Steel Dynamics, Inc.’s (STLD - Free Report) board has authorized it to build a new state-of-the-art, electric-arc-furnace (“EAF”) flat roll steel mill in the United States. The steel maker plans to invest $1.7-$1.8 billion to construct the facility that is expected to have a production capacity of roughly 3 million tons annually. It will have the capability to make the latest generation of advanced high strength steel products.
The project is expected to create around 600 well-paying positions with opportunities for indirect job growth from other support service providers. It will include value-added finishing lines including a galvanizing line with an annual capacity of 450,000 tons as well as a paint line with an annual coating capacity of 250,000 tons.
Steel Dynamics plans to locate the new facility in the southwestern United States to cater the southern United States and the underserved Mexican flat roll steel market. Selection of the final location is subject to state and local government infrastructure and incentive support. The company expects to start construction in 2020 upon final site selection and the receipt of necessary environmental and operating permits. Operations are anticipated to begin in the second half of 2021.
The company noted that this investment would allow it to cost effectively serve the customers in this growing flat roll steel consuming region and enhance its steelmaking capacity and value-added product capability.
The facility is expected to produce a range of flat roll steel products including hot roll, cold roll, galvanized, Galvalume and painted steel to mainly serve energy, automotive, construction and appliance sectors. Steel Dynamics intends to use new technologies that will further reduce the gap between existing EAF and integrated steel mill production capabilities.
Steel Dynamics’ shares have lost 11% over a year, outperforming its industry’s 13.7% decline.
Steel Dynamics, in its third-quarter call, said that market and macroeconomic conditions are positioned to benefit domestic steel consumption. The company envisions steel consumption to remain strong and grow into 2019 based on customer optimism across the market sectors and strong underlying domestic steel demand fundamentals. The company believes that these along with its expansion actions are firm drivers for its sustained growth.
Steel Dynamics is also progressing well with the integration of the recent Heartland acquisition and is on track to attain its expected annual run-rate of between 800,000 tons and 900,000 tons of cold roll, pickled & oiled, and galvanized flat roll steel by mid-2019.
The company also noted that it remains focused on delivering shareholder value and strengthening its financial position through strong cash flow generation and execution of its long-term strategy.
Zacks Rank & Stocks to Consider
Steel Dynamics currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth considering in the basic materials space include The Mosaic Company (MOS - Free Report) , CF Industries Holdings, Inc. (CF - Free Report) and Methanex Corporation (MEOH - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Mosaic has expected long-term earnings growth rate of 7%. Its shares have surged 44% in the past year.
CF Industries has expected long-term earnings growth rate of 6%. Its shares have gained 17% in a year.
Methanex has expected long-term earnings growth rate of 15%. Its shares have gained 7% in the past year.
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