Fort Wayne, Indiana-based Steel Dynamics, Inc. reported Q2 2013 net income of $29 million on net sales of $1.8 billion. By comparison, prior year Q2 net income was $44 million on net sales of $1.9 billion; and sequential Q1 2013 net income was $48 million on net sales of $1.8 billion.
Q2 shipments improved in the company's steel and fabrication operating segments when compared to Q1, but were lower for both metals recycling and ferrous operations. Operating income for the company's steel operations decreased as compared to the sequential Q1, declining 28 percent, and declined 37 percent as compared to Q2 2012, primarily due to lower steel metal spreads, as declining steel prices more than offset increased volume.
"Specific to product pricing, the second quarter proved most challenging for our sheet and structural steel operations," said President and Chief Executive Officer, Mark Millett. "Slower anticipated economic growth in China coupled with suppressed economic growth in the European community influenced near-term market sentiment. The persistent uncertainty in the domestic economic environment continued to influence customer buying patterns as they maintained low inventory levels. Domestic oversupply, coupled with increased quarter-over-quarter steel imports, resulted in decreased quarterly selling values."
"Compared to the first quarter, operating income from our steel operations decreased 28 percent to $88 million, driven by metal margin compression caused by declines in average consecutive quarterly sheet and structural steel pricing, which more than offset the benefit of increased overall volume," continued Millett. "We saw meaningful volume improvements for rail, engineered special bar quality products, and galvanized sheet steel from The Techs. Modest growth in the overall construction market continued in the quarter and supported improved shipments and backlog for our fabrication business, which achieved its fifth consecutive profitable quarter.
The company's steel mill production utilization rate was 83 percent in Q2, compared to 89 percent in Q1 2013. Planned maintenance downtime in April at the Flat Roll and Engineered Bar divisions was the primary reason for the decrease. The Structural and Rail Division continued a positive utilization trend as standard rail volume increased 20 percent over the sequential quarter. The average selling price for the company's steel operations per ton shipped decreased $8 to $781 in Q2, and the average ferrous scrap cost per ton melted increased $3 per ton. Operating income attributable to the company's long product operations decreased 20 percent when compared to the sequential quarter, while earnings from sheet operations decreased 34 percent.