SDI seeks more pig iron self-sufficiency, less prime scrap usage

Steel Dynamics Inc. is pursuing opportunities to become more self-sufficient in its pig iron supply and has worked in-house to develop a higher-quality shredded scrap mix, lowering its reliance on prime scrap and imported pig iron, CEO Mark Millett said April 21.

Noting the disruption of pig iron supplies resulting from Russia's invasion of Ukraine, Millett said SDI's flat-rolled steel operations have reduced pig iron usages while maintaining quality through changes in operating practices and through sourcing alternative inputs.

"So, typically where a mill is around 22% pig iron input, our mills today are running at about 14%," Millett said during the company's first quarter conference call April 21.

With a large portion of pig iron sourced from Russia and Ukraine, SDI, like other mills, scrambled to find alternative sourcing in the wake of Russia's invasion. SDI has been able to cover its pig iron needs for the rest of this year and into 2023 by sourcing from Brazil and India, while lowering its overall pig iron requirements, allowing operations to continue uninterrupted, he said.

However, more demand for Brazilian and Indian pig iron amid Russia and Ukraine's absence has pushed up imported prices, he noted. Prices for Brazilian merchant pig iron for export surged 65% in the weeks following Russia's invasion, according to S&P Global Commodity Insights pricing data.

SDI's Butler flat-rolled division in Indiana has on-site liquid pig iron production that supplies nearly all its pig iron needs while "significantly" increasing productivity and reducing melting costs, Millett said.

"We are currently in the process of pursuing opportunities to become even more pig and self-sufficient for the future," Millett said. Company executives declined to provide further details on current plans.

On the scrap side, over the past 18 months the company's recycling and steel teams have worked to develop higher-quality shredded scrap that can be used in place of prime scrap, he said. This has resulted in reducing Butler's need for prime scrap from 65% of its mix to 40% while achieving the same steel qualities, Millett said.

"We are currently rolling this out to our Columbus and Sinton steel divisions, allowing for a lower-cost, readily available, low-residual scrap supply," he said.

SDI continues to ramp up output at its newest flat-rolled steel mill in Sinton, Texas, and expects the mill to achieve capacity utilization of about 80% by the end of Q3 and over 90% before year-end, Millett said. Shipments from the mill are expected to be around 1.5 million st in 2022.

Additionally, four previously announced coating lines, located at Sinton and the company's Heartland flat-rolled operations in Indiana, remain on schedule to begin operating in mid-2023, he added. The company is building a paint line and galvanizing line at each facility.

SDI reported Q1 net income of $1.1 billion on sales of $5.57 billion, up from net income of $430.5 million on sales of $3.54 billion in the year-ago period.