This Steel Company Is Way Ahead of the Competition on This Key Metric
Steel is a vital product across many industries, but demand tends to fluctuate along with economic activity. The cyclical nature of demand often leads to huge swings in profitability for steelmakers. But some steel mills are better able to handle the ups and downs than others, and Steel Dynamics (NASDAQ: STLD) has a proven history of outperforming its peers on one key industry benchmark.
Steel mills are very large, and it requires a lot of money to keep one up and running. That statement is bigger than it seems because running a mill that is producing much less than it can costs just as much as running the same mill at full production levels.
The key difference is the amount of money that is made selling the steel that gets produced. If you only make a small amount of steel you only make a little money to offset the cost of running the mill. In fact, it isn't unusual for steel companies facing low demand to bleed red ink. Commodity prices can impact this dynamic, but usually even high prices don't completely offset the pain of low production rates. And, sometimes, low demand and low prices go hand in hand, augmenting the pain.
Source Fool.com
