(Bloomberg) — Stelco Holdings Inc. warned investors that steel shipments are taking a hit as the rapid spread of omicron accelerates absenteeism within the company and among its customers’ work crews.
The Ontario, Canada-based producer expects to report fourth-quarter shipments of about 625,000 net tons of steel, well below its prior guidance of 675,000 to 680,000 metric tons, and it warned that the first quarter could drop even more. The main reason for the significant pullback in deliveries is the omicron coronavirus variant, which has spread like “wildfire,” according to Chief Executive Officer Alan Kestenbaum.
“Many of our customers were starting to report to us really in the last few days of December that they simply don’t have work crews to come and produce parts,” Kestenbaum told BNN Bloomberg Television. “What we’re seeing is impacts all over the place including transportation, and including issues we have to deal with within the company in terms of absenteeism.”
Shares of Stelco fell 10% at 12:02 p.m. in Toronto, on pace for the biggest drop in more than 10 months. Canada’s biggest steelmaker rose more than 80% last year amid an unprecedented rally in the steel industry, boosted by a surge in demand as economies reopened across North America with the vaccine rollout.
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Analysts at Scotiabank said they view the impact to Stelco as “temporary and relatively mild,” with the net impact being about 70 cents a share. However, Capital Economics said in a note on Jan. 5 that the biggest threat to the economy could be on the supply side due to a lack of workers, saying that more than 2% of the workforce could now be isolating.
The largest American steelmakers, including Nucor Corp. and Cleveland-Cliffs Inc., have not yet responded to an inquiry about absenteeism hangups. U.S. Steel Corp. said in an email that they are not seeing a “significant” impact.
“Generally when people shut their doors at the end of the year you usually get a surge in shipments in the early days, but that’s not occurred,” Kestenbaum said.
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