Steel Dynamics (STLD 33.02, +0.17) has added 0.5% despite issuing cautious guidance for the second quarter.
The steelmaker expects that second quarter earnings will be between $0.60 per share and $0.64 per share, which is well below market expectations.
The lowered outlook is due in part to a modernization of a galvanizing line. In addition to modernizing the line, Steel Dynamics expanded the line's annual value-added production capacity by 180,000 tons. The upgrade cost $15 million and it required a three-week shutdown in May, leading to higher costs and lower value-added shipments.
Separately, the company had to contend with quality issues related to the start-up of a new Galvalume and paint line at the Columbus Flat Roll division. This also led to higher costs and lower value-added shipments, and will reduce second quarter pretax earnings by about $15 million.
Lower overall shipments and higher average scrap costs will result in lower profitability when compared to the first quarter.
Average steel product pricing is expected to be up in the second quarter, but higher scrap costs are expected to offset the benefits of higher prices.
Profitability for the company's metal recycling platform is expected to be steady when compared to the first quarter. Similarly, earnings from Steel Dynamics' fabrication business are expected to remain steady in the second quarter.