has been in a clear downtrend since mid-August. That cast doubt on its failed breakout bid from a cup-with-handle base just before Thanksgiving.
Nucor and Commercial Metals have been leaders among the group. NUE stock has a 91 Relative Strength Rating from IBD, meaning it has outperformed 91% of all stocks over the past year. NUE stock sank 2.3% on Tuesday after rising 2.4% Monday. U.S. Steel stock slumped 4.2% after recovering to edge up 0.9% on Monday.
CMC stock gave up 3.8% Tuesday. On Monday, shares bounded 4.7% higher after testing the 200-day line earlier in the session. Commercial Metals reported fiscal Q1 earnings through November on Jan. 10, highlighting "a growing construction backlog in North America, as well as broad strength across key end markets in both North America and Europe."
