US flat rolled minimill, Steel Dynamics Inc. (SDI), announced Friday that it expects an earnings loss in the fourth quarter of 2008, despite expecting to achieve record-high annual revenues for the whole of 2008.
Keith E. Busse, SDI's president and CEO, said in a press release, "We are in the midst of a rapidly changing and very challenging global economic environment. We have seen a sharp drop in demand for all products: steel, recycled metals and fabrication. The global credit crisis has had a profoundly negative impact on what was already a weakening and very fragile world economy."
To address the weak demand, SDI says its combined operations are currently running at about a 50 percent utilization rate.
The company also said that many clients reduced and canceled orders in the fourth quarter to decrease their own higher-priced inventory positions to generate cash amidst the current economic crisis and uncertain economy. This, combined with the swift decline in ferrous material costs, may result in an SDI write-down in excess of $60 million during December. However, the company still expects to post record-high full-year revenues, operating income and cash flow from operations for 2008.
Looking forward, Mr. Busse is optimistic that the bottom of the downtrend is near. "We believe that the precipitous decline in ferrous scrap prices has run its course, as prices rose slightly from November to December," Busse said. He continued, "A more stable recycled metallic market, combined with lower-cost ferrous scrap inventories at our flat and long product steel operations positions the company to achieve improved operating margins in the first quarter of 2009, as we believe that steel selling prices are at the bottom and could likely see modest increases."