Q4 2023 Steel Dynamics Inc Earnings Call

Operator: Good day and welcome to the Steel Dynamics 4th quarter and full year 2023 earnings conference call. At this time all participants are in aimless in only mode.

Operator: After management's remarks we will conduct a question and answer session and instructions will follow up that time. Please be advised this call is being recorded today, January 24th, 2024 and your participation implies consent to our recording this call. If you do not agree to these terms please disconnect.

David Lipschitz: At this time I would like to turn to conference over to David Lipschitz, Director Investor Relations, please go ahead. Thank you Holly. Good morning and welcome to Steel Dynamics 4th quarter and full year 2023 earnings conference call. As a reminder today's call is being recorded and will be available on our website for replay later today.

David Lipschitz: Leading today's call are Mark Millett, Chairman and Chief Executive Officer of Steel Dynamics, Theresa Wagler, Executive Vice President and Chief Financial Officer, and Barry Schneider, President and Chief Operating Officer. The other members of our senior leadership team are joining us in the call individually.

David Lipschitz: Some of today's statements which speak only as of this date may be forward-looking and predictive. Typically you proceeded by believe, expect, anticipate, or words of similar meaning. They are intended to be protected by the Private Security's litigation reform act of 1995 should actually result turn out differently.

David Lipschitz: Such statements involve risk and uncertainties related to integrating or starting up new assets, the aluminum industry, the use of estimates and assumptions that connect with anticipated project returns, and our steel metals recycling and fabrication businesses, as well as the general business and economic conditions. Example of these are described in the related press release as well as in our annual filed SEC form 10K under the headings, forward-looking statements and risk factors found on the internet at www.scc.gov, and if applicable in any later SEC form 10K you. You also find any reference non-gap financial measures reconciled to the most directly comparable gap measures in the press release issued yesterday entitled Steel Dynamics Report's fourth quarter in full yield 2023 results.

Mark Millett: And now please return to call over to Mark. Sorry, thank you David.

Mark Millett: Good morning everyone. Thank you for being with us on our fourth quarter in full year 2023 earnings call. As you saw in our release, our teams achieved a strong annual 2023 financial operational performance. I think most gratifying was achieving our best safety year with the lowest recordable incident grade ever.

Mark Millett: I want to applaud and congratulate all the teams because there's a monumental effort put into it to get there. Steel shipments were record 12.8 million tons. I think it needs to be emphasized that we've got 3 million tons yet of additional shipping capability to leverage. The second best year for revenues at 8.18.8 billion and cash flow from operations at 3.5 billion. Adjusted EBITDA was 3.7 billion dollars.

Mark Millett: I think the year clearly demonstrated the three cycle earnings resilience of our business model. It's manifest by a diverse value-add product portfolio supported by a superior operating culture driving world-class low-cost operations. I can't be more pleased at Centrum, Centrum is showing significant operating improvement, was EBITDA positive in December with a clear path to profitability in the first quarter of 2024 and thereafter.

Mark Millett: We're also achieving fast-paced progress on our aluminum flat-rolled investments that continues to be strong commercial support for a new and innovative supply chain solution from Steel Dynamics, who the aluminum industry is considering a well-known highly regarded metals producer. I'm incredibly proud of the Steel Dynamics team, they are the foundation of our company, and they drive us success. And to be honest, they inspire me.

Mark Millett: Feeling their spread of core and commitment to the SDI family during the recent holiday parties was absolutely just simply humbling. And that is why we are so focused on providing the very best for their health, safety, and welfare. We're actively engaged in safety at all times, and at every level, keeping it top and mind in an active conversation each and every day. And as I already suggested, without focus, the team's safety performance was a record low incident rate in 2023. Obviously though there's more to do, we will not rest until we consistently achieve our goal of zero injuries.

Mark Millett: So that said, I will hand it to Theresa, who will then bat the ball to Barry, and then back to me to finish up. So Theresa?

Theresa Wagler: Thank you, Mark. Good morning, everyone. Thank you for being with us today. In addition to the achievements Mark has mentioned, the teams also achieved our third best year for operating income of $3.2 billion, and net income of $2.5 billion, or $14.64 per deluded share. Cash flow from operations and liquidity of $3.5 billion, and a three year after tax return on invested capital of 32%. A truly great performance.

Theresa Wagler: My sincere thank you and congratulations to our entire team. As for the fourth quarter of 2023, net income was $424 million, or $2.61 per deluded share, with adjusted EBITDA of $659 million. Fourth quarter of 2023 revenues of $4.2 billion, an operating income of $519 million, or lower than sequential third quarter results driven by seasonally lower volume, and realized steel and steel fabrication pricing. Our steel operations generated operating income of $365 million in the fourth quarter, lower than sequential third quarter results due to lower realized flat road steel pricing. Our steel shipments remain steady at 3.1 million tons.

Theresa Wagler: Our four new flat road coding lines have, or will begin operating this quarter, increasing our higher margin value added product mix by an additional 1 million tons, making our capacity and value added in flat road at $7 million. For the full year of 2023, operating income from our steel operations was $1.9 billion, with record annual shipments of 12.8 million tons. For those of you that track our flat road shipments and more specificity, Hotwell Coil and P&O shipments were 927,000 tons, cold road shipments, 124,000 tons, encoded shipments of $1,192 million, and Customs.

Theresa Wagler: For metals recycling, fourth quarter operating income was $6 million due to seasonally lower volume and non-ferrous metal spread compression. For the full year, operating income from our metals recycling operations was $108 million. Lower than prior year results based on decreased fair scrap pricing more than offsetting higher volume. Were the largest non-ferrous metals recycler in all of North America, recycling aluminum, copper and other metals.

Theresa Wagler: The team continues to lever our circular manufacturing operating model, providing high-quality low-cost scrap to our steel mills, which improves furnace efficiency and reduces company-wide working capital. Our steel fabrication operations achieved operating income of $250 million in the fourth quarter. Lower than sequential third quarter results yet historically strong due to lower pricing and seasonally lower shipments. Our Steel Fabrication Platform had another great year in 2023, with operating income of $1.6 billion, congratulations to the team. Our Steel Joyce inducted me into rain solid with good order activity.

Theresa Wagler: Our backlog is sent through the first half of 2024 and forward pricing remains strong. Infrastructure and glacial reduction act, the DOE decarbonization support and manufacturing onshoreing are expected to support domestic success at investment and related flat and long-product steel consumption and related Joyce induct consumption as well. During the fourth quarter of 2023, we generated strong cash flow from operations of $865 million. For the full year, we achieved our second best annual cash flow of $3.5 billion.

Theresa Wagler: Our cash generation is consistently strong based on our different shade, circular business model and highly variable low-cost structure. At the end of the year, we had liquidity of $3.5 billion. During 2023, we invested $1.7 billion in capital investments, of which almost 60% related to the construction of our aluminum flat-rolled investments. For 2024, we believe capital investments will be in the range of $2 billion, of which approximately $1.4 billion relates to aluminum investments.

Theresa Wagler: During the fourth quarter, we maintained our cash dividend at 42.5 cents per common share after increasing at 25% in the first quarter of 2023. During the full year of 2023, we paid cash dividends of $271 million and repurchased $1.5 billion or 8% of our outstanding shares, representing a 62% net income shareholder distribution rate. The board also authorized an additional $1.5 billion share of purchase program in November and 1.4 billion remained available at the end of the year.

Theresa Wagler: Since 2017, we've increased our cash dividend and per share by 174% and we've repurchased $5.5 billion of our common stock or 37% of our outstanding shares. These actions reflect the strength of our capital foundation and consistently strong cash flow generation capability and the continued optimism and confidence Future. Our capital allocation strategy prioritizes high return growth where shareholder distributions comprise of a base positive dividend profile that's complemented with a variable share purchase program while we remain dedicated to preserving our investment grade credit designation. Our free cash flow profile has fundamentally changed over the last five years, from an annual average of $540 million to $2.8 billion.

Theresa Wagler: We are squarely positioned for the continuation of sustainable optimized long-term value creation. Our three-year after-tax return on invested capital of 32% is a testament to our profitable growth. Sustainability is also a significant part of our long-term value creation strategy and we're dedicated to our people, our communities, and our environment. We're committed to operating our business with the highest integrity. We have an actionable platform to carbon neutrality as more manageable and we believe considerably less expensive than lay ahead for many of our industry peers. Our sustainability and carbon reduction strategies and ongoing journey and we're moving forward with the intent to make a positive difference.

Barry Schneider: Thank you for your time this morning, Barry. Thanks, Theresa.

Barry Schneider: Our steel fabrication operations performed exceptionally well throughout 2023, achieving historically strong earnings. At the end of the year, our steel joist and deck order backlog was solid, extending to the first half of 2024. We continued to have high expectations for the business. Continued ensuring and manufacturing coupled with infrastructure spending and fixed asset investment related to the IRA programs should continue to provide momentum for additional construction spending. Equally important, our customers tell us demand remains solid and share our optimism.

Barry Schneider: Current pricing is stabilized at a historically high levels and order entry has improved. Our fabrication platform provides meaningful volume support for our steel mills, critical and softer demand environments allowing for higher through-cycle steel utilization compared to our peers. It also helps mitigate the financial risk of lower steel prices. Our metals recycling operations also performed well this year considering the challenge of declining scrap prices throughout much of 2023. The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating customers. In particular, our Mexican locations competitively advantage our Columbus and Sinton raw material positions.

Barry Schneider: They will strategically support aluminum scrap procurement for our future flat-rolled aluminum investments. Our metals recycling team is also partnering even more closely with both our steel and aluminum teams to expand our scrap separation capabilities through process and technology solutions. This will help mitigate potential prime ferrous scrap supply issues in the future. It will also provide us with significant advantage to material increase recycled content for our aluminum flat-rolled products and increase the earnings opportunities.

Barry Schneider: The steel team had another strong year achieving record volume of 12.8 million tons. During 2023, the domestic steel industry operated at an estimated production utilization rate of 76 percent while our steel mills operated at a rate of 93 percent excluding the Sinton. Plan.

Barry Schneider: We consistently operate a higher utilization due to our value added steel product diversification, our differentiated customer supply chain, and the support of our internal manufacturing businesses. This higher through-cycle utilization of all our steel mills is a key competitive advantage, supporting our strong and growing cash generation capability, and best in class financial metrics. Regarding the steel markets, steel pricing improved in the 4th quarter, 2023, and into January. Customer order entry rate has been strong, and lead times have been extended, while their inventory levels remain at historically low amounts.

Barry Schneider: In fact, our fladdle steel operations have experienced one of the strongest order entry environments in January, especially for our value added products. Additionally, steel imports have generally remained at a manageable level with expectations of this to continue. As for sitting, the team has achieved significant improvements in operating efficiency and consistency. They average about 65% capability in November, December, and have been running even stronger rates here in January. We are planning to present and see additional improvements in production after the team makes changes to certain transformers at the end of this first quarter, 2024, while we allow access to 100% of our milk capacity versus the current 80% capacity.

Barry Schneider: Additionally, the two new value added coding lines will begin operating in the first quarter, supporting increased volume, and margins. Regarding the steel market environment, automotive production estimates for 2024 are an estimated 16 million units, while automotive dealer inventories remain below historical moons. Non-residential construction remains solid as evidenced by the strength of shipments and backlogs that are structural rail division and customer inventory levels are low. Additionally, ensuring an infrastructure spending should provide meaningful support to fixed asset investment in related construction oriented projects in the coming years. As for the energy market, oil and gas activity is strong, driving approved orders for OCTG and solar, those areas all grow. Looking forward, we are optimistic regarding steel demand and pricing dynamics for 2024.

Mark Millett: With that, Mark? Super. Thanks, Barry. Thanks, Theresa.

Mark Millett: I think I'm consistently strong through cycle operating and financial performance continues to support our cash generation and growth investment strategies. As Barry mentioned, the four value add flat rail steel coding lines are starting this quarter, and Syngen should see a step function improvement, hitting it stride in the second quarter of this year. Our aluminum growth strategy is especially compelling, responses from existing and new customers across all markets remaining credible, only strengthening as we move forward.

Mark Millett: Many customers have already indicated they would like to build facilities on our rolling mill site in Columbus, Mississippi, and this co-location strategy provides a sustainably competitive model for all of us, conserving time, money, and reducing emissions across the supply chain, and has already proven itself clearly in the incentive. The project itself, 650,000 metric ton aluminum flat rail facility located in Columbus, Mississippi. It's going to be a state-of-the-art plan, obviously, serving the sustainable beverage and packaging, both all-body, end, and tab, automotive and industrial sectors.

Mark Millett: Roughly 300,000 metric tons of canstar, which is about 45% of the output, roughly 200,000 tons of water and 150,000 metric tons of industrial and construction products. The onsite melt cast slab capability of 600,000 metric tons will be supported by two satellite recycled aluminum slab casting centers located in UBC, Scrant Ridge regions, one out west and one in central Mexico. The expanded products scope is including additional scrap processing and treatment to maximize aluminum recycled content.

Mark Millett: Startup plans as a non-schedule rolling mill should be mid-25, the Mexico Slab Center at the end of 24, and then our Arizona Slab Center around mid-25. The total project cost, as you saw on the release, including the recycled slab centers, is risen to $2.7 billion.

Mark Millett: The installation cost for the rolling mill has expanded due to inflationary installation costs that we are all facing. But with virtually all equipment and construction contracts complete, we are confident in this final budget. As we said before, 100% to be funded with cash, and the expectation is to have through-cycle annual EBITDA around $650 to $700 million from the aluminum facility, with an additional $40 to $50 million from the Army source. I think we're definitely going to see superior financial metrics relative to our competition.

Mark Millett: As we see it, the market environment is similar to the domestic steel industry when we started STI 30 years ago. Oder assets, little reinvestment, heavy legacy costs with inefficient high cost operations. With confidence, we can emulate the performance-driven, high-efficiency load cost model that drove our success and steel to drive superior financial metrics. Our organizational mill structure, through which it just advanced the layout and technology and our performance-driven speed core and culture, will drive a census of around about 750 people versus typically 2,000 or more in a similar competitive.

Mark Millett: We will have higher yield through the system. We will leverage Army source's market position and separation technologies to ensure higher recycle content. We obviously won't have the legacy burden that others have.

Mark Millett: We will have production cost efficiencies and along with customer co-location. In the end, we'll also have a preferred sustainability profile. If you put it all together, we're confident that our earnings profile is going to be far superior to the industry today. We've developed the best financial metrics in the steel industry, and as they said, we have confidence we can do the same, and Aluminum. A point for continued growth. We have an additional 3 million tons that they said earlier of shipping capability that will be leveraged through our new processing lines, new products, and new supply chains.

Mark Millett: And we're on passion by our future growth plans as they will continue to drive the high return growth momentum we have consistently demonstrated over the years. We have the highest average five-year aftertax return on investment capital within the S&P 500 materials company companies. And the last three years we have an average aftertax ROIC of 32%. I'm going to say that just doesn't happen.

Mark Millett: A disciplined, intentional, organic and acquisition strategy focused on differentiated, value added supply chain solutions is providing sustainable cash generation and strong returns. And I continue to be optimistic moving forward. I believe the market dynamics are in place to support increased demand across our operating platforms in 2024 and the years ahead. North America will benefit from continued on showing of manufacturing businesses. And the US will benefit from the allocation of public monies from the infrastructure program, inflation reduction act, and other public programs. Few dynamics is levered to benefit from those programs through increased steel, joist and deck demand, flattened long product steel demand, and the associated higher demand for recycled scrap and aluminum.

Mark Millett: And closing, there's no doubt our themes are our foundation. And I thank each of them for their passion and dedication. We're committed to them. And I remind those listening today that safely for yourselves, your families and each other is the highest priority.

Mark Millett: Our culture and business model continue to positively differentiate our performance, leading to best in class financial metrics. We are no longer a pure steel company, but an integrated metals business providing enhanced supply chain solutions to the industry. And in turn, mitigating volatility and cash flow generation through all market cycles. We're competitively positioned and continue to focus on providing superior value for our company. Customers, team members, and shareholders alike. We look forward to creating new opportunities for everyone today and the years ahead.

Operator: So with that said, holiday, excuse me, Holly, I would love for you to open it up for questions. Thank you.

