Ternium reports leap in profits

Luxembourg-based Ternium S.A., a steel producer with most of its capacity in Central and South America, has announced a 250 percent year-on-year leap in earnings for its 2021 first quarter and says it anticipates ongoing favorable market conditions.

Ternium has reported first-quarter 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.1 billion on steel shipments of 3.1 million tons. The firm says its EBITDA margin was 33 percent and its EBITDA per ton was $341.10.

In remarks accompanying the release of its results, Ternium says in Mexico, which it calls its “main steel market,” manufacturing activity remained at good levels in the period driven mainly by finished goods exports, while construction activity kept recovering gradually.

Ternium’s Mexican shipments were 1.7 million tons in the first quarter of 2021, increasing 3 percent on a year-over-year basis and compared with the fourth quarter of 2020.

In the firm’s southern region, activity in Argentina’s industrial and construction sectors “remained at strong levels during the first quarter of 2021,” Ternium says. The firm shipped more than 620,000 tons of steel in the quarter. That was a decrease from the prior quarter but represented a 64 percent rebound year over year. “Volumes in Argentina were significantly affected in the first quarter of 2020 by the measures implemented to mitigate the COVID-19 pandemic,” the firm states.

Ternium says finished steel shipments in its “other markets” region increased 15 percent on a sequential basis, thanks in part to the ramping up of its new facility in Palmar de Varela, Colombia.

The company ascribed its strong EBITDA figure to steel prices that “increased significantly in the period under a strong global pricing environment, particularly in the North American steel market.” Ternium adds, “On the other hand, the company's cost per ton also increased, mainly reflecting higher costs of raw materials, purchased slabs and energy.”

The company says it sees more of the same going forward: “After achieving record EBITDA in the first quarter of 2021, Ternium expects a sequentially higher EBITDA in the second quarter primarily due to an increase in realized steel prices, partially offset by higher cost per ton due to higher iron ore, scrap and slab costs flowing through the company’s inventories.”

Ternium says it anticipates volumes to remain stable in the second quarter, with shipment increases in Mexico offset by lower slab sales to third parties. “Following the pandemic-induced decrease in steel consumption during the first half of 2020, an increased demand for steel has outpaced the speed of the recovery in global steel production,” the company adds.

The demand-supply imbalance “has driven a significant increase in steel benchmark prices around the globe over the last nine months,” Ternium states. “The company currently expects these conditions will tend to normalize during the second half of 2021, as steel capacity utilization increases [and] government stimulus programs continue to be deployed and the pandemic effects begin to wane as a result o vaccination programs.”

The company says it “anticipates sequentially higher realized steel prices in Mexico in the second quarter of 2021, as prices in the USMCA (United States, Mexico, Canada Agreement) market continue to increase and quarterly contract prices reset, with a lag, at higher levels than in the first quarter of 2021.”