Steelmakers express confidence in near-term earnings

Two of the largest scrap-fed electric arc furnace (EAF) steelmakers in the United States have reported continuing profits in mid-2021, while Cleveland-Cliffs—which has EAF assets and blast furnace/basic oxygen furnace (BOF) complexes—also has reported healthy earnings.

Charlotte, North Carolina-based Nucor Corp., America’s largest EAF producer, has announced record quarterly consolidated net earnings of $1.51 billion for the second quarter of 2021. “Nucor’s second-quarter earnings of $5.04 per diluted share marks the highest quarterly earnings in the company’s history,” states Leon Topalian, Nucor president and CEO.

In the first six months of 2021, Nucor’s consolidated net sales of $15.81 billion were an increase of 59 percent compared with consolidated net sales of $9.95 billion in the first half of 2020, according to the company. Overall operating rates at the company’s steel mills increased to 97 percent in the second quarter of this year, contrasting sharply with a 68 percent rate in the pandemic-affected second quarter of 2020.

Nucor sees the good times continuing, stating, “We expect earnings in the third quarter of 2021 to be the highest quarterly earnings in Nucor history, surpassing the record set in the second quarter of 2021. The primary drivers [are] improved pricing and margins in the steel mills segment. The steel products segment and the raw materials segment are expected to have increased earnings in the third quarter of 2021 compared to the second quarter of 2021.”

Nucor’s positive news has arrived at about the same time as similar news from Fort Wayne, Indiana-based Steel Dynamics Inc. (SDI), which has reported what it calls record earnings during this year’s second quarter.

In comments accompanying the results, Mark D. Millett, SDI chairman and CEO remarks, “Our segment operating results were exceptional. Second-quarter operating income from our steel operations was a record $1 billion, and our metals recycling operations sustained strong earnings as increased domestic steel mill utilization of 81 percent supported ferrous scrap demand and pricing.”

Looking ahead, Millet says, “We remain confident that macroeconomic and market conditions are in place to support strong domestic steel demand in 2021 and beyond."

Cleveland-based Cleveland-Cliffs melted some 4.5 million tons of scrap in 2020, according to its sustainability report, but it also has touted its strategy to rely on its own virgin iron-based metallics feedstock.

That firm’s second-quarter earnings included what it calls “record quarterly revenue of $5 billion” and “record quarterly net income of $795 million.”

Cleveland-Cliffs Chairman, President and CEO Lourenco Goncalves points specifically to the firm’s raw materials strategy as a profit contributor. “This quarter was a clear illustration of our raw material cost and quality advantage over others in the industry, particularly the ones fully dependent on scarce prime scrap and dirty pig iron imported from polluting countries,” he states.

Goncalves adds, “The decision we made four years ago to invest $1 billion in our direct reduction plant has been proven to be not only right but also perfectly timed. Our internal use of HBI [hot briquetted iron] has minimized our reliance on prime scrap in our BOFs and EAFs, as well as enhanced productivity and reduced emissions in our blast furnaces as demonstrated by our actual CO₂ emissions figures.”

Like the other two CEOs, Goncalves expresses optimism for the near term, stating, “Steel demand remains excellent and, as we continue to negotiate our contract businesses with several clients in different sectors, it is progressively translating into substantially higher contract prices later this year and into 2022.”

All three firms are operating in a global environment featuring increased demand for and production of steel this year compared with the pandemic-affected conditions in 2020.