Operator: If you would like to ask a question, please signal by pressing the star key followed by the digit one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you press star one earlier during today's call, please press star one again to ensure our equipment has captured your signal. Also, we ask that you please limit yourselves to one question to facilitate time for everyone. Any additional questions can be addressed upon re-entering the Q.

Martin Englert: Your first question for today is coming from Martin Engler with Seaport Research. Hello. Good morning, everyone.

Martin Englert: Quick question on field conversion costs were estimated around 530 for Con in the fourth quarter and kind of average around there for the year looking ahead at one Q. Taking that point of reference into account, should we expect some decline there based on the ramping of sentent farther and some better fixed cost leverage? Good morning, Martin.

Martin Englert: As the way that the information that you guys can use to back into our conversion costs, I know this is a little difficult, but you hit the primary driver with sitting and ramping up as significantly as we're expecting them to do in the first quarter and as they're doing right now in January already, we would expect to see that overall, as you calculate at conversion costs, come down, absent any other factors, correct. Okay, and any goal post as far as when we think about what that could potentially decline on a sequential basis, and I understand there might be other offsets there with some stray that's flowing through there as well with.

Martin Englert: You know, it's really hard for us to give you guidance as you know, Martin, as you're early to the conversion costs as you're calculating it. As conversion costs really stand within the steel operations themselves. The two conversion costs are very stable. We don't expect to see a lot of movement except for sitting again because of the additional volumes. The substrate does have an impact, as you mentioned, but we don't expect to see that mix of processing versus production be dramatically different in the first quarter.

Martin Englert: Okay, if I could one follow up on steel fabrication in the release, you noted improved activity as well as a well priced backlog extending through first half of 24. On average is the backlog price higher or lower than the fourth quarter as be a 3500 for time. Martin, the backlog price is held in very steadily. There's not a dramatic difference.

Martin Englert: And again, we don't give specific access to the backlog pricing or fabrication or for other operations. But the resiliency and the price, both what we're seeing now and in that backlog is very steady. I would add, you know, in the fourth quarter.

Martin Englert: I believe is that the fabrication is kind of trough in large parts, but in the in the fourth quarter we had the highest order input rate of the prior six quarters. So volumes there, what we'll call obviously you've got a little seasonality and Q1, but the expectation is things will go upward thereafter. Your comment on you believe that it's trough does that pertain to volumes or price or volumes and price? I would say that for sure volume and pricing appears to have stabilized.

Martin Englert: Okay. Excellent. Thank you very much. You're welcome.

Tristan Cresser: Your next question is coming from Tristan Cresser with BNP Paraboss. Yes, hi. Good morning and thank you for taking the questions.

Tristan Cresser: The first one is a kind of a follow up on the fabrication guidance, maybe on the volumes. If we look at the shipments you had in Q4, that's probably the lowest that shipments we've seen in five years. And you mentioned you've seen that trough, but could you explain a little bit what has been holding you back there of late. And if we get if we look at 2024, what kind of growth expectation do you foresee for the business? I know you provided some some guidance last year on a half on half basis. So anything there would be helpful that that be my first question.

Tristan Cresser: I guess I would just leave it as already stated. The order input rate increased in Q4, that will flow through this year. You always have as you, as you, I know you appreciate sort of seasonality in this first quarter, when a month's in construction being a little inhibited by the weather. But I think we will certainly see a turn into the second quarter and through the rest of the year. All right, that's fair.

Tristan Cresser: And my second question is more on the capex hikes or the project budget hikes, I think you mentioned the aluminum that I think the deal carbon project also, the capex has been high. So what drove that?

Tristan Cresser: And when we look at this, let's say 300 million budget hikes versus prior, how should it be spread out between 2024 and 2025? I know you provided some insight on the budget for 2024, around 2 billion, but there is a significant drop in consensus expectation in 2025. So it'd be helpful to get a sense of how much is flowing into 2025 for those projects. And also when you look at this elevated capex budget the next year and your expectation for for your several businesses, do you expect to be cashful, positive for 2024? Thank you. Thanks, Tristan.

Tristan Cresser: So the bio carbon project hasn't increased in cost. It's stayed the same. It's $260 million. We did expect at one point in time to possibly get some tax credits that became unavailable once the conditions kind of became more precise from the administration. But otherwise the capital cost of 260 remains what we thought it would be. And that project is still online to be completed and to start before the end of 2024.

Tristan Cresser: Which as a reminder is incredibly additive to our decarbonization path and it's going to really help our customer basis. You look at the carbon content across our seal operations with the benefit of using the bio carbon.

Tristan Cresser: So and Carly excited and the team's doing a fantastic job in Mississippi getting that up and running. So that will be spent primarily in 2024. And that $2 billion is the number that I would have given you last quarter as well. So that's stayed the same for total capex in 2024. As it relates to the aluminum project most of the incremental and it rounded to 200 million but it was less than that in actuality.

Tristan Cresser: But most of that will be spent in 2024. So I gave you the spend for aluminum that's about $1.4 billion this year and it would be our expectation. And then there would be a trailing call it 150 to 200 million dollars remaining to be spent in 2025 related to the aluminum project. Tracks, and so really nothing significant has changed on the capital front except for that incremental addition in the aluminum project itself. Oh, wait, wait, I forgot, I had to look at my notes, you asked a lot of questions, Tristan.

Tristan Cresser: The last one was related to consensus for 2025, and I would just, and free cashflow, I would know, for the last two years, unfortunately, Stanton has been negative from an EBITDA perspective, and Mark said on the call this morning that we will be EBITDA positive in the first quarter and thereafter. That's a significant swing in just earnings itself, just as it relates to the ramp up of Stanton. In addition to that, you know, the four value ads flat rail lines that are coming online in 2024, which are significant additional opportunity for contribution to earnings on the value added side, as well as that towards the demand is today, is in the payment products and the double-loom products.

Tristan Cresser: And then if you couple that with the fact that we've been increasing and we'll continue to increase volumes in our melt recycling segment, both related to the collection of non-fair scraps, specifically aluminum, and to help service our steel mills on the fairest side of the equation. And then finally, in 2025, we will be starting our aluminum mill mid-year is the current forecast. So that's contributing to earnings, as Mark mentioned, not, you know, we believe through cycle earnings is $650 to $700 million, so I think everybody maybe needs to take a step back and kind of look at the opportunity that we have from an earnings perspective.

Tristan Cresser: And yes, you know, we do expect to generate cash in 2024, and we expect to continue, we plan to continue with our share of purchase program. Just one added point, although we are disappointed with the CAFACS creep there in the center. We are very, very confident. I mean, sorry, sorry, in Columbus, aluminum. But we're confident that that's the final creep, but it has no impact to schedule. To be honest, it is going at a breathtaking pace, absolutely for a normal job by the team down there, and there's no doubt we'll be up and running mid-year of 25.

Carlos Diaba: Your next question for today is coming from Carlos Diaba with Morgan Stanley. Good morning, Mark. And Teresa, my question is on the aluminum project, I don't know if you could maybe give a little bit of color as to what extent have you been able to, you know, contract some of the volumes that will come online in mid-2025, and what type of pricing mechanism or structure, even in just high level and on a qualitative basis, have you been able to use to implement in those contracts, if you have done so? Thank you, Carlos.

Carlos Diaba: The commercial team, in all honesty, is.., has only been put together over the last, I would say, two months. They're very, very active with our customer base, and in all honesty, we all are at every level. The reception is incredibly high, and I would suggest that we have total confidence that we're going to be able to support the ramp up in 25 into 26. All right, thanks for that.

Carlos Diaba: And if I may ask on the, what is the expected ramp up and EBDA contribution for the four quarter lines, I mean, I think two of them will start in the first quarter. As far as the ramp up, I'll let Barry address how quickly they ramp up, I would tell you from a financial perspective, the coding line, they are in totality all for around $600 million, and they tend to have a two and a half to three year payback. So it's very nice return. Yeah, and this is Barry.

Barry Schneider: I'd just like to add the, the teams, the personnel are in place. They've been training, building the lines. That's our culture to be part of the construction.

Barry Schneider: So the teams are already very familiar with equipment. Two of the lines have actually run first coils, one at Hartland, the paint line, and a coding line down in Sitten. So that's great news, that's always exhilarating for the teams to get that point. The next two lines are in hot commissioning now, and we anticipate those running first coils in the March timeframe. So the ramp up, keep product room. We're pretty aggressive in what we do typically, and we anticipate these will be contributing to our customers here in the near future.

Barry Schneider: I envision prime sales in Q1 from the two lines that have run first coils, and we see all four of the lines making and shipping saleable goods into the marketplace in Q2. So we anticipate our experience and our cultural will allow these startups to be very seamless, and we're very responsible to our customers, make sure the product leaving is nothing less than the best they expect from us. Thank you very much.

Barry Schneider: When you think about the four lines, or particularly the two lines in Sitten, obviously it's going to expand our value add product portfolio down there and enhance the margin directly there. But as importantly, it will allow us to fully utilize the downstream lines. So yes, the team has been a phenomenal job on the hot side.

Barry Schneider: You're going to see great gains there through increased utilization. As Barry said, we're knocking on 75% utilization today in January, and 80% is right around the corner. But downstream, when you take that product, you pick a lift, you put it through the tandem mill and other other lines, having the additional three, four hundred thousand tons of downstream, that's going to allow a and probably loading of those downstream lines and obviously a dilution of the cost structure.

Barry Schneider: So it's a very, very, very important and effective impact to send here in the next three or four or five months. I appreciate it, Carter. Mark, thank you.

Timna Tanners: Your next question for today is coming from Timna Tanners with Wolf Research. Okay, hey, good morning, everyone. I wanted to add a little bit about good morning.

Timna Tanners: On the bounce that I wanted to follow up and just, I know you mentioned that you thought volumes had hit bottom and prices were stabilizing. Do we have kind of the effect of the higher price from the, into the fourth quarter hitting in the first quarter? Or is that more of a second quarter phenomenon? So that was my first question. All right, I didn't get that. Yeah, sorry.

Timna Tanners: On the bounce I just asking about cost from, from throughput from the hot road side. Oh, okay. Yeah. So David thought you were talking about fabrication.

Timna Tanners: You're actually talking about flat roll. So the, no, we're operating right now because of the percent contract business lagging. Let's call it two to three. Three months.

Timna Tanners: So the increase pricing that we saw in flat roll in the fourth quarter is going to be benefiting the first quarter from a contract perspective on the 80% is really been pre consistent all year for the flat roll operation. So we'll see that benefit key one. Okay, that's actually really helpful, but I was asking about fabrication and the throughput of flat roll pricing creases and the impact on margins on downstream. So if you could actually answer that as well, that would be great. Thanks very much. Sorry, Tim.

Timna Tanners: I'll get this right eventually. From the cost perspective for the substrate for fabrication, they tend to have anywhere between, call it eight to ten weeks of inventory on the ground. That's the same thing that they would have had coming into the first quarter. So you're going to see some of that incremental price hike in the first quarter. But you would have seen some of it in the fourth quarter as well. Okay, thanks. And then if I could just one last one.

Timna Tanners: I know Barry talked about and Mark talked about. Even to customer inventory is being low. So I just don't understand that because I know that at least at SMU actually had some really high inventories for December. So is that just not aligned with what you're seeing or can you help me understand why the difference of narrative there?

Timna Tanners: Well, Tim, that was very, I think a lot of our, a lot of our relationships, especially with the galvanized and the pain in our, our very, you know, directly with customers. So we see our supply chains still meeting the fill, you know, orders and a really good rate. So the MSCI inventories still are, our seed are traditionally pretty low. But more to the point, ours are specific.

Timna Tanners: OEM relationships are still pulling tons from us. And when we have conversations, you know, the lead times haven't changed it all with vast majority of the business we do that is on these contract relationships. So, so I think what we're seeing out there in the nature of our inquiries make us feel like that, you know, that there is a real demand out there. Still, you know, underneath everything we're doing.

Timna Tanners: I think generally we believe that we're just a very, very constructive for a 2024 relative to Steel demand, and everyone gets a little excited by maybe a little back and off of the hot band pricing here of the light. But for us, Flatwell continues to be very, very solid, and maybe the macro indicators may not be overly constructive right now. The order input rate in January for us has been incredibly strong.

Timna Tanners: And we would, as I said, suggest that supply chain inventories, not just Emma, that has CI or SMU, but just supply chain in general is relatively tight, and imports are not a material factor today and won't be. We'll book that out for the coated and pre-paint, right? Right?

Timna Tanners: It's very, very strong for us. And I think the, again, when you look at the, just the hot band pricing, because coated pre-paint is all very, very strong still. It's just like recent cycles, and it's more motion than anything else, but you get that steep climb. You have exuberance, tends to overshoot the mark a little bit, and it just sort of retrenches itself a little bit.

Timna Tanners: And I think that's where we are today. And it's not a signal as it used to be. It's not a signal as the underlying, the structural underlying demand, because it's so little spot material transacted today. Just because you have a slight erosion in hot band price, doesn't mean to say that this will affect it from where the demand is. So for us, demand is, as I said, very, very solid throughout off sheet mills.

Timna Tanners: And I also see that long products in a very, very solid territory. And would like to congratulate the team, you know, they had record earnings in near record volumes in 2023. And they've done an incredible job. They've changed the commercial approach somewhat. They've expanded their product portfolio, and that's going to support higher through cycle volumes going forward for the long products platform as well. So I think for us, the market's quite rosy. Okay, thanks again.

Kurt Woodworth: Your next question is coming from Kurt Woodworth with UBS. Yeah, good morning. Hi, Mark. So just wanted to follow up on the bad pricing dynamic. I think at the start, or maybe at the end of the first quarter of 23, you talked about pricing in the back half of the year, being down 10 to 15 percent. And you came in down 22.

Kurt Woodworth: And then I think for now, two quarters in a row, you have talked about price stabilization. And obviously mentioned that order entry getting better. So, you know, would you be willing to provide any, you know, directional color on pricing? Like, should we assume that the first half, that the backlog you've priced for the first half of this year, you know, it is somewhat similar to where you were in the fourth quarter, which would be consistent with kind of what you've said, the past two quarters that pricing has stabilized. Well, I never do well in Vegas.

Kurt Woodworth: So I expect that given a projection is $1 projection is perhaps, sorry, perhaps that's right. But I do believe, again, that underlying structure demand is there. If you look at literally the last 18 to 24 months, you've seen these hotband pricing cycles, and they have not been driven by demand. They've been driven by emotion, whether it be the threat or the anticipation of a high interest rate, and inflation, and recession, and all these sorts of things.

Kurt Woodworth: They've been emotional pivots as opposed to demand pivots. And all we can say is that we do believe strongly that underlying demand is going to be sustained for the year, and that should support pricing. Okay.

Kurt Woodworth: And then in terms of, I think you noted the order entry in SAP was the highest you've seen in the past six quarters, which is a pretty healthy statement. So I'm just curious, what's driving that? You know, a lot of the data we've seen in terms of warehouse starts with somewhat negative and the data centers was growing in other areas. But, you know, how do you characterize kind of the composition, your end market composition of fabrication demand today versus maybe how that looked 18 months ago? Thank you.

Kurt Woodworth: Barry may have additional commentary as well, but we're seeing a lot of incremental demand on the manufacturing side. You know, we've been talking about ensuring that is actually happening, and that does have a good impact on the steel, deicindic market. We're also seeing a lot of activity in the education side, as well as in the, I'll call it farm up for healthcare. And then anecdotally, you have to separate warehouses from data centers.

Kurt Woodworth: We're continuing to see really good strengths in the data center arena as well. Barry, I don't know if there's anything I'm missing. No, I just say that the mixes, it's a good mix for them on the engineering side of the business to keep up with the lead times. So it isn't substantially different than the typical business flow that comes through its small changes in the segments that we're serving through fabrication. Thank you very much. Very helpful.

Katja Jancic: Your next question for today is coming from Katja, Jansik with BMO. Hi, thank you for taking my question.

Katja Jancic: Just quickly on the aluminum segment, you started disclosing the operating loss. Can you provide some color how we should think about the cost there over the next few quarters or how it should impact you? Katja, we did break out so aluminum because of the investment size, we will have a separate segment going forward.

Katja Jancic: We can't really give you projections on startup losses. We expect them during 2024 to not be of significant size, and you will be able to see them. The one thing of note that you should recognize, though, it's kind of an odd thing that's required from an accounting perspective, but those startup losses actually get reflected in our SGNA amount. So if you see SGNA fluctuating and maybe being higher than it is normally, it's because those startup losses during construction are actually included in that line.

Katja Jancic: But is it a fair to assume that they should come up, I think, in the fourth quarter, they were around 11 million, or is that a fair assumption over the next few quarters? We do have a big contingent of people on the ground now, but yes, during the year, because we'll be expecting to actually, you know, still start up as Mark said, in mid-2025, you're going to be seeing head count increase, as well as additional construction activity. So yes, you should expect to see those cost rise during 2024. Okay. Thank you.

Alex Hacking: Your next question is coming from Alex Hacking with City. Yeah, thanks, morning. On Sinton, how much of Sinton's output is currently being sold into Mexico? You know, if I remember correctly, you were targeting something like, you know, 30 percent before that mail started off. Thanks. Oh, yeah, we've had a very good ability to move product in the Mexico. We have a very established team down there that's been serviced in our flat-world group for a while, but we added a warehouse capability in Monterey.

Alex Hacking: And last year, we moved about 600,000 tons in the Mexico and various industries all together. But we're very pleased about how the business is moving. We are welcoming, being welcomed by the customer base in Mexico. In many cases, we've had relationships and haven't had the ability to get the tons there.

Barry Schneider: Sinton provides us the opportunity, not just through proximity, but through the advanced product features that we have. So we have wider, we have heavier products that we would typically have. And these products have been very well received in the various industries. I would tell you that the continued near-shoring of manufacturing to the United States is very apparent with the investments we see in Mexico and the customer base there. So it continues to go along with our strategies, being a great place to do business, and we're excited about it. Thanks, Barry.

Alex Hacking: And then just to follow, if I may, on the alley rolling mill, how comfortable are you with your ability to source 900,000 tons of scrap, or have a much you need? I'm not as familiar with the alley scrap market, but it doesn't seem like there's particularly a lot of excess scrap. And I guess like how much is just for contact?

Alex Hacking: How much is on the source handle today? How many tons? Thanks.

Barry Schneider: Great question. Obviously, I think we're advantaged by having on the source, the on the source recycled platform. Because today, not only are the largest or second largest Ferris scrap, the recycle, that they are clearly the largest non-ferrous recycler. And they're recycling somewhere around 500 million pounds of aluminum. We also have a secondary aluminum operation here in Fort Wayne that will make 260 million pounds, or there are about of secondary aluminum, in particular. So it's not a new environment for us. I think we've got a great team.

Barry Schneider: We've actually hired some incredible talent. The equipment are already incredible talent. And so sourcing the materials, we don't believe in a major issue. If you look at our strategy, there are two principal kind of scrap streams, you might say. What one is for the Automotive Industrial Base. The other is for Canstalk. And the UBC scrap is, well, it's highly available in California. They're a deposit state.

Barry Schneider: So there's a lot of the aluminum UBC scrap generated up and then the West Coast, currently either moving to Asia or to Midwest. And similarly in Mexico, a sort of a UBC scrap arena. So that's why we're locating two facilities, two satellite facilities in those scrap rich areas. Collect the scrap out of the source, melt it, and then the freight of then moving big-solid slab versus scrap to the Midwest is around a half the price.

Barry Schneider: And so we're not only advancing ourselves on the scrap collection side, but economically on getting that aluminum to the milk. Okay, thanks. Just one follow-up if I may. This is probably a dumb question, but I assume the facility can handle primary as well if they're required. We certainly will.

Barry Schneider: And you don't, because you've got 900,000 tons of just a clear cast need, because the yield loss through the system, and when I say yield loss, it's not what's called loss that disappears. It's just sort of a circular within the mill. You still only need roughly 650,000 tons of total input, 20% of which is primary. Okay, thanks.

William Peterson: Your next question for today is coming from Bill Peterson with JP Morgan. Yeah, hi. Good morning.

William Peterson: Thanks for taking our questions. Just on centenant, I think you mentioned hitting stride in second quarter. How should we think about utilization for the full year? If I recall correctly, I think you had expected on 80% for the full year at the last quarter of Aaron's call. Is that still the target or should we assume a bit lower? It's my target, Mary.

William Peterson: Now we continue to strive for 80%. The team is doing as Mark said, a phenomenal job. It's a big challenge to bring such a big asset up all at once.

William Peterson: Transport problems have been unfortunate that we have several fixes in the works, approaching the problem for both a resiliency is also getting back to full power capacity. So we remain confident that the operational levels we're going to see 80% is the target, the whole teams aware of. We're all incentivized to make and not to complicate the math, but if you think about it in January, we're approaching 75% utilization right now, that's 75% of ultimate, even though the team is handcuffed because of the lower power input. So we're quite confident to get to that 80% for the year. Okay, thanks for that. We'll plug in 84%. No, I just just joking.

William Peterson: Just on the, I guess things like onshore and the infrastructure bill, you said, you know, this is an expectation to benefit in 2024. I guess have you seen orders? When do you expect to see orders? Do we think of this more as a second half, 24 to really kind of benefit you?

William Peterson: And then between, I guess, onshore and infrastructure specifically, which you've seen being more impactful for you this year? Just from a product mix, so to speak, the infrastructure growth, you know, on the solar, it's already the solar as exploded renewables exploded last year continues to grow dramatically. We were advantaged hugely both structural for the tortubes and also for flat-roll for the support tubing. We're starting to see, and I don't think we can be specific on how that ramps up, but the directionally we're starting to see orders from bridge makers currently.

William Peterson: So that's the start, at least from my perspective, the start of a ramp up and spend. We also see in the long products a lot of, let's call it foundational pipe, you know, structural sales, and even though it's a smaller division steel, the less Virginia is very, very full with us right now with stuff that is tangential, whether it's solar fields, the support steel goes in the ground, or for trucks and things like that that go into these new factories and these new warehouses and data centers.

William Peterson: So we do see a good bounce from that. We also see the pipe line industry and the state is picking up orders, some cases for carbon sequestration lines, as well as some major pipelines. So those markets are awake, and we see a lot of inquiry activity that is very exciting for us, ultimately. I want to encourage that there are some of you on the phone right now that may not understand that if the infrastructure program and the IRA and anything related to the roads and bridges and construction, they don't only benefit long products, they benefit long products, they certainly benefit our steel and joist and deck operations, but additionally the flat roll operations have exposure to that as well, whether it's through HVAC systems or pipe and tube, like Barry just mentioned, there's a lot of impact on the flat roll site, and I would encourage you to think about that perspective as well. Thanks.

John Tumazos: Your next question for today is coming from John Tumaz, a private investor. Thank you very much.

John Tumazos: Could you give us a little feedback on the potential 2025 catbacks and with Sinton and the four coding lines in the aluminum and the carbon projects behind us? What are some of the leading candidates for the next capital investments going forward? And in particular, could you talk about growth in recycling where aluminum, copper, zinc have much lower global recycling rates than steel in particular? Some points at me.

John Tumazos: John is considered to hear from you. Yet we do have projects in mind for 2025. I'm not sure that we're prepared to go into that today. I would say from the perspective of capital spending, as I mentioned earlier on the call, aluminum will probably have a tail of somewhere between $200 and $250 million. Our teams are consistently bringing us wonderful ideas that have high returns associated with them. Again, I'll point back to our ROIC.

John Tumazos: They do a good job of giving us those projects that have really great returns. So the number for 2025, I would say would be a minimum of probably $500 million, something like that, because you do still have some sustaining capital as well, which for us is very low at around $160 million, but there's still some benefit there. Mark, I don't know if you want to add any addition to that. I kicked it to you just to get the capex part, not the whole thing. But John, as Theresa just mentioned, we have an absolutely incredible team that continues to be innovative. And if you were to just be with us or be with that team, it's incredible.

Mark Millett: We have a new digital printing technology that we're exploiting, again, not big dollars, but it's going to be an incredibly, incredibly high margin neat business. We have two products segments that we're not in today in front of all that we're exploring and they have a couple of innovative things there. So the pipeline and steel is still there for sure. I think also, and we've got to walk before we run.

Mark Millett: But in an aluminum, you know, I see that growth kind of paralleling the growth in steel. Yeah, we get on the front end, make the basic substrates that will speak. And then from a processing standpoint, for instance, you know, there's a massive, massive amount of aluminum that gets prepainted today.

Mark Millett: That's an expertise of ours. You can see. See growth and expansion there. So I think, and you've witnessed that John, you know, almost personally, over the years and shared our history, but we've clearly demonstrated the ability to be innovative and grow. And I would emphasize grow in a very disciplined, intentional manner. That's the only way you can get the return on an invested capital numbers.

Theresa Wagler: That's the reasons that we achieve. So both organically, but also through acquisition, that will continue to be opportunity there. But you will see us remain very, very disciplined, very, very intentional. We're not going to overpay for anything. And we're going to retain the best financial metrics in our industry. As we build our financial models, if in 2025 the CAPEX fell to somewhere, let's just say for discussion in the range of $500 to $1 billion, should we be increasing the share buyback dollars from the levels of the last several years given the drop in CAPEX?

Theresa Wagler: So John, we want to be super clear that we see the share buyback program is a very good tool for us to be able to use and you've seen that. So very much the dividend, we've been increasing and we increase it with increases in our structural through cycle cash flow generation when projects come online. And then we do it pretty aggressively. We want to keep that positive momentum, but then we use that share buyback program during periods of access cash flow when we maybe have less growth in mind, but we still are very much a growth company.

Theresa Wagler: To Mark's point, whether that's through Greenfield access or whether that's through acquisitions, but at the same time, we have the luxury that we don't have to sacrifice to share with purchase program. We absolutely can execute on all those things. And that's what you'll continue to see us do in 2024 and 2025. Absolute extraneous things.

John Tumazos: Thank you very much. I'm a happy shareholder. Excellent.

Martin Englert: Your next question is a follow up question coming from Martin Angler. I appreciate the time for the follow up just two quick ones here over the last four years, seasonal sequential one Q gain and external seal volumes average about seven percent quarter on quarter based on what you're seeing with order intake in the new year here. And I'm also taking into account the continued rampant and value added lines. Should we expect something at the core similar on a sequential basis around seven percent and then later in the additional volumes from ramping assets. Martin, we can't give directionality.

Martin Englert: Obviously, we had outages in the fourth quarter at two of our steel mills. We won't have those in the first quarter. We just mentioned that's going to be ramping out aggressively in the first quarter. So all in all absent any significant market moves you should expect to see incremental volume from our steel operations. And as they're pointed out with the additional value added lines, you're going to start to see that product mix get richer and richer. So it'll go more into the processing lines. You'll eventually see some really great spread enhancement throughout the year as well.

Martin Englert: What were the outages in 4Q, and I assume that you mentioned it because it did have an adverse impact on volumes? Martin, they were just normal outages. We take outages at our flatwall mills and at our long-toddic mills. They weren't anything that we didn't note them as far as from the volume perspective, but yes, obviously we didn't have outages that does impact volumes. But there was nothing of significance to note.

Martin Englert: Okay, thank you. One last one, if I could, on the aluminum project. Based on the two-cycle estimate, I could give implied EBITDA around $900,000 per ton. One, when you were coming up with that analysis, are you able to share what you think the bottom and top core tiles of profitability might look like when we think about peak to drop? No, Martin, we're not. We do mid-cycle through cycle.

Martin Englert: And as we get more familiar, we don't provide that type of information. Okay, no worries. Thought I'd try. Thanks again for your time. Thanks, Martin.

Mark Millett: That concludes our question and answer session. I'd like to turn the call back over to Mr. Millett for any closing remarks.

Mark Millett: Well, thank you everyone, and thank you, thank you, Holly, and thank you everyone on the call. I guess as John noted, he's a happy shareholder. To be honest, everyone at SBI are happy shareholders, because we all are equity holders. And that's part of the conversation for each and every one of us. Collectively, we do own a reasonable amount of our stock, and I would just emphasize that we treat your dollars just like there are our own. And we'll absolutely focus on continuing to outstrip our competition relative to shareholder value creation through the cycle. But we can't do it on our own.

Mark Millett: So any customers listening at the thank you for your support. We have loyal support, and it takes us through through the cycles that suppliers can do it without you and got a stress. We have the best metal team in the world.

Mark Millett: Our people are absolutely phenomenal. Thank you for what you do each and every day. And for those that are on us on the call as well, thank you for your support. Have a great day. Once again, ladies and gentlemen, that concludes today's call. Thank you for your participation and have a great and safe day.

Good day and welcome to the steel dynamics fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen only mode.

After management's remarks, we will conduct a question and answer session and instructions will follow at that time.

Be advised this call is being recorded today January 24th 2024, and your participation implies consent to our recording this call. If you do not agree to these terms. Please disconnect.

At this time I would like to turn the conference over to David Lipschitz Director of Investor Relations. Please go ahead.

David Lipschitz: Thank you Holly good morning, and welcome to steel dynamics fourth quarter and full year 2023 earnings Conference call. As a reminder, today's call is being recorded and will be available on our website for replay later today leading.

Speaker Change: Leading today's call are Mark Millett, Chairman and Chief Executive Officer of Steel dynamics, Theresa Wagler, Executive Vice President and Barry <unk>.

Speaker Change: Vice President and Chief Financial Officer, and Barry Schneider, President and Chief operating officer. The other members of our senior leadership team are joining us on the call individually.

Speaker Change: Some of today's statements, which speak only as of this date may be forward looking and predictive typically preceded by believe expect anticipate or words of similar meeting.

Speaker Change: They are intended to be protected by the private Securities Litigation Reform Act of 1995 should actual results turn out differently such statements involve risks and uncertainties related to integrating are starting up new assets. The aluminum industry. They use of estimates and assumptions in connection with anticipated project returns and our steel metals recycling and fabrication businesses as well as the general.

Speaker Change: Business and economic conditions example of these are described in the related press release as well as in our annual filed SEC Form 10-K under the headings forward looking statements and risk factors found on the Internet at Www Dot S. E T Dot Gov and if applicable in any later SEC Form 10-Q, you'll also find any referenced non-GAAP financial measures.

Speaker Change: Inside to the most directly comparable GAAP measures in the press release issued yesterday entitled Steel dynamics reports fourth quarter and full year 2023 years old and now I'm pleased to turn the call over to Mark.

Mark D. Millett: Alright. Thank you David Good morning, everyone. Thank you for being with us on our fourth quarter and full year 2023 earnings call.

Mark D. Millett: As you saw in our release our teams achieved a strong annual 2023 financial operation operational performance.

Mark D. Millett: Most gratifying was achieving our best safety year was the lowest recordable incident rate of Ah I wanted to applaud and congratulate all the teams because that's the ammonium monumental effort put in to get the.

Mark D. Millett: Steel shipments were a record $12 8 million tonnes I think it needs to be emphasized that we bought the 3 million tons, yet of additional shipping capability to deleverage.

Mark D. Millett: We had the second best year for revenues at eight point $18 8 billion in cash flow from operations of $3 5 billion.

Mark D. Millett: Adjusted EBITDA was $3 $7 billion.

Speaker Change: I think the the year clearly demonstrated the through cycle earnings resilience of our business model.

Speaker Change: Manifest by a diverse value added product portfolio supported by our superior operating culture driving world class low cost operations.

Speaker Change: I can't be more pleased at syndrome syndrome is showing significant operating improvement was EBITDA positive in December with a clear path to profitability in the first quarter of 'twenty to 'twenty four and thereafter.

Speaker Change: We're also achieving fast paced progress on our aluminum flat rolled investments there.

Speaker Change: It continues to be strong commercial support for new and innovative supply chain solutions from steel Dynamics', who the aluminum industry is considering a well known and highly regarded metals producer.

Speaker Change: I'm incredibly proud with Stuart on the Nymex team. They are the foundation of our company and they drive our success.

Speaker Change: And to be honest they inspire me.

Speaker Change: Feeling their esprit de corps and commitment to the SDI family. During the recent holiday parties was absolutely just simply humble.

Speaker Change: Feeling their esprit de corps and commitment to the SDI family. During the recent holiday parties was absolutely just simply humble.

Speaker Change: And that is why we are so focused on providing the very best for the health safety and welfare.

Speaker Change: We're actively engaged in safety at all times and at every level keeping it top of mind in an active conversation each and every day.

Speaker Change: And as I already suggested without focus the team's safety performance was a record low incident rate in 2023.

Speaker Change: Obviously, though there is more to do we will not rest until we consistently achieve our goal of zero injuries.

Speaker Change: But that said I will hand, it to Teresa who will then about the bowl to Bury them and then back to me to finish up so Theresa.

Thank you Mark.

Teresa: Good morning, everyone. Thank you for being with US today. In addition to the achievements Mark has mentioned the team has also achieved our third best year for operating income of $3.2 billion in net income of $2 $5 billion.

Teresa: Working dollars and 64 cents per diluted share.

Teresa: Cash flow from operations and liquidity is $3 $5 billion and a three year. After tax return on invested capital was 32% a truly great performance my sincere. Thank you and congratulations to our entire team.

Teresa: That's where the fourth quarter of 2023, net income was $424 million or $2.61 per diluted share with adjusted EBITDA of $659 million.

Fourth quarter 2023 revenues of $4 $2 billion and operating income of $519 million were lower than sequential third quarter results driven by seasonally lower volume and realized steel and steel fabrication pricing.

Teresa: Our steel operations generated operating income of $365 million in the fourth quarter lower than sequential third quarter results due to lower realized flat rolled steel pricing.

Teresa: Steel shipments remained steady at $3 1 million tonnes or four new flat rolled coating lines have or will begin operating this quarter, increasing our higher margin value added product mix by an additional 1 million tonne, making our capacity in value added and flat roll at 7 million tonnes on the coating line.

Teresa: For the full year of 2023 operating income from our steel operations was $1 $9 billion with record annual shipments at $12 8 million tonnes, but those of you that track our bottled shipments and more specificity hot rolled coil and piano shipments were 927000 tons.

Teresa: Cold rolled shipments 124000 tons and coated shipments of 1.192 million tons.

Teresa: For metals recycling fourth quarter operating income was $6 million due to seasonally lower volume and nonferrous metal spread compression.

Teresa: Full year operating income from our metals recycling operations was $108 million lower than prior year results based on decreased ferrous scrap pricing more than offsetting higher volume were the largest non we're the largest nonferrous and ferrous metals recycler in all of North America.

Teresa: I mean aluminum copper and other metals. The team continues to lever our circular manufacturing operating model, providing high quality low cost scrap to our steel mills, which improves furnace efficiency and reduces companywide working capital.

Teresa: Our steel fabrication operations achieved operating income of $250 million in the fourth quarter lower than sequential third quarter results, yet historically strong due to lower pricing and seasonally lower shipments.

Teresa: Our steel fabrication platform had another great year in 2023 with operating income of $1 $6 billion congratulations to the team.

Teresa: Our steel joist and deck demand remains solid with good order activity backlog extends through the first half of 2024 and forward pricing remains strong.

Teresa: Infrastructure inflammation reduction at the D O E depart de carbonization support and manufacturing onshoring are expected to support domestic fixed asset investment and.

Teresa: Related flat and long products steel consumption and related joy sent that consumption as well.

Teresa: During the fourth quarter of 2023, we generated strong cash flow from operations of $865 million for the full year, we achieved our second best annual cash flow of $3 $5 billion.

Teresa: Our cash generation is consistently strong based on our differentiated circular business model and highly variable low cost structure at the end of the year, we had liquidity of $3 $5 billion.

Teresa: 2023, we invested $1 $7 billion in capital investments of which almost 60% related to the construction of our aluminum flat rolled in Boston.

Teresa: For 2024, we believe capital investments will be in the range of $2 billion of which approximately $1 $4 billion relates to the aluminum investments.

Teresa: During the fourth quarter, we maintained our cash dividend at <unk> 42, and a half cents per common share after increasing at 25% in the first quarter of 2023.

Teresa: During the full year of 2023, we paid cash dividends of $271 million and repurchased one $5 billion or 8% of our outstanding shares representing a 62% net income shareholder distribution rate. The board also authorized an additional $1.5 billion share repo.

Teresa: This program in November.

Teresa: And 1.4 billion remained available at the end of the year.

Teresa: Since 2017, we've increased our cash dividend per share by 174% and we've repurchased $5 $5 billion of our common stock or 37% of our outstanding shares.

These actions reflect the strength of our capital Foundation and consistently strong cash flow generation capability, and the continued optimism and confidence in our future.

Teresa: Our capital allocation strategy.

Or tasers high return growth with shareholder distributions comprised of a base positive dividend profile, that's complemented with a variable share repurchase program, while we remain dedicated to preserving our investment grade credit designation.

Teresa: Our free cash flow profile has fundamentally changed over the last five years from an annual average of $540 million to $2 $8 billion.

Teresa: We are squarely positioned for the continuation of sustainable optimized long term value creation, our three year. After tax return on invested capital of 32% is a testament to our profitable growth sustain.

Teresa: Sustainability is also a significant part of our long term value creation strategy and we're dedicated to our people our communities and our environment, we're committed to operating our business with the highest integrity.

Teresa: We have an actionable plan forward to carbon neutrality that is more manageable and we believe considerably less expensive that then lay ahead for many of our industry peers, our sustainability and carbon reduction strategy is an ongoing journey and we're moving forward with the intention to make a positive difference.

Speaker Change: Thank you for your time this morning Barry.

Barry Schneider: Thanks Teresa.

Fuel fabrication operations performed exceptionally well throughout 2023, achieving historically strong earnings at the end of the year or steel joist and deck order backlog was solid extending through the first half of 'twenty 'twenty four we continue to have high expectations for the business.

Barry Schneider: Because he knew the onshoring of manufacturing coupled with infrastructure spending and fixed asset investment related to the IAA programs should continue to provide momentum for additional construction spending equally important our customers tell us demand remained solid and share our optimism current pricing would stabilize at historically higher levels and order entry has improved.

Barry Schneider: Moved.

Barry Schneider: Our fabrication platform provides meaningful volume support for our steel mills critical and softer demand environment, allowing for higher through cycle steel utilization compared to our peers, but also helps to mitigate the financial risk of lower steel prices.

Barry Schneider: Our metals recycling operations also performed well this year, considering the challenge of declining scrap prices throughout much of 2023.

The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating customers.

Barry Schneider: Particular, our Mexican locations competitively advantage, our Columbus and sit in raw material positions that will strategically support aluminum scrap procurement for our future flat rolled aluminum investments are.

Barry Schneider: Bottles recycling team is also partnering more closely with both our steel and aluminum teams to extract expand our scrap separation capabilities through process and technology solutions, which will help mitigate potential prime ferrous scrap supply issues in the future.

Barry Schneider: We'll also provide us with significant advantage to materially increase recycled content for our aluminum flat rolled products and increase the earnings opportunities.

Barry Schneider: The steel team had another strong year, achieving record volume of $12 8 million tons. During 2023, the domestic steel industry operated at an estimated production utilization rate of 76%.

Barry Schneider: While our steel mills operated at a rate of 93% excluding certain plant.

Barry Schneider: We consistently operate at a higher utilization due to our value added steel product diversification, our differentiated customer supply chain and the support of our internal manufacturing businesses.

Barry Schneider: This higher through cycle utilization of all of our steel Mills is a key competitive advantage supporting our strong and growing cash generation capability and best in class class financial metrics.

Barry Schneider: Regarding the steel markets steel pricing improved in the fourth quarter 2023, and as of January <unk>.

Barry Schneider: Customer order entry rate has been strong and lead times have been extended while their inventory levels remain at historically low amounts.

Barry Schneider: In fact, our flat rolled steel operations have experienced one of the strongest order entries environments of January.

Barry Schneider: Especially for our value added products.

Barry Schneider: Additionally, steel imports have generally remained at a manageable level with expectations of this to continue.

Barry Schneider: As we sit and the team has achieved significant improvements in operating efficiency and consistency. They average about 65% of capability in November December and have been running even stronger rates here in January.

Barry Schneider: We are planning for since the additional improvements in production. After the team makes changes to certain transfers at the end of this first quarter 2024, while we allow access to 100% of our mill capacity.

Barry Schneider: Versus the current Eighty's, 80% capacity.

Barry Schneider: It's really the two new value added coating lines will begin operating in the first quarter supporting increased volume and margins.

Barry Schneider: Regarding the steel market the market environment automotive production estimates for 2024, or an estimated 16 million units, while automotive dealer inventories remain below historical norms.

Barry Schneider: Non residential construction remains solid as evidenced by the strength of shipments and backlogs are structural and rail division and customer inventory levels are low.

Good day, and welcome to the Steel Dynamics fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Barry Schneider: Additionally, onshoring in infrastructure spending should provide meaningful support to fixed asset investment and related construction oriented projects in the coming years.

After management's remarks, we will conduct a question and answer session, and instructions will follow at that time. Please be advised, this call is being recorded today, January 24th, 2024, and your participation implies consent to our recording this call. If you do not agree to these terms, please disconnect. At this time, I would like to turn the conference over to David Lipschitz, Director of Investor Relations. Please go ahead.

Barry Schneider: That's where the energy market oil and gas activity was strong driving improved orders rosy D G and solar.

Barry Schneider: Those areas all growth looking forward, we are optimistic regarding steel demand and pricing dynamics for 2024.

With that Mark.

Thanks, Barry Thanks Theresa.

Speaker Change: And I think yeah.

Speaker Change: Our consistently strong through the cycle operating and financial performance continues to support our cash generation and growth investment strategies.

David Lipschitz: Thank you, Holly. Good morning, and welcome to Steel Dynamics' fourth quarter and full year 2023 earnings conference call. As a reminder, today's call is being recorded and will be available on our website for replay later today. Leading today's call are Mark Millett, Chairman and Chief Executive Officer of Steel Dynamics, Theresa Wagler, Executive Vice President and Chief Financial Officer, and Barry Schneider, President and Chief Operating Officer. The other members of our senior leadership team are joining us on the call individually. Some of today's statements, which speak only as of this date, may be forward-looking and predictive, typically preceded by believe, expect, anticipate, or words of similar meaning. They are intended to be protected by the Private Securities Litigation Reform Act of 1995 should actual results turn out differently.

Speaker Change: As Barry mentioned, the full value added flat roll steel coating lines of studying this quarter the syndrome that should see a step function improvement hitting its stride in the second quarter of this year.

Speaker Change: Our aluminum growth strategy is especially compelling responses from existing and new customers across all markets remain incredible only strengthening as we move forward.

Speaker Change: Many customers have already indicated they would like to build facilities are rolling mill site in Columbus, Mississippi.

Speaker Change: This co location strategy provides a sustainably competitive model for all of us conserving time money and reducing reducing emissions across the supply chain.

Speaker Change: And has already proven itself clearly in our incentive.

Barry Schneider: Such statements involve risk and uncertainties related to integrating or starting up new assets, the aluminum industry, the use of estimates and assumptions in connection with anticipated project returns, and our steel, metals recycling, and fabrication businesses, as well as general business and economic conditions. Examples of these are described in the related press release, as well as in our annual filed SEC Form 10-K under the headings, Forward-Looking Statements and Risk Factors, found on the internet at www.sec.gov, and, if applicable, in any later SEC Form 10-Q. You'll also find any referenced non-GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled, Scale Dynamics Reports Fourth Quarter and Full Yield 2023 Results. And now, I'm pleased to turn the call over to Mark. So, thank you, David. Good morning, everyone.

Speaker Change: The project itself for 650000 metric ton aluminum flat roll facility located in Columbus, Mississippi.

Speaker Change: It's gonna be a state of the art plan, obviously, serving the sustainable beverage and packaging.

Speaker Change: The ore body and on time.

Speaker Change: Automotive and industrial sectors.

Speaker Change: Roughly 300000 metric tons of of constant which is about 45% of the output roughly 200000 tons of water.

Speaker Change: 50000 metric tons of industrial and construction problems.

Speaker Change: The onsite milk cost slab the capability.

Speaker Change: 600000 metric tons will be supported by two satellite recycled aluminum slab casting incentives.

Speaker Change: And you'd be see scrap rich regions, one out west and one in central Mexico.

Mark D. Millett: Thank you for being with us on our fourth quarter and full year 2023 earnings call. As you saw in our release, our teams achieved a strong annual 2023 financial and operational performance. But, I think what was most gratifying was achieving our best safety year with the lowest recordable incident rate ever.

Speaker Change: The expanded.

Speaker Change: Project scope.

Speaker Change: These are including additional scrap processing and treatment to maximize aluminum recycled content.

Speaker Change: A lot of plans that are still on schedule Rolling mill should be a mid 25, the Mexico slabs center at the end of 'twenty four.

Mark D. Millett: I want to applaud and congratulate all the teams because that was a monumental effort put in to get there. Steel shipments were a record 12.8 million tons. I think it needs to be emphasized that we've got 3 million tons yet of additional shipping capability to leverage. We had the second best year for revenues at $18.8 billion and cash flow from operations at $3.5 billion; suggested EBITDA was $3.7 billion. I think the year clearly demonstrated the three-cycle earnings resilience of our business model, as manifested by a diverse value-add product portfolio supported by a superior operating culture driving world-class, low-cost operations. I couldn't be more pleased at Syntem.

Speaker Change: And then the Arizona slab center.

Speaker Change: Mid 'twenty thought.

Speaker Change: The total project cost.

Speaker Change: As you saw on the release, including the recycled slab centers has risen to $2 $7 billion.

The installation cost for the Rolling Mill has expanded Judah inflationary and installation costs that we're all facing.

Speaker Change: But with virtually all equipment and construction contracts are complete we are confident in this final budget.

Speaker Change: As we've said before 100% to be funded with cash.

Speaker Change: And the expectation is to time through cycle.

Speaker Change: But it's all Brian the $650 to $700 million from us and they believe in the facility with.

With an additional $40 million to $50 million from omni source.

Speaker Change: And I think we're definitely gonna see superior financial metrics relative to our competition.

Mark D. Millett: Syntem is showing significant operating improvement and was EBITDA positive in December, with a clear path to profitability in the first quarter of 2024 and thereafter. We're also achieving fast-paced progress on our aluminum flat-rolled investment. There continues to be strong commercial support for a new and innovative supply chain solution from Steel Dynamics, which the aluminum industry is considering a well-known and highly regarded metals producer. I'm incredibly proud of the Steel Dynamics team. They are the foundation of our company, and they drive our success, and to be honest, they inspire me. Feeling their esprit de corps and commitment to the SDI family during the recent holiday parties was absolutely, just simply, humble.

Speaker Change: As we see that the market environment is similar to the domestic steel industry. When we started that's the I'd say two years ago.

Speaker Change: Assets little reinvestment heavy legacy costs.

Speaker Change: Inefficient high cost operations.

Speaker Change: We're confident we can emulate the performance driven high efficiency low cost model that drove our success in steel to drive superior financial metrics.

Speaker Change: Our organizational structure to interest of advanced layer and the technology.

Speaker Change: And a performance driven a sort of a spree decor and culture.

Speaker Change: It will drive a census of around about 750 people versus a typically 2000 or more in a similar a similar competitor.

Mark D. Millett: And that is why we are so focused on providing the very best for their health, safety, and well-being. We're actively engaged in safety at all times and at every level, keeping it top of mind in an active conversation each and every day. As I already suggested, without focus, the team's safety performance was a record low incident rate in 2023. Obviously, though, there's more to do. We will not rest until we consistently achieve our goal of zero injuries. So that said, I will hand it to Theresa, who will then bat the ball to Barry, and then back to me to finish up. So, Theresa?

Speaker Change: The.

Speaker Change: We will have higher yield through the system.

Speaker Change: We will leverage omni sources market position.

Speaker Change: And then a separation technologies to ensure a higher recycled content.

Speaker Change: We obviously won't have the legacy a burden that others have.

Speaker Change: We will have production cost efficiencies.

Speaker Change: Along with the customer co location.

Speaker Change: And we also have a preferred sustainability profile.

Speaker Change: If you put it all together, we're confident that our earnings profile is going to be far superior to the industry today.

Theresa E. Wagler: Thank you, Mark. Good morning, everyone. Thank you for being with us today. In addition to the achievements Mark just mentioned, the team also achieved our third best year for operating income of $3.2 billion and net income of $2.5 billion, or $14.64 per diluted share. Cash flow from operations and liquidity of $3.5 billion and a three-year after-tax return on invested capital of 32%. A truly great performance.

Speaker Change: We've developed the best financial metrics in the steel industry and as I said, we have confidence we can do the same in aluminum.

Speaker Change: But poised for continued growth we have an additional 3 million tons as I said earlier have shipping capability that will be leveraged through our new processing lines, new products or new supply chains.

Speaker Change: And we're gonna passion by our future growth plans, because they will continue to drive the high return growth momentum we've consistently demonstrated over the years.

Theresa E. Wagler: My sincere thank you and congratulations to our entire team. As for the fourth quarter of 2023, net income was $424 million, or $2.61 per diluted share, with adjusted EBITDA of $659 million. Fourth quarter 2023 revenues of $4.2 billion and operating income of $519 million were lower than sequential third quarter results driven by seasonally lower volume and realized steel and steel fabrication prices. Our steel operations generated operating income of $365 million in the fourth quarter, lower than sequential third quarter results due to lower realized flat rolled steel prices. Our steel shipments remain steady at 3.1 million tons.

Speaker Change: We have the highest average five year after tax return on invested capital within the S&P 500 materials come to companies.

Speaker Change: And then the last three years, we had an average after tax ROIC of 32%.

Speaker Change: I got to say that just doesn't happen.

Speaker Change: Disciplined intentional organic and acquisition strategy focused on differentiated value added supply chain solutions is providing sustainable cash generation and strong returns.

Speaker Change: And I continue to be optimistic moving forward.

Speaker Change: I believe the market dynamics are in place to support increased demand across our operating platforms in 2024 and the news ahead.

Speaker Change: North America will benefit from continued onshoring of manufacturing businesses.

Speaker Change: In the U S will benefit from the allocation of public monies from the infrastructure program inflation reduction Act and other public programs.

Theresa E. Wagler: Our four new flat roll coating lines have or will begin operating this quarter, increasing our higher margin value added product mix by an additional 1 million tons, making our capacity and value added in flat roll at 7 million tons on the coating line. For the full year of 2023, operating income from our seal operations was $1.9 billion with record annual shipments of 12.8 million. For those of you that track our bottled shipments in more specificity, hot-rolled coil and P&O shipments were 927,000 tons, cold-rolled shipments were 124,000 tons, and coated shipments of 1,192,000. For metals recycling, fourth-quarter operating income was $6 million due to seasonally lower volume and non-ferrous metal spread compression.

Speaker Change: Steel dynamics is levered to benefit from those programs through increased steel joist and deck demand.

Speaker Change: Latin long product steel demand and the associated higher demand for recycled scrap aluminum.

Speaker Change: And in closing there is no doubt our teams are all foundation I think each of them for their passion and dedication.

Speaker Change: We're committed to them.

Speaker Change: I remind those listening today the safety for yourselves your families and each other as the highest priority.

Speaker Change: Our culture and business model continue the positive totally differentiate our performance.

Speaker Change: The best in class financial metrics.

Speaker Change: We're no longer a pure steel company, but an integrated metals business, providing enhanced supply chain solutions to the industry and then two in mitigating volatility and cash flow generation through all market cycles.

Speaker Change: We're competitively positioned and continue to focus on providing superior value for our company customers team members and shareholders alike.

Speaker Change: Look forward to creating new opportunities for everyone.

Speaker Change: Today and they use it.

Speaker Change: So with that said holiday Hollywood excuse me Holly I would love for you to open it up for questions.

Theresa E. Wagler: For the full year, operating income from our metals recycling operations was $108 million, lower than prior year results based on decreased ferrous scrap pricing more than offsetting higher volume. We are the largest non-ferrous and ferrous metals recycler in all of North America, recycling aluminum, copper, and other metals. The team continues to leverage our circular manufacturing operating model, providing high-quality, low-cost scrap to our steel mills, which improves furnace efficiency and reduces company-wide working capital. Our steel fabrication operations achieved operating income of $250 million in the 4th quarter. Lower than sequential 3rd quarter results, yet historically strong, due to lower pricing and seasonally lower shipping. Our steel fabrication platform had another great year in 2023 with operating income of $1.6 billion. Congratulations to the team!

Holly: Thank you if you would like to ask a question. Please signal by pressing the star key followed by the digit one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. If you press star one earlier during today's call.

Holly: Press Star one again to ensure our equipment has captured your signal also we ask that you. Please limit yourselves to one question to facilitate time for everyone. Any additional questions can be addressed upon re entering the queue.

Speaker Change: Your first question for today is coming from Martin Engler with Seaport research.

Martin Englert: Hello, and good morning, everyone.

Martin Englert: Yeah.

Quick question on skilled conversion costs were estimated at around 530 per ton in the fourth quarter and kind of averaged around there for the year. Looking ahead, one Q, taking that point of reference into account should we expect some decline there based on the year.

Martin Englert: Ramping up further in some better fixed cost leverage.

Speaker Change: Good morning Martin.

Speaker Change: And the way that.

Theresa E. Wagler: Steel joists and deck demand remains solid, with good order activity. Our backlog extends through the first half of 2024, and forward pricing remains strong. The Infrastructure and Equation Reduction Act, the DOE Decarbonization Support, and Manufacturing and Law Ensuring are expected to support domestic fixed asset investment and related flat and long product steel consumption and related joists and deck consumption as well. During the fourth quarter of 2023, we generated strong cash flow from operations of $865 million. For the full year, we achieved our second best annual cash flow of $3.5 billion. Our cash generation is consistently strong based on our differentiated circular business model and highly variable low cost. At the end of the year, we had liquidity of $3.5 billion.

Speaker Change: Information that you guys can use to back into our conversion costs I know it is a little difficult, but you you hit the primary driver with CIT and ramping up as significantly as we're expecting them to do in the first quarter and Hudson are doing right now in January already we would expect to see that overall as.

Speaker Change: You calculate it conversion costs come.

Speaker Change: Come down absent any other factors correct.

Speaker Change: Okay.

Goalpost as far as when we think about what that could potentially decline decline on a sequential basis and I understand there might be other.

Speaker Change: Our offsets there with.

Speaker Change: Substrate, that's flowing kind of flowing through there as well but.

Speaker Change: You know, it's really hard for us to give you on guidance as you know Martin as it relates to the conversion classes, you're calculating it as conversion costs really stand within the steel operations themselves in the queue conversion costs are very stable, we don't expect to see a lot of moving except for sitting again because.

Theresa E. Wagler: During 2023, we invested $1.7 billion in capital investments, of which almost 60% relate to the construction of our aluminum flat rolls. For 2024, we believe capital investments will be in the range of $2 billion, of which approximately $1.4 billion relates to aluminum. During the fourth quarter, we maintained our cash dividend at 42.5 cents per common share after increasing it 25% in the first quarter of 2020.

Speaker Change: The additional volumes.

Speaker Change: And the substrate does have an impact as you mentioned, but we don't expect to see that mix of processing versus production be dramatically different in the first quarter.

Speaker Change: Okay, if I could one follow on steel fabrication in the release, you noted improved activity as well.

Speaker Change: Well priced backlog extending through the first half of 'twenty four on average is the backlog price higher or lower than the fourth quarter, It's 3500 per ton.

Speaker Change: Turning to the backlog prices held in very steadily there's not a dramatic difference and again, we don't give specifics as to the backlog pricing or fabrication work for their operations, but the resiliency and the price both what we're seeing now and in that backlog.

Theresa E. Wagler: During the full year of 2023, we paid cash dividends of $271 million and repurchased $1.5 billion, or 8% of our outstanding shares, representing a 62% net income shareholder distribution. The board also authorized an additional $1.5 billion share repurchase program in November, and 1.4 billion remained available at the end of the year. Since 2017, we've increased our cash dividend per share by 174%, and we've repurchased $5.5 billion of our common stock, or 37% of our outstanding. These actions reflect the strength of our Capital Foundation and consistently strong cash flow generation capability and the continued optimism and confidence in our capital allocation strategy, which prioritizes high return growth with shareholder distributions comprised of a base positive dividend profile that's complemented by a variable share of purchase program while we remain dedicated to preserving our investment grade credit designation. Our Free Cash Flow profile has fundamentally changed over the last five years, from an annual average of $540 million to $2.8 billion.

Speaker Change: It's very steady.

Speaker Change: Yeah, I would just add you know in the fourth quarter.

Speaker Change: I believe is that the fabrication has kind of dropped in large part a.

Speaker Change: But in the in the fourth quarter, we had the highest order input rate.

Speaker Change: Of the of the prior six quarters.

Speaker Change: So the volumes are a little too and obviously, you've got a little seasonality in it.

Speaker Change: In Q1.

But the expectation is things will will go upward thereafter.

Speaker Change: Your comment on your believes that its trough does that pertain to volumes or price or volumes and price.

Speaker Change: I would say that the push for sure volume and the pricing appears to have stabilized.

Speaker Change: Okay excellent. Thank you very much and good luck.

Speaker Change: Youre welcome.

Speaker Change: Your next question is coming from Tristan Gresser with BNP Paribas.

Tristan Gresser: Yes, hi, good morning, and thank you for taking the questions the.

Tristan Gresser: The first one is a kind of a follow up on the fabrication guidance maybe on the volumes. If we look at the shipments you had in Q4 is probably the lowest snap shipments we've seen in five years and you mentioned you you see that trough, but.

Theresa E. Wagler: We are squarely positioned for the continuation of sustainable, optimized, long-term value creation. Our three-year after-tax return on invested capital of 32% is a testament to our profitable growth. Sustainability is also a significant part of our long-term value creation strategy, and we're dedicated to our people, our communities, and our environment. We're committed to operating our business with the highest integrity. We have an actionable path forward to carbon neutrality that is more manageable and, we believe, considerably less expensive than that which lies ahead for many of our industry peers. Our sustainability and carbon reduction strategy is an ongoing journey, and we're moving forward with the intention to make a positive difference. Thank you for your time this morning.

Tristan Gresser: Could you expand a little bit what has been holding you back there of late and if we get if we look at 'twenty 'twenty four are what kind of growth expectation do you foresee the business I know you you provided some.

Tristan Gresser: Some guidance last year on a half on half basis.

Tristan Gresser: Anything there would be helpful that that'd be my first question.

Tristan Gresser: Yeah.

Tristan Gresser: Well I guess I would just leave it leave it as has already stated a little older.

Tristan Gresser: The order input rate.

Tristan Gresser: The increase in Q4.

Tristan Gresser: That will flow through this.

Speaker Change: Yeah, you always have as you are as you I know you appreciate a sort of lets see seasonality and are in this for the first quarter with the winter months in construction.

Speaker Change: Little inhibited by the weather.

Speaker Change: But I think we will we will suddenly see a turn into the second quarter and through the rest of the year.

Speaker Change: Thanks, Theresa. Our steel fabrication operations performed exceptionally well throughout 2023, achieving historically strong earnings. At the end of the year, our steel joists and deck order backlog was solid, extending through the first half of 2023. We continue to have high expectations for the business; continued onshoring and manufacturing, coupled with infrastructure spending and fixed asset investment related to the IRA program, should continue to provide momentum for additional construction. Equally important, our customers tell us demand remains solid and share our view that current pricing is stabilized at historically high levels and order entry has improved. Our fabrication platform provides meaningful volume support for our steel mills, critical in softer demand environments, allowing for higher through cycle steel utilization compared to our peers. It also helps mitigate the financial risk of lower steel prices.

Speaker Change: Alright, that's.

Speaker Change: That's that's fair and my second question is more on the Capex hike sort to the project budget hikes are you.

Speaker Change: You mentioned your aluminum, but I think the view of carbon projects also are the capex. It's been high so what drove that and then when we look at this that say 300 million are such a tight versus prior how should it be spread out.

Speaker Change: Between 2024, and 2025 I know you provided some some some insight on the budgets for 2020 for around 2 billion, but there is a significant drop in consensus expectation.

Speaker Change: 2025, so it'd be helpful to get a sense of how much is.

Speaker Change: Flowing into 2025 and for those.

Speaker Change: For this project and also do well.

Speaker Change: When you look at this elevated capex budget for next year and your expectation for food for you. Several businesses do you expect to be free cash flow positive for 'twenty 'twenty four thank you.

Speaker Change: Thanks, Kristen so the biogas project hasn't increase in class a.

Kristen: Well, it's it stayed the same at $260 million, we did expect at one point in time to possibly get some tax credits that became unavailable. Once the definitions kind of became more precise from the administration, but otherwise the capital constitute 60 remains what we thought it would be.

Speaker Change: Our metals recycling operations also performed well this year, considering the challenge of declining scrap prices throughout much of 2020. The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating facilities. In particular, our Mexican locations competitively advantage our Columbus and Sinton raw materials. They will strategically support aluminum scrap procurement for our future flat-rolled aluminum. Our Battles with Tycholine team is also partnering even more closely with both our steel and aluminum divisions to expand our scrap separation capabilities. Thank you. Thank you. Thank you.

Kristen: And that project is still online to be completed and to start before the end of 2024, which as a reminder is incredibly additive to our de carbonization path and it's going to really help our customer base and so you can look at the carbon content across our steel operations with the benefit of using the bio carbon so incredibly excited.

Kristen: Team is doing a fantastic job in Mississippi, and getting that up and running so that will be spent primarily in 2024 and in that $2 billion is the number that I would've given you last quarter as well so that that stayed the same for total capex in 2024 as it relates to the aluminum project most of.

Kristen: The incremental it rounded to 200 million, but it was less than that in actuality.

Speaker Change: This will help mitigate potential prime fair scrap supply issues in the future and will also provide us with a significant advantage to materially increase recycled content for our aluminum flat roll products and increase earnings. The Steel Team had another strong year, achieving a record volume of 12.8 million. During 2023, the domestic steel industry operated at an estimated production utilization rate of 76%, while our steel mills operated at a rate of 93%. Thanks for doing the sentence.

Kristen: Right.

Kristen: Most of that will be spent in 2020 or so I gave you the spend for aluminum that's about $1 $4 billion.

Kristen: This year and it would be our expectation and then there would be a trailing call it.

Kristen: $150 million to $200 million remaining to be spent in 2025 related to the aluminum projects and so really nothing significant has changed on the capital front makes up for that incremental addition in the aluminum project itself.

Speaker Change: We consistently operate at higher utilization due to our value-added steel product diversification, our differentiated customer supply chain, and the support of our internal manufacturers. This higher through cycle utilization of all our steel mills is a key competitive advantage, supporting our strong and growing cash generation capability and best-in-class financial services. Regarding the steel markets, steel pricing improved in the fourth quarter of 2023 and into January.

Kristen: No.

Speaker Change: So I'm, sorry, I forgot I had to look at my notes you asked a lot of water.

Questions first and last one was related to the consensus for 2025 mm and I I would just and in free cash flow I would just point out for everyone on the call. So.

Speaker Change: Now for the last two years. Unfortunately, Sidney has been negative from an EBITDA perspective, and Mark said on the call. This morning that we will be EBITDA positive in the first quarter and thereafter, that's a significant swing and just earnings itself just as it relates to the ramp up of certain in addition to that you know the floor value added.

Speaker Change: Flat roll lines that are coming online in 2024, which are a significant additional opportunity for contribution to earnings on the value added side as well as that's where the demand is today isn't painted products and the novel products and then if you couple that with.

Speaker Change: Customer order entry has been strong, and lead times have been extended. While their inventory levels remain at historically low levels, In fact, our flat-walled steel operations have experienced one of the strongest order entry environments, especially for our value. Additionally, steel imports have generally remained in the management, with expectations of this.

Speaker Change: The fact that we've been increasing and will continue to increase volumes in our metals recycling side met both related to the collection of nonferrous scrap specifically aluminum and to help service our steel mills on the ferrous side of the equation and then finally in 2025, we will be starting our.

Speaker Change: As for SINT, the team has achieved significant improvements in operating efficiency and consistency. They averaged about 65% of capability in November and December and have been running even stronger rates here in January. We are planning for sentencing additional improvements in production after the team makes changes to certain transformers at the end of this first quarter, 2024. Additionally, we will allow access to 100% of our milk capacity, versus the current 80% capacity. Additionally, the two new value-added coding lines will begin operating in the first quarter, supporting increased volume and margin. Regarding the steel market environment, automotive production estimates for 2024 are an estimated 16 million units, while automotive dealer inventories remain below historical norms. Non-residential construction remains solid, as evidenced by the strength of shipments and backlogs at our structural and rail division, and customer inventory levels are low.

Speaker Change: Aluminum mill midyear is the current forecast so that's contributing to earnings as Mark mentioned and nuts.

Speaker Change: We believe through cycle earnings of $650 million to $700 million, though I think everybody maybe need to take a step back and kind of look at the opportunity set that we have from an earnings perspective, and yes, we do expect to generate cash in 2024, and we expect to continue we plan to continue with our share repurchase.

Speaker Change: This program.

Speaker Change: And just one added point, although we are.

Speaker Change: Disappointed with the the Capex creep. The syndrome are we we are very very confident I mean, sorry, sorry in Columbus.

Speaker Change:

Speaker Change: We are confident that that's the final green.

Speaker Change: But it has no impact to our schedule to be honest. It is gone out of breath taken place absolutely for novel job by the team down there and there's no doubt it will be.

Speaker Change: You're up and running mid year of 25.

Speaker Change: Your next question for today is coming from Carlos de Alba with Morgan Stanley.

Speaker Change: Yes, good morning, Mark I'm Theresa My question is on the aluminum project I don't know if you could maybe give a little bit of color as to what extent have you been able to contract. Some of the volumes that will come online in mid 2025, and what type of pricing mechanism similar structures.

Speaker Change: Additionally, onshore outsourcing and infrastructure spending should provide meaningful support to fixed asset investment in related construction-oriented projects in the coming years. As for the energy market, oil and gas activity is strong, driving improved orders for OCTG and solar. Those areas are all growing. Looking forward, we are optimistic regarding steel demand and pricing dynamics for 2024. And with that, Mark.

Theresa E. Wagler: Maybe you could just high level and on a.

Theresa E. Wagler: Call It a day basis and how are you.

Theresa E. Wagler: Being able to to use to implement them in those contracts. If you have done so.

Theresa E. Wagler: So you can tell us of the the team the commercial team in all honesty is is Uh huh.

Mark D. Millett: Thanks, Barry and Thanks, Theresa. I think, you know, our consistently strong three-cycle operating and financial performance continues to support our cash generation and growth investment strategy. As Barry mentioned, the four value-added flat-roll steel coating lines are starting this quarter, and Simgen should see a step-function improvement, hitting its stride in the second quarter of this year. Our aluminum growth strategy is especially compelling, with responses from existing and new customers across all markets

Theresa E. Wagler: It's only been put together over the last I would say two months.

Theresa E. Wagler: They're very very active with our customer base and in all honesty, we all at a at every level.

Theresa E. Wagler: The reception is incredibly high.

Theresa E. Wagler: And I would suggest that we have total confidence that we're going to be be able to support the ramp up and twenty-five into 'twenty six.

Speaker Change: Alright, thanks for that and if I may ask on the spec what is the expected ramp up in EBITDA contribution.

Speaker Change: For the fourth quarter lines.

Speaker Change: I can do all of them, but we will start in the first quarter.

Speaker Change: As far as the ramp up I'll I'll, let Barry address how quickly they ramp up I would tell you from a financial perspective, the coating lines. They are in totality all for around $600 million and they tend to have like two and a half to three year payback. So it's very nice return.

Mark D. Millett: Only strengthening as we move forward. Many customers have already indicated they would like to build facilities on a rolling mill site in Columbus, Mississippi, and this co-location strategy provides a sustainably competitive model for all of conserving time, money, and reducing emissions across the supply chain, and has already proven itself clearly in the incentive. The project itself, a 650,000 metric ton aluminum flat roll facility located in Columbus, Mississippi. It's going to be a state-of-the-art plant, obviously, serving the sustainable beverage and packaging, both body and tab, automotive, and industrial sectors. Roughly 300,000 metric tons of can stock, which is about 45% of the output. Roughly 200,000 tons of cars, and 150,000 metric tons of industrial and construction products. The on-site melt-cast slab capability

Speaker Change: Yeah.

Speaker Change: Yeah. This is Barry I, just like to add that the teams. The personnel are in place are they've been training a building the lines. That's our culture to be part of the construction. So the teams are already very familiar with their equipment.

Speaker Change: Two of the lines are actually run first coils wanted hartland the paint line in our coating line down in Sydney.

That's great news, that's always exhilarating for the teams to get that point are the next two lines or in the hot commissioning now and we anticipate those running first coils are in the March timeframe. So the ramp up keep product through them, we were pretty aggressive in what we do typically and we dissipate these will be contributing to our customers here in the near.

Speaker Change: Future right.

Speaker Change: Envision prime sales and in Q1 from the two lines that have run first coils and we see all four of the lines, making and shipping a saleable goods.

Speaker Change: Into the marketplace in Q2, so we anticipate our experience and our cultural will allow these startups will be very very seamless and we're very.

Responsible to our customers make sure the product is leaving US is nothing less than the best they expect from us.

Mark D. Millett: David Fincher expanded, Product scope is including additional scrap processing and treatment to maximize aluminum recycled content. Startup plans are on schedule, Rolling Mill should be mid-25, the Mexico slab center at the end of 24, and then the Arizona slab center around mid-25. The total project cost... As you saw in the release, including the recycled slab centers, has risen to $2.7 billion. The installation costs for the roller mill have expanded due to inflationary installation costs that we are all facing. But with virtually all the equipment and construction contracts complete, we are confident in this final budget.

Speaker Change: Thank you very much.

Speaker Change: What are you thinking about the the four lines or particularly the two lines in symptom.

Speaker Change:

Speaker Change: Obviously, it's going to expand our value add a sort of product portfolio down there and enhance the margin directly there.

Speaker Change: But as importantly, it will allow us to fully utilize the the the downstream lines.

Yes, the the the team has done a phenomenal job on the hot side.

Speaker Change: The.

Speaker Change: Gonna see great games there through.

Speaker Change: Kris utilization as Barry said, you know, we're we're knocking on 75% utilization today.

Speaker Change: And in January.

Mark D. Millett: As we've said before, 100% to be funded with cash, and the expectation is to have a through-cycle annual EBITDA of around $650 to $700 million from the Iblum facility, with an additional $40 to $50 million from OmniScore. I think we're definitely going to see superior financial metrics relative to our competition. As we see it, the market environment is similar to the domestic steel industry when we started SDI 30 years ago. Odor assets, little reinvestment, heavy legacy costs, and inefficient, high-cost operations.

Speaker Change: And 80% is right around the corner.

Speaker Change: But downstream you know when you take that product you pick a live you put it through the the time the mill and all the other our other lines.

Speaker Change: Having the additional.

Speaker Change: One of the three three or 400000 tonne of of downstream.

Speaker Change: That's gonna Alero.

Uh huh.

Speaker Change: Fully loading of those downstream lines and obviously a dilution of the cost structure. So so it's a very.

Mark D. Millett: We're confident we can emulate the performance-driven, high-efficiency, low-cost model that drove our success in steel to drive superior financial metrics. Our organizational mill structure, through just an advanced layout and technology, and our performance-driven sort of esprit de corps and culture, will drive a census of around about 750 people versus typically 2,000 or more in a similar and similar competitors. We will have higher yield through the system; we will leverage Army Source's market position and their separation technologies to ensure higher recycled content. And we obviously won't have the legacy burden that others have.

Speaker Change: Very very important.

Speaker Change: The effect of the impact is in here in the next three or four or five months.

Speaker Change: I appreciate the color Mark Thank you.

Your next question for today is coming from Timna Tanners with Wolfe research.

Timna Beth Tanners: Yeah, Hey, good morning, everyone.

Timna Beth Tanners: I was wondering about.

Good morning, Hey wanted to follow up.

Timna Beth Tanners: I know you mentioned that you thought volumes have hit bottom in prices are stabilizing do we have kind of the effect of that higher price.

Mark D. Millett: We will have production cost efficiency, and along with the customer co-location, and in the end, we'll also have a preferred sustainability profile. We put it all together, and we're confident that our earnings profile is going to be far superior to the industry today. We've developed the best financial metrics in the steel industry, and as I said, we have confidence we can do the same. We are poised for continued growth. We have an additional 3 million tons, as I said earlier, of shipping capability that will be leveraged through our new processing lines, new products, and new supply chains. And we are inspired by our future growth plans, as they will continue to drive the high return growth momentum we have consistently demonstrated over the years. We have the highest average five-year after-tax return on invested capital within the S&P 500 materials companies, and in the last three years, we had an average after-tax ROIC of 32%. Am I going to say that it just doesn't happen?

Timna Beth Tanners: I'm into that fourth quarter hitting in the first quarter or is that more of a second quarter phenomenon.

Speaker Change: So that's that was my first question.

Speaker Change: I didn't give that tourism film.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: The upside is asking about cost.

Speaker Change: For throughput from the hot rolled side.

Speaker Change: Oh, Okay, Yeah. So David though you were talking about fabrication, you're actually talking about flat roll so that.

Speaker Change: We're operating right now has been about.

Speaker Change: That contract business lagging, let's call. It two to three months. So they then increased pricing that we saw in flat rolled in the fourth quarter is going to be benefiting the first quarter from a contract perspective in the 80% as well.

Speaker Change: Really been pretty consistent all year mm for the firewall operation So that we'll see that benefit in Q1.

Speaker Change: Okay, that's actually really helpful. But I was asking about fabrication in the throughput of flat rolled price increases and the impact on margins on downstream. If you could actually answer that as well that would be great. Thanks very much.

Speaker Change: Sorry, Timna I'll get this right eventually all of them from a cost perspective for the substrate for fabrication. They tend to have anywhere between call. It eight to 10 weeks of inventory on the ground. That's the same thing that they would've had them coming into the first quarter, so you're going to see some of that incremental price hike.

Mark D. Millett: Our disciplined, intentional, organic, and acquisition strategy, focused on differentiated value-added supply chain solutions, is providing sustainable cash generation and strong retail, and I continue to be optimistic moving forward. I believe the market dynamics are in place to support increased demand across our operating platforms in 2024 and the years ahead. North America will benefit from continued onshoring of manufacturing businesses, and the U.S. will benefit from the allocation of public monies from the Infrastructure Program, the Inflation Reduction Act, and other public programs.

Speaker Change: And in the first quarter that you would have seen some of it in the fourth quarter as well.

Speaker Change: Okay.

Speaker Change: Okay. Thanks, and then if I could just one last one I know Barry talked about and I talked about customer.

Speaker Change: Customer inventories being low.

Speaker Change: So I just don't understand that because I know that at least S. N. You actually had some really high inventories for December. So is that just not aligned with what you're seeing or can you help me understand why that that difference of narrative there.

Speaker Change: Well Timna. This is Barry I think a lot of our a lot of our relationships, especially with the galvanizing painted or are very you know directly with customers. So we see our supply chains are still needing to fill our orders that are really good right. So.

Mark D. Millett: Steel Dynamics is levered to benefit from those programs through increased steel joist and deck demand, flat and long product steel demand, and the associated higher demand for recycled scrap. And in closing, there's no doubt, our teams are our foundation, and I thank each of them for their passion and dedication. We're committed to them. I remind those listening today that safety for yourselves, your families, and each other is the highest priority.

Speaker Change: MSCI inventories are still our seasonal are traditionally pretty low but more to the point higher SAR specific OEM relationships are still pulling.

Speaker Change: <unk> tons from us and when we have conversations.

Speaker Change: The lead times haven't changed at all with with a vast majority of the business. We do that is on these contract relationships. So so I think what we're seeing out there in the in the nature of our acreage make us feel like that.

Mark D. Millett: Our culture and business model continue to positively differentiate our performance, leading to best-in-class financial metrics. We are no longer a pure steel company but an integrated metals business providing enhanced supply chain solutions to the industry, and in turn, mitigating volatility in cash flow generation through all market cycles. We're competitively positioned and continue to focus on providing superior value for our company, customers, team members, and shareholders alike. We look forward to creating new opportunities for everyone, today and in the years ahead. So with that said, Holly, I would love for you to open it up for questions. Thank you. If you would like to ask a question, please signal by pressing the star key followed by the digit 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: You know that there is a real demand out there are still.

Speaker Change: Now underneath everything we're doing.

Speaker Change: Okay.

Speaker Change: So I think generally we feel.

Speaker Change: I believe.

Speaker Change: Oh, we just have a very very constructive for 'twenty 'twenty four relative to steel demand and everyone gets a little excited by like maybe a little backing off of a hot band pricing here of late.

Speaker Change: But for US flat roll continues to be very very solid.

Speaker Change: And maybe the you know the macro indicators may not be overly a constructive right now the order input rate in January for us has been incredibly strong.

Speaker Change: Yeah, we would as I said suggests that our supply chain inventories not just M. A C. I O S. S them here, but just the supply chain in general is relatively tight.

Speaker Change: Yeah, and imports are not a material factor today and won't be.

Holly: If you pressed star 1 earlier during today's call, please press star 1 again to ensure our equipment has captured your signal. Also, we ask that you please limit yourselves to one question to facilitate time for everyone. Any additional questions can be addressed upon re-entering the queue. Your first question for today is coming from Martin Englert with Seaport Research. Hello. Good morning, everyone.

Speaker Change: We will book doubtful for coated and unprepared right right.

Speaker Change: It's very very strong for us.

Speaker Change: I think the.

Speaker Change: So again when you when you look at the just the hot band.

Speaker Change: Uh huh.

Martin Englert: Thank you. I have a quick question on steel conversion costs. We're estimated around 530 per ton in the fourth quarter and kind of average around there for the year. Looking ahead at 1Q, taking that point of reference into account, should we expect some decline there based on the ramping of Senton farther and some better fixed cost leverage? Good morning, Martin. As the way that the information that you guys can use to back into our conversion costs, I know it's a little difficult, but you hit the primary. The driver.

Speaker Change: Rising because coated prepaying is all very very very strong still.

Speaker Change: Hum.

Speaker Change: It is it's just like a recent cycles and it's it's more emotional than anything else, but you get that a steep climb.

Speaker Change: Yeah I've exuberance.

The overshoot, the Mark a little bit and it just sort of retrenching is itself a little bit and I think that's where we where we are today.

Speaker Change: And it is not a signal as it used to be it's not a signal as the underlying structural underlying demand.

Speaker Change: With Senton ramping up as significantly as we're expecting them to do in the first quarter and as they're doing right now in January already, we would expect to see that overall, as you calculate it, conversion costs come down, absent any other factors, correct? Okay, and any goalposts as far as when we think about what that could potentially decline on a sequential basis? And I understand there might be other offsets there with substrate that's kind of flowing through there as well, but, You know, it's really hard for us to give you guidance, as you know, Martin, as it relates to the conversion costs as you're calculating them. As conversion costs really stand within the steel operations themselves, the Q conversion costs are very stable.

Speaker Change: So so little spot material transacted today.

Speaker Change: Just because you have a.

A slight erosion in hot band prices it doesn't mean to say that with this.

Speaker Change: This reflective of where the where the demand is so for US demand is a as I said very very solid throughout a throw it off.

Speaker Change: Mills.

Speaker Change: And I.

Speaker Change: Also see that our long products is in a very very solid the territory.

I would like to congratulate the team you know they had record earnings and record volumes in 2023.

Speaker Change: And they've done an incredible job.

Speaker Change: They they've changed the commercial approach somewhat.

Speaker Change: Expanded their product portfolio, and that's going to support higher through cycle volumes going forward for the long haul it platform as well so I think for us the market for a quite.

Speaker Change: We don't expect to see a lot of movement except for at sit-in, again, because of the additional volumes. The substrate does have an impact, as you mentioned, but we don't expect to see that mix of processing versus production be dramatically different in the future. Okay, if I could one follow up on steel fabrication. In the release, you noted improved activity as well as a well-priced backlog extending through the first half of 24. On average, is the backlog price higher or lower than the fourth quarter ASP of 3500 per ton? Martin, the backlog price is held in very steadily; there's not a dramatic difference, and again, we don't give specifics as to the backlog for Fabrication News. But the resiliency and the price, both what we're seeing now and in that backlog, are very, You know, I would like to add that in the fourth quarter, our belief is that fabrication is kind of in a trough in large part, So volumes will turn. Obviously, you've got a little seasonality if you want it.

Speaker Change: Quite rosy.

Speaker Change: Okay. Thanks again.

Speaker Change: Your next question is coming from Curt Woodworth with UBS.

Curt Woodworth: Yeah, Good morning, Hi, Mark three of them.

Curt Woodworth: Good morning, So just wanted to follow up on on the pricing dynamic I think that at the start or maybe at the end of the first quarter of 'twenty three you talked about pricing in the back half of the year being down 10% to 15% and you came in down 22.

Curt Woodworth: And then I think for now two quarters in a row you you have talked about price stabilization and obviously you mentioned the order entry getting better. So you know what would you be willing to provide any directional color you know on pricing like should we assume that the first half that the backlog you've price for the first half of this year.

Curt Woodworth: It is somewhat similar.

Curt Woodworth: To where you were in the fourth quarter, which would be consistent with kind of what you've said about two quarters that pricing has stabilized.

Speaker Change: But the expectation is that things will go upward, your comment on you believe that it's a trough. Does that pertain to volumes or price? I would say that, for sure, volume and pricing appear to have stayed. Okay, excellent. Thank you very much and good luck.

Speaker Change: Well I I never never do well in Vegas, So yeah I think the.

Speaker Change: Given our projection is.

Speaker Change: The dollar projection is perhaps.

Speaker Change: Sorry, Brett.

Speaker Change: You're welcome. Your next question is coming from Tristan Gresser with BNP Paribas. Yes, hi, good morning, and thank you for taking the questions.

Speaker Change: That's right.

Speaker Change: But the directional way.

Speaker Change: I do believe a game, but the underlying structural demand as the.

Speaker Change: If you look good.

Speaker Change: Literally the last 18 to 24 months.

Tristan Gresser: The first one is kind of a follow-up on the fabrication guidance, maybe on the volumes. If we look at the shipments you had in Q4, that's probably the lowest fab shipments we've seen in five years. And you mentioned you've seen that trough, but could you explain a little bit what has been holding you back there of late?

Speaker Change: You've seen these hot band pricing cycles.

Speaker Change: And they have not been driven by demand.

Speaker Change: They've been driven by emotion, whether it would be the threat or the anticipation of it.

Speaker Change: High interest rates and inflation and recession and all these sorts of things.

Tristan Gresser: And if we look at 2024, what kind of growth expectation do you foresee for the business? I know you provided some guidance last year on a half on half basis. So anything there would be helpful.

Speaker Change: They've been emotional.

Speaker Change: Pivots as opposed to demand patents.

And all we can say is that we do believe strongly that the underlying demand is going to be sustained through the year.

Tristan Gresser: That'd be my first question. I guess I would just leave it as already stated, the order input rate increased in Q4. That will flow through this year. You always have, as you, as you, I know you appreciate. We had some issues with seasons in the winter months.

Speaker Change: And that should support pricing.

Speaker Change: Okay and then.

Speaker Change: In terms of I think he noted the order entry in fab was the highest we've seen in the past six quarters.

Tristan Gresser: But I think we will certainly see a turn into the second quarter and through the rest of the year. All right, that's fair. And my second question is more on the CAPEX hikes or the project budget hikes. You mentioned the aluminum, but I think the geocarbon project also had a CAPEX hike. So what drove that?

Speaker Change:

Speaker Change: Which which is a pretty healthy statement I'm just curious like what you know.

Speaker Change: What.

Speaker Change: What's driving that you know a lot of the data we've seen in terms of where our warehouse start with or somewhat negative I know data centers is growing in other areas, but you know how do you characterize kind of the composition of your end market composition of a fabrication demand today versus maybe how that looked.

Speaker Change: And when we look at this, let's say $300 million budget hike versus prior, how should it be spread out between 2024 and 2025? I know you provided some insight on the budget for 2024, around $2 billion, but there is a significant drop in consensus expectation into 2025. So it'd be helpful to get a sense of how much is flowing into 2025 for those projects. And also, when you look at this elevated CAPEX budget for next year and your expectations for your various businesses, do you expect to be free cash flow positive for 2024? Thank you. Thanks, Tristan. So the biocarbon project hasn't increased in cost. It has stayed the same.

Speaker Change: 18 months ago. Thank you.

Speaker Change: Barry May have additional commentary as well that we're seen a lot of incremental demand on the manufacturing side. You know we've been talking about onshoring that is actually happening and when that does have a good impact on the steel joist and deck market. We're also seeing them a lot of activity in the education side as well.

Barry Schneider: As in the I'll call, it pharma, where health care and then anecdotally as well you have to separate warehouses from data centers, we're continuing to see really good strength in the data Center arena as well very I don't know if there's anything I'm missing.

Barry Schneider: I would just say that the mix is it it's a good mix for them on the engineering side of the business to keep up with the lead times. So it.

Barry Schneider: It isn't substantially different than the typical business flow that comes through.

Speaker Change: It's $260 million. We did expect at one point in time to possibly get some tax credits that became unavailable once the definitions kind of became more precise from the administration. But otherwise, the capital cost of 260 remains what we thought it would be, and that project is still on track to be completed and to start before the end of 2024, which, as a reminder, is incredibly additive to our decarbonization path. And it's going to really help our customer base as we look at the carbon content across our steel operations with the benefit of using biocarbon. So, incredibly excited.

Barry Schneider: It's it's small changes in the segments that we're serving through fabrication.

Speaker Change: Thank you very much very helpful.

Speaker Change: Your next question for today is coming from Katya Jan sick with BMO.

Katya Jan: Hi, Thank you for taking my question just quickly on the aluminum segment you started disclosing the operating loss.

Katya Jan: Can you provide some color how we should think about the cost there over the next few quarters or how it should impact you.

Katya Jan: Yeah.

Katya Jan: And we did breakout so aluminum because of the investment size, we will have a separate segment going forward.

Katya Jan: We can't really give you projections on startup losses, we expect them during 2024 cannot be of significant size and you will be able to see them. The one thing of note that you should recognize though it's kind of an odd thing that's required from an accounting perspective, but those startup losses actually get reflected in.

Katya Jan: Our SG&A amount. So if you see SG&A fluctuating and maybe being higher than than it is normally it's because those startup losses. During construction are actually included in that line.

Katya Jan: But is it a first start to see them that they should come up I think that in the fourth quarter. They were around 11 million or is that a fair assumption over the next few quarters.

Speaker Change: And the team is doing a fantastic job in Mississippi getting it up and running. So, that will be spent primarily in 2024. And that $2 billion is the number that I would have given you last quarter as well. So, that stayed the same for total cuts in 2024. As it relates to the aluminum project, most of the incremental funding, and it rounded to $200 million, but it was less than that in actuality. But most of that will be spent in 2024. So, I gave you the spending for aluminum of about $1.4 billion this year, and that would be our expectation.

Katya Jan: We we do have a big contingent of people on the ground now, but yes during the year, because we'll be expecting to actually see.

Katya Jan: They'll start up as Mark said in mid 2025, you're going to be seen head count increase as well as additional construction activity. He asked you should expect to see those costs rise during 2024.

Speaker Change: Okay. Thank you.

Your next question is coming from Alex hacking with Citi.

Alex: Yeah. Thanks morning on center and how much of Simpson's output is currently being sold into Mexico.

Alex: I remember correctly, you were targeting something like you know, 30% before that mill started up thanks.

Speaker Change: And then there would be a trailing, call it, $150 to $200 million dollars remaining to be spent in 2025 related to the aluminum project. And so really nothing significant has changed on the capital front, except for that incremental addition to the aluminum project itself. Oh, wait, wait. I'm sorry.

Speaker Change: Oh, Yeah, we've had a very good.

Speaker Change: The ability to move product into Mexico, we have a very established team down there that's been servicing our flat roll group for a while but we added the warehouse capability in Monterrey and last year, we moved about 600000 tonnes in the Mexico and our various industries.

Speaker Change: I forgot. I had to look at my notes. You asked a lot of questions, Tristan. The last one was related to consensus for 2025 and free cash flow. I would just point that out for everyone on it.

Speaker Change: Altogether.

Speaker Change: We're very pleased with how the how the business is booming.

Speaker Change: Our Walker being are being welcomed by our customer base in Mexico and in many cases, we've had relationships and haven't had the ability to get the tons are sitting provides us the opportunity not just through proximity but through the advanced the product features that we have so we have wider.

Speaker Change: So, you know, for the last two years, unfortunately, Senten has been negative from an EBITDA perspective. And Mark said on the call this morning that we will be EBITDA positive in the first quarter and thereafter. That's a significant swing in just earnings itself, just as it relates to the ramp-up of Senten. In addition to that, you have the four value-add flat-row lines that are coming online in 2024, which are a significant additional opportunity for contribution to earnings on the value-added side, as well as that's where the demand is today, is in the painted products and the Galvalume products. And then if you couple that with.

Speaker Change: We have heavier products that we would typically have and these products are being very well received in the various industries.

Speaker Change: I would tell you that of the <unk>.

Speaker Change: The near shoring of manufacturing to the United States is very apparent with the investments we see in Mexico in the customer base. There. So it continues to go along with our strategy as being a great place to do business.

Speaker Change: The fact that we've been increasing and will continue to increase volumes in our metals recycling segment, both related to the collection of non-ferrous scraps, specifically aluminum, and to help service our steel mills on the ferrous side of the equation. And then, finally, in 2025, we will be starting our aluminum mill. Mid-year is the current forecast, and so that's contributing to earnings, as Mark mentioned. I mean, that's, you know, we believe through cycle earnings of $650 to $700 million.

Speaker Change: You know we're excited about it.

Speaker Change: Thanks, Barry and then just a follow up if I may on the Alley Rolling mill Yeah.

Speaker Change: How comfortable are you with your ability to source you know 900000 tons of scrap will have a much you need to do I'm not as familiar with the alley scrap market, but you know it doesn't seem like this particularly a lot of excess scrap and I guess like how much is just for context, how much does omnicell has handled today, how many tonnes. Thanks.

Speaker Change: So I think everybody maybe needs to take a step back and kind of look at the opportunities that we have from an earnings perspective. And, yes, you know, we do expect to generate cash in 2024. And we expect to continue, we plan to continue with our share of, which is one added point, although we are disappointed with the... very, very confident, I mean, sorry, sorry, in Columbus, Illinois. We're confident that's the final creep.

Speaker Change: Yeah.

It's a great question and obviously I think we were advantaged by having the omni source domiciles recycled platform cause today not only are they.

Speaker Change: The largest or second largest ferrous scrap the recycler, but they are clearly the largest nonferrous recycler.

Speaker Change: And they were recycling somewhere around 500 million pounds of aluminum.

Speaker Change: But it has no impact on the schedule, to be honest; it is going at a breathtaking pace. Absolutely phenomenal job by the team, and there's no doubt we'll be up and running mid-year. Your next question for today is coming from Carlos De Alba with Morgan Stanley. Good morning, Mark and Theresa.

Speaker Change: We also have a secondary aluminum operation here in Fort Wayne.

Speaker Change: Well I don't know 216 million pounds or thereabouts of secondly, Linda.

Speaker Change: So is it we're not it's not a new environment for us and I think we've got a great team, we've actually hired some incredible talent the supplement.

Speaker Change: My question is on the aluminum project. I don't know if you could maybe give a little bit of color as to what extent you have been able to contract some of the volumes that will come online in mid-2025, and what type of pricing mechanism or structure, even at just a high level and on a qualitative basis, have you been able to use to implement in those contracts, if you have done so? Thank you, Collis.

Speaker Change: Our already incredible talent.

Speaker Change: And so sourcing the materials and all of that.

We don't believe it's a major issue.

Speaker Change: If you look at our strategy.

Speaker Change: There were the two principal kind of scrap streams you might say what one is for the automotive industrial base are the other is for Comstock.

And the the UBC scrap.

Speaker Change: It is.

Speaker Change: The, the commercial team, in all honesty, has, It's only been put together over the last, I would say, two months. They're very, very active with our customer base, and we all are at every level. The reception is incredibly high, and I would suggest that we have total confidence that we're going to be... be able to support the ramp-up in 2025. All right, thanks for that. And if I may ask, what is the expected ramp-up and EBITDA contribution for the four quarterlines? I mean, I think two of them will start in the first quarter.

Speaker Change: Well, that's it's highly available in California.

Speaker Change: Posit state.

Speaker Change: So there's a lot of the aluminum UPC scrap the generated are up and down the west coast currently either moving to to Asia or to the Midwest.

Speaker Change: And similarly in Mexico.

Speaker Change: Any sort of a U b C scrap arena. So that's why we're we're locating two facilities to satellite facilities in those scrap rich areas.

Speaker Change: The scrap at the source the melted.

Speaker Change: On the freight.

Speaker Change: Then moving a big solid slab versus scrap to the Midwest is up around about half the price.

Speaker Change: As far as the ramp-up, I'll let Barry address how quickly they ramp up. But from a financial perspective, the coding lines are, in totality, all for around $600 million, and they tend to have a two-and-a-half to three-year payback, so it's a very nice return. Yeah, this is Barry.

Speaker Change: And so we're not only advantages ourselves all the scraps collection side.

Speaker Change: But economically on getting that the aluminum to the to the mill.

Speaker Change: Okay. Thanks, just one follow up if I may this is probably a really dumb question, but I assume that facility can handle primary as well if if required.

Speaker Change: Yeah.

We certainly will.

Speaker Change: If you don't because you've got 900000 tons of <unk>.

Barry Schneider: I just like to add that the teams and the personnel are in place. They've been training, building the lines. That's our culture to be part of the construction. So the teams are already very familiar with the equipment.

Speaker Change: Just to be clear.

Cask need.

Speaker Change: Because the.

Speaker Change: The yield loss through the system and when I say your losses is not.

Barry Schneider: Two of the lines have actually run first coils, one at Heartland, the paint line, and a coating line down in Sinton. So that's great news. It's always exhilarating for the teams to get that point.

Speaker Change: What's it called lost it disappears, it's just a sort of a circular within the mill you're still only need.

Speaker Change: Roughly 650000 tons of our total input 20% of which is Ah is primary.

Barry Schneider: The next two lines are in hot commissioning now, and we anticipate those running first coils in the March time frame. So the ramp up, keep product through them, we're pretty aggressive in what we do typically, and we anticipate these will be contributing to our customers here in the near future. I anticipate prime sales in Q1 from the two lines that have run the first coils, and we see all four of the lines making and shipping saleable goods into the marketplace in Q2. So we anticipate our experience and our culture will allow these startups to be very, very seamless, and we're very responsible to our customers to make sure the product that's leaving is nothing less than the best they expect from us. Thank you very much.

Speaker Change: Okay. Thanks.

Speaker Change: Your next question for today is coming from Bill Peterson with Jpmorgan.

Bill Peterson: Yeah, Hi, good morning, and thanks for thanks for taking our questions.

Bill Peterson: Just on Central I think you mentioned hitting stride in the second quarter.

Speaker Change: How should we think about utilization for the full year I, if I recall correctly I think you had expected on 80% for the full year at the last quarterly earnings calls is that still the target or should we assume a bit lower.

Barry Schneider: Obviously, it's going to expand our value-add sort of product portfolio down there and enhance the margin directly there. But, more importantly, It will allow us to fully utilize the downstream line. So yes, the team has done a phenomenal job on the hot side, and you know you're going to see great games there. Increased utilization, as Barry said, we're knocking on 75% utilization today in January, and 80% is right around the corner, but downstream, you know, when you take that product, pickle it, you put it through the Tandem Mill and other lines, having the What is it, 300,000, 400,000 tons of downstream? That's going to allow a... very, very important. Thank you, impact us here in the next three or four. I appreciate the call, Mark. Thank you. Your next question for today is coming from Timna Tanners with Wolf Reef. Hey, good morning, everyone.

Speaker Change: Is my target Barry.

Barry Schneider: No. We we continue to strive for 80%.

Barry Schneider: The team is doing that as Mark said, a phenomenal job. It's a it's a big challenge of bringing such a big asset up all at once.

Barry Schneider: The transfer of problems a bit unfortunate, but we have several fixes in the works.

Barry Schneider: Approaching the problem for both the resiliency is all there's also was getting back to full power capacity.

Barry Schneider: So we we remain confident that the operational levels. We're gonna see 80% is the target the whole team's aware of we're all incentivized to make that happen.

Barry Schneider: And not to complicate the math, but if you think about it in January.

Barry Schneider: We're approaching 75% utilization right now.

That's 75% of ultimate.

Timna Beth Tanners: I wanted to ask about, good morning, on the fab side. I wanted to follow up and just, I know you mentioned that volumes had hit bottom and prices were stabilizing. Do we have kind of the effect of the higher price from the fourth quarter hitting in the first quarter, or is that more of a second quarter phenomenon? So that was my first question, thank you for watching. Yeah, sorry, I was on the fab side just asking about cost from Throughput on the Hot Rolls side. Okay. Yeah, so David thought you were talking about fabrication.

Barry Schneider: Even though the team is handcuffed because of the lower power input. So we were quite confident to get to that 80, 480% for the year.

Speaker Change: Okay. Thanks.

Speaker Change: So that will plug in 84%.

I was just just yoga.

Speaker Change: Just on the I.

Speaker Change: I guess things like onshore and the infrastructure Bill.

Speaker Change: You said you know this is expectation to benefit in 2024.

Speaker Change: I guess have you seen orders when do you expect to see orders should we think of this more as a second half.

Speaker Change: 24 can really kind of benefit you in and then between I guess onshoring and infrastructure, specifically, which you've seen being more impactful for you this year.

Speaker Change: You're actually talking about flat roll. So, we're operating right now at about a percent contract business, lagging, let's call it two to three months. So, the increased pricing that we saw in flat roll in the fourth quarter is going to be benefiting the first quarter from a contract perspective. And the 80 percent, it's really been pretty consistent all year for the flat roll operation. So, we'll see that benefit in Q1. Okay, that's actually really helpful, but I was asking about fabrication and the throughput of flat rolled price increases and the impact on margins on downstream, so if you could actually answer that as well, that would be great, thanks very much. Sorry, Timna.

Speaker Change: Just from a.

Speaker Change: From a a sort of a product mix so to speak the the infrastructure growth.

Speaker Change: Now on the solar it's already the solar has exploded renewables exploded last year continues to grow dramatically we were advantaged.

Speaker Change: Hugely both structural.

Speaker Change: For the torque tubes, and also for our flat roll.

Speaker Change: For our support to them.

Speaker Change: We're starting to see it.

Speaker Change: I don't think we can it'd be specific on how that ramps up but the direction Holly we're starting to see orders from from bridge makers currently and so that's the that's the with the stock at least from my perspective, the start of a ramp up in spend.

Timna Beth Tanners: I'll get this right eventually. From a cost perspective for the substrate for fabrication, they tend to have anywhere between, call it eight to 10 weeks of inventory on the ground. That's the same thing that they would have had coming into the first quarter. So you're going to see some of that incremental price hike in the first quarter, but you would have seen some of it in the fourth quarter as well. Okay, thanks. And then, if I could just have one last one.

Speaker Change: We also see in the long products a lot of let's call it a foundational type.

You know.

Speaker Change: Structural sales and even though it's a smaller division steel of West Virginia is very very full with US right now with with stuff that is tangential, whether it's solar fields. The support steel it goes in the ground.

Speaker Change: I know Barry talked about, and Mark talked about, customer inventories being low, but I just don't understand that because I know that at least SMU actually had some really high inventories for December. So is that just not aligned with what you're seeing? Or can you help me understand why the difference in narrative there?

Speaker Change: Or or fork trucks, and things like that that they go into these new factories and these new warehouses and data centers. So we do see a good a good bounce from that we also see the pipeline industry and in the states is picking up orders some cases for carbon sequestration lines as well as some a major pipeline. So those those those.

Speaker Change: Markets are awake and and we see a lot of inquiry activity that is is.

Speaker Change: Very exciting for us.

Speaker Change: Ultimately.

Speaker Change: Well, Timna, this is Barry. I think a lot of our relationships, especially with the galvanized and the painted ones, are very, you know, directly with customers. So we see our supply chains still needing to fill orders at a really good rate. So the MSCI inventories, still, are traditionally pretty low this time of year. But more to the point, our specific OEM relationships are still pulling tons from us, and when we have conversations, you know, the lead times haven't changed at all with the vast majority of the business we do that is on these contract relationships. So I think what we're seeing out there and the nature of our inquiries make us feel like that, you know, that there is a real demand out there still, underneath everything we're doing. Okay, that's helpful. Thanks very much.

Speaker Change: And just.

Speaker Change: I encourage that there some of you on the phone right now that may not understand that at the infrastructure program and the I R E and anything related to the roads and bridges and construction. They don't really benefit long products. They benefit long products, He's certainly benefit our ceiling joist and deck.

Speaker Change: Operations, but additionally, the flat roll operations have exposure to that as well, whether it's the HVAC systems or our pipe and tube like Barry just mentioned and Theres not theres a lot of impact on the flat rolled side and I would encourage you to think about that perspective as well.

Speaker Change: Yes.

Your next question for today is coming from John Tumazos, a private investor.

John Charles Tumazos: Thank you very much.

John Charles Tumazos: Could you.

John Charles Tumazos: Give us a little.

Speaker Change: We believe that we just are very, very constructive for 2024, relative to steel demand, and everyone gets a little excited by maybe a little backing off of hot pan pricing here at the end of the year. But for us, flat roll continues to be very, very solid. And maybe the macro indicators may not be overly constructive right now. The order input rate in January for us has been incredibly strong. And we would, as Larry said, suggest that supply chain inventories, not just MSCI or SMU, but just supply chain in general, are relatively tight. We're booked out for coded and prepaint, right?

John Charles Tumazos: Feedback on the potential 2025 capex.

John Charles Tumazos: And with certain in the four coating lines in the aluminum and carbon projects behind us.

John Charles Tumazos: What are some of the.

John Charles Tumazos: Leading candidates for the next capital investments.

John Charles Tumazos: Hum going forward.

John Charles Tumazos: And in particular could you talk about growth in recycling where.

John Charles Tumazos: Aluminum copper and zinc have much lower global recycling rates.

Speaker Change: Right. It's very, very strong for us. And I think that, again, when you look at just the hot band, pricing because coded pre-paint is all very, very, very strong still, It's just like recent cycles, and it's more emotion than anything else, but you get that steep climb, exuberant tends to overshoot the mark a little bit, and it just sort of retrenches itself a little bit. And I think that's where And it's not a signal as it used to be.

John Charles Tumazos: Steel in particular.

John Charles Tumazos: From a well.

Points at me.

John Charles Tumazos: So honestly, it's good to hear from you Yeah, we do have projects in mind for 2025, I'm not sure that we're prepared to go into that today I would say from the perspective of our capital spending as I mentioned earlier on the call aluminum will probably have a tail of somewhere between call. It 200.

John Charles Tumazos: $250 million or teams.

Speaker Change: It's not a signal of the underlying, the structural underlying demand, because there's so little spot material transacted today just because you have a... For us, demand is, as I said, very, very solid throughout our sheet. And I also see that Long Products is in a very, very solid territory. I would like to congratulate the team. You know, they had record earnings and new record volumes in 2023, and they've done an incredible job. They changed their commercial approach somewhat.

John Charles Tumazos: <unk> consistently bringing us wonderful ideas that have high returns associated with them again, I'll point back to our Aro I see they do a good job.

John Charles Tumazos: I've given us those projects that have really great returns. So the number for 2020 five I would say would be a minimum of probably five or $500 million something like that because you do still have some sustaining capital as well, which for us is very low at around $160 million, but theres still some benefit there.

Speaker Change: If you want to add any addition to that you know it kicked up just to get the capex part not the whole thing, but oh, John as well.

Speaker Change: And choices just mentioned.

Speaker Change: We have an absolutely incredible team that continues to be an innovative and if you.

Speaker Change: They've expanded their product portfolio, and that's going to support higher through-cycle volumes going forward for the long products platform. So I think for us, the markets are quite rosy. Thanks again.

Speaker Change: If you were to.

Speaker Change: So just to be with us it will be without team, but it's incredible.

Speaker Change: Your next question is coming from Kurt Woodworth with UBS. Yeah, good morning. Hi Mark.

Speaker Change: We have a new digital printing technology that we're that we're exploiting again not big dollars, but it's going to be an incredibly incredibly high margin.

Kurt Woodworth: So just wanted to follow up on the FAB pricing dynamic. I think at the start or maybe the end of the first quarter of 23, you talked about pricing in the back half of the year being down 10 to 15 percent, and you came in down 22, and then I think for now two quarters in a row you have talked about price stabilization and obviously you mentioned the order entry getting better so you know would you be willing to provide any you know directional color you know on pricing like should we assume that the first half that the backlog you've priced for the first half of this year you know is somewhat similar to where you were in the fourth quarter which would be consistent with kind of what you've said the past two quarters that pricing has stabilized? Well, I never do well in Vegas, so I don't think that.., given a projection is, and Donald Puget.

Speaker Change: He knows the business.

Speaker Change: We have to.

Speaker Change: Suffice it to say to our product segments that we're not in today in flat roll.

Speaker Change: We're exploring them and they have a couple of innovative things there. So the pipeline on steel is still there for sure.

Speaker Change: I think also.

Speaker Change: And we got a walk before before we run.

Speaker Change: And Ah and aluminum.

Speaker Change: I see that growth kind of paralleling the growth then and and steel yeah, we get on the front end like the the the basic substrates so to speak and then the.

Kurt Woodworth: Rapps, Sorry, perhaps right. But directionally, I do believe, again, that the underlying structural demand is there. If you look at, literally, the last 18 to 24 months, you've seen these hot band placement cycles, and they have not been driven by the map. They've been driven by emotion, whether it be the threat or the anticipation of, you know, high interest rates and inflation and recession and all these sorts of things. They've been emotionally driven. Pivots, as opposed to the man.

Speaker Change: From a from a protein processing standpoint for instance, you know there's a massive massive amount of the aluminum look like as prepayments, though that's an expertise of ours.

Speaker Change: You can see our.

C growth and expansion, though so I think.

Speaker Change: And you witnessed that John you know almost personally though over the years and should our history, but we've clearly demonstrated the ability to be innovative.

Speaker Change: And grow.

Speaker Change: And I would emphasize grow in a very disciplined intentional manner.

Kurt Woodworth: And all we can say is that we do believe strongly that underlying demand is going to be sustained through the year, and that should support prices. Okay, and then in terms of, I think you noted that order entry in FAB was the highest you've seen in the past six quarters, which is a pretty healthy statement. So I'm just curious, like, what, you know, what's driving that?

Speaker Change: That's the only U.

Speaker Change: That's the only way you can get the return on invested capital numbers that we that we achieve.

Speaker Change: So both organically, but also through acquisition.

Speaker Change: The <unk> will continue to be opportunity there, but you will see us remain very very disciplined very very intentional, we're not going to overpay for anything.

Kurt Woodworth: You know, a lot of the data we've seen in terms of warehouse starts is still somewhat negative. I know data centers are growing in other areas, but, you know, how do you characterize kind of the composition of your end market composition of fabrication demand today versus maybe how that looks 18 months ago?

Speaker Change: And where we're going to retain the best financial metrics are in our industry.

Because we build our financial models.

Speaker Change: In 2025 for Capex fell to somewhere it was just say for discussion in the range of 500 to a $1 billion.

Speaker Change: Barry may have additional commentary as well, but we're seeing a lot of incremental demand on the manufacturing side. You know, we've been talking about onshoring, and that is actually happening, and that does have a good impact on the steel, joists, and deck market. We're also seeing a lot of activity on the education side, as well as in the, I'll call it pharma, or healthcare. And then anecdotally, you have to separate warehouses from data centers. We're continuing to see really good strength in the data center arena, as well. Barry, I don't know if there's anything I'm missing.

Speaker Change: Should we.

Speaker Change: The increasing.

Speaker Change: The share buyback towers from the levels over the last several years given the drop in Capex.

Speaker Change: So John when we one of these super clear that we see the share buyback program is a very good tool for us to be able to use and you've seen that so I'm very much that the dividend, we've been increasing and we increase it with increases in our structural do cycle.

Barry Schneider: Now I'd just say that the mix is a good mix for them on the engineering side of the business to keep up with their lead times. So it isn't substantially different than the typical business flow that comes through. It's small changes in the segments that we're serving through fabrication. Thank you very much.

John: Hello generation when projects come online and then we do it pretty aggressively we want to keep that positive momentum, but then we use that share buyback program during periods of excess cash flow. When we maybe have less growth in mind, but we still are very much a growth company to marks point, whether that's true greenfield assets or whether that's through acquisitions.

Barry Schneider: Very helpful. Your next question for today is coming from Katja Jancic with BMO. Hi, thank you for taking my question. Just quickly, on the aluminum segment, you started disclosing the operating loss. Can you provide some color on how we should think about the cost there over the next few quarters or how it should impact you? We did break out, so aluminum, because of the investment size, we will have a separate segment going forward. We can't really give you projections on startup losses, but we expect them during 2024 to not be of significant size, and you will be able to see them.

John: But at the same time, we have the luxury that we don't have to sacrifice a share repurchase program. We absolutely can execute on all of those things and that's what you'll continue to see US do in 2024, and 2025 absent extraneous things.

Speaker Change: Thank you very much I'm a happy shareholder.

Speaker Change: Excellent.

Speaker Change: Your next question is a follow up question coming from Martin Engler.

Katja Jancic: The one thing of note that you should recognize though, it's kind of an odd thing that's required from an accounting perspective, but those startup losses actually get reflected in our SG&A amount. So if you see SG&A fluctuating and maybe being higher than it normally is, it's because those startup losses during construction are actually included in that line. But is it fair... Is it fair to assume that they should go up? I think in the fourth quarter they were around 11 million. Or is that a fair assumption for the next few quarters?

Speaker Change: Yeah.

Martin Englert: I appreciate the time for the follow up just two quick ones here over the last four years, the seasonal sequential <unk> gain.

Martin Englert: External steel volumes average about 7% quarter on quarter based on what Youre seeing with order intake in.

Martin Englert: In the new year here.

Martin Englert: And then also taking into account the continued ramp.

Katja Jancic: We do have a good contingent of people on the ground now, but yes, during the year, because we'll be expecting to actually still start up, as Mark said, in mid-2025, you're going to be seeing headcount increase, as well as additional construction activity. So yes, you should expect to see those costs rise during 2024. Okay, thank you. Your next question is coming from Alex Hacking with Citi.

Martin Englert: Value added lines should.

Martin Englert: Should we expect something.

Martin Englert: At the core similar on a sequential basis around 7% and then layer in the additional volumes from wrapping assets.

Speaker Change: Martin we can't give directionality I'm, obviously, we had outages in the fourth quarter at two of our steel mills and we won't have those in the first quarter and we've just mentioned that setting is going to be ramping up aggressively in the first quarter.

Alex Hacking: On Synton, how much of Synton's output is currently being sold into Mexico? You know, if I remember correctly, you were targeting something like 30% before that mill started up. Thanks.

So all in all absent any significant market moves you should expect to see you know incremental volume from our steel operations and as Barry pointed out with the additional value added lines youre going to start to see that product mix get richer and richer. So it'll go more into the processing line.

Alex Hacking: Oh, yeah, we've had a very good ability to move product into Mexico. We have a very established team down there that's been servicing our flat roll group for a while, but we added a warehouse capability in Monterey. And last year, we moved about 600,000 tons into Mexico in various industries all together. But we're very pleased with how the business is moving. We are welcomed and being welcomed by the customer base in Mexico. In many cases, we've had relationships and haven't had the ability to get the tons there.

Speaker Change: Eventually see you know some really great spread enhancement am.

Speaker Change: Throughout the year as well.

Speaker Change: What were the outages in four Q and did it.

Speaker Change: Assume that you mentioned it because it did have an adverse impact on volumes.

Speaker Change: Martin they're not they weren't they were just normal outages, we take outages at our flat rolled mills that are all long product mills, they weren't anything that where we didn't know them as far as from a volume perspective, but yes, obviously when you have outages it doesn't impact volume, but there was nothing of significance to note.

Alex Hacