Comparatively, prior year first quarter net income was $39 million, or $0.17 per diluted share, on net sales of $1.8 billion, and sequential fourth quarter 2014 net sales were $2.5 billion, with adjusted net income of $97 million, or $0.40 per diluted share, which excluded the impact of non-cash asset impairment and purchase accounting charges of $0.59 per diluted share. 

As mentioned in the company's earnings guidance released on March 17, 2015, two important industry developments occurred in the first quarter.  First, domestic steel product pricing declined to levels that are more globally competitive, which the company believes will result in reduced steel import levels in the coming months.  Despite continued strong domestic steel consumption, steel product pricing decreased meaningfully due to delayed customer orders caused by the volatility in scrap prices and inventory buildup related to the excessive level of imported steel.  Second, ferrous scrap pricing declined between 25 and 30 percent during February. Historically iron ore and scrap prices have been highly correlated, but during 2014 ferrous scrap pricing disconnected from iron ore pricing and remained relatively high while iron ore prices declined dramatically.  Therefore, a sharp decline in scrap prices at the beginning of this year was not unexpected, and allows for a better cost position.

"The first quarter 2015 market environment was extremely challenging for our steel and metals recycling operations," said Mark D. Millett, Chief Executive Officer. "The elevated steel import volume and customer inventory overhang resulted in significantly lower first quarter 2015 steel shipments, which was the primary driver of a 44 percent reduction in our consolidated operating income, when compared to the fourth quarter 2014 (excluding fourth quarter impairment charges).  Our steel operations experienced margin compression as product pricing declined and the full benefit of lower mid-quarter scrap costs were not able to be realized in first quarter 2015 results, due to our inventory accounting methodology (FIFO) and lower production rates.  However, we should see the benefit of the lower scrap prices in the second quarter 2015, and we believe scrap prices will remain lower through the remainder of the year, as there are no strong drivers to support significant price appreciation.

"We believe the reduction in both steel and scrap prices, coupled with continued strength in domestic steel consumption from the automotive, manufacturing and construction sectors, should support a stronger domestic steel industry later this year, predicated upon the expectation of reduced levels of imported steel, sustainable lower raw material costs and increased orders, as customer inventory overhang dissipates," continued Millett.

"An important barometer for domestic steel consumption is the strength of the construction industry.  Historically, the construction industry has been the largest single domestic steel consuming sector, and it is continuing to strengthen this year.  For the first quarter 2015, our fabrication operations achieved its second highest quarterly financial result, despite a seasonal decline in shipments.  Strong demand has allowed for increased product pricing, while order inquiries and bookings remain robust, confirming the positive trend in the non-residential construction market."

Additional comments and information can be found at www.steeldynamics.com.
 

Steel Dynamics, Inc. is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with annual sales of $8.8 billion in 2014, over 7,700 employees, and manufacturing facilities primarily located throughout the United States (including six steel mills, eight steel processing facilities, two iron production facilities, over 90 metals recycling locations and six steel fabrication plants).