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Steel production from an additional seven million ton capacity, which steel producers in the United States are expected to bring online in 2022 and 2023, will be “quite readily absorbed” by demand from steel consumers, Mark Millett, chairman, president, and chief executive officer at Steel Dynamics Inc (SDI) said on Tuesday November 9.
This includes new capacity at SDI’s $1.97 billion steel mill in Sinton, Texas, which is expected to produce 2.0-2.2 million tons in 2022 and 3 million tons in 2023.
“Sinton is not just a mill. It’s not just a function of adding capacity. I’s kind of an extension of our business model into the Southwest and into Mexico,” Millett said at the Steel Success Strategies conference in Miami.
The new facility is located in an underserved market in the Southwest and can make wider sheet products, Millett said.
“Folks in the energy business have to import a lot of their products. They can’t get the width they need domestically,” he said.
Millett reported on progress in gearing up production at the Sinton facility, which was originally expected to begin hot-rolled sheet production by mid-2022.
“Some of the finishing lines are already up and running. The pre-paint line is running and the galvanizing line is starting about right now. The hot side will be up and running by the end of the year,” he said.
Millett said he did not discount concerns that the US steel market could create overcapacity that could lead to a crash in the price of hot-rolled steel. “I recognize the rationale behind that. The lunacy was in the conviction.”
“There’s nothing in our world you can predict in all honesty in two-to-three years. So far, it hasn’t come to fruition,” he said.
Further, Millett said, all the talk in recent years about the steel industry creating overcapacity “dissuaded investors from investing in our space.”
Meanwhile, the SDI senior executive said, there has been capital destruction during the pandemic, taking out capacity at the same time that capital investment has been expanding it.
“The rebalance of the market which might have unfolded over time was [instead] sped up by Covid-19,” Millett said. “Several million tons were permanently idled.”
“Generally from a capacity standpoint, you’ve got to recognize – and many of you do – that the US is perhaps the only steel market still in short supply. We need 21-22% of imports to meet demand in a good market. We have to have imports to support base demand.”
Millett said he also did not see overcapacity in Mexico, one of the markets SDI is targeting with its new steelmaking hub in Sinton.
Even though Mexican steel producers have expanded capacity, the additional capacity has already been been absorbed by steel consumers, Millett said. “If you look at the product mix of the customer base, Mexico needs [more] capacity.”
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $94.11 per hundredweight ($1,882.20 per ton) on Monday November 8, up by 1.38% from $92.83 per cwt on Friday and down by 0.59% from $94.67 per cwt a week ago.