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We have been getting a lot of guidance from steelmakers in recent days. Steel Dynamics (STLD) is trading modestly lower after guiding Q2 EPS at just $2.64-2.68, which was below analyst expectations. The reaction is fairly muted because it was not surprising. Nucor (NUE) and STLD tend to both provide EPS guidance around the middle of the last month each quarter.

• On Friday, we got downside guidance from Nucor, which we think prepared investors for a guide down from Steel Dynamics today. If that were not enough, US Steel (X) also provided guidance today. After guide downs from NUE and STLD, we were a bit surprised to see US Steel guide Q1 EPS in-line. However, it did lower Q2 adjusted EBITDA guidance to approx $425 mln from $425-475 mln prior guidance.
• Nucor did not provide a lot of color with its guidance on Friday, but Steel Dynamics did provide a bit more context. Basically, STLD expects Q2 EPS to be lower both yr/yr and sequentially. In particular, Q2 profitability from its steel operations are expected to be meaningfully lower than Q1 as lower pricing is offsetting steady shipments. The silver lining is that STLD sees underlying domestic steel demand remaining intact. The automotive, non-residential construction, energy, and industrial sectors continue to lead demand. However, steel buying hesitancy has resulted from a weakening scrap price environment.
• Briefing.com notes that, for mini-mills in particular, scrap prices matter a lot. Because scrap is a major input material, especially for mini-mills, oftentimes steel buyers will monitor scrap prices. If they drop, buyers will often wait out steel producers, knowing that they will likely need to follow suit with lower selling prices for steel. That seems to be happening right now and it's impacting Q2 results.
• Turning to US Steel, the company said its Adjusted EBITDA guidance reduction reflects stable domestic flat-rolled steel end-use demand despite a "dynamic" spot steel pricing environment. In Europe, X recently restarted its temporarily idled blast furnace in response to improving customer demand. However, as expected, challenging market conditions are negatively impacting the Tubular segment. Regarding its pending deal to be acquired by Nippon Steel, X says it's "make progress."

Overall, we are seeing a muted reaction in both STLD and X today despite weak guidance and a sluggish pricing environment. We think Nucor's weak guidance on Friday prepared investors for this, and maybe STLD guidance was not as bad as feared. Also, it seems both steelmakers' positive comments on end customer demand is helping prop up shares of both companies. Regardless, it seems Q2 industry dynamics will pressure steel earnings this earnings season.