[ferro-alloys.com]All of Steel Dynamics Inc.'s US steel mills are continuing to operate amid the coronavirus pandemic, with the company targeting an 80% utilization rate at its flat-rolled steel mills in the second quarter, CEO Mark Millett said Tuesday.

SDI's US mills shipped a total of 2.85 million st in the first quarter, up from shipments of 2.68 million st in the year-ago quarter. Of SDI's Q1 steel shipments, 2.5 million st was purchased by outside customers. SDI's mill utilization level stood at 94% in Q1, according to the company.

A utilization rate around 80% for the company's flat-rolled operations would be a good balance between fixed-cost absorption and pricing as demand in the US steel market overall has weakened amid the coronavirus, Millett said Tuesday during the company's Q1 earnings call. Given the company's current backlog, SDI is confident it can keep its flat-rolled mill output level around 80% through April and May, possibly into June, he said.

Since mid-March, the landscape in the US steel industry has shifted rapidly, with steel demand from the energy and automotive sectors taking the biggest hit. To date, SDI has seen some construction jobs delayed or postponed but it has not been widespread or meaningful, Millett said.

"While some projects have been disrupted or postponed, at this time the sector still remains intact," Millett said, commenting on the outlook for construction. "Our steel order activity from construction customers, as well as our strong steel fabrication order backlog supports this sentiment."

Any impact of COVID-19 on the construction market is likely to lag four to six months due to pre-funded construction activities, Millett said.

SDI received the required environmental permits for its new flat-rolled steel mill under construction in Sinton, Texas, in January and is continuing to move forward with the project despite the downturn, Millett said, adding the company still believes the underlying case for the investment remains intact.

The company currently anticipates the mill to startup in mid-2021, however, Millett said the company will continue to reassess its order books, the underlying market demand and cash flow generation, and could make adjustments to the time line of the project as it sees fit.

Overall SDI reported net income of $187.34 million on sales of $2.58 billion in Q1, down from net income of $204.3 million on sale of $2.82 billion in the year-ago quarter.

(S&P Global Platts)

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