Fort Wayne, Indiana-based Steel Dynamics, Inc. (SDI) recorded a Q2 net income of $44 million on net sales of $1.9 billion, a substantial drop for Q2 2012 earnings of $99 million on net sales of $2.1 billion and sequential Q1 2012 income of $46 million. In the first half of 2012, net income was $90 million. By comparison, in the first half of 2011 net income was $205 million.
"Overall steel demand remained steady in the second quarter with volumes increasing about 5 percent," said Chief Executive Officer Mark Millett. "Stability in demand from the automotive, energy, construction equipment and agricultural sectors supported volumes. However, decreases in flat roll pricing related to both supply-side pressure caused by increased imports and increased domestic capacity, resulted in somewhat decreased margins as compared to both the first quarter of 2012 and certainly the second quarter of 2011--a timeframe when historically high margins were achieved...earnings from our metals recycling operations were severely impacted as margins and volume fell. The ferrous scrap market was oversupplied as the export market weakened and demand decreased as US steel mill utilization declined." Operating income for OmniSource, SDI's scrap operations, was $5 million in Q2 2012, a decrease of $20 million compared to the first quarter of 2012.
The company's steel operations overall Q2 margins and operating income remained relatively consistent in comparison to Q1 2012 quarterly results. The average selling price per ton shipped decreased $21 per ton to $854, and the average ferrous scrap cost per ton melted decreased $22. However, in spite of continued non-residential construction market weakness, the company's fabrication operations reported positive quarterly operating income for the first time since the first half of 2009, based on increased volumes and better utilization of manpower brought on to support expanding backlogs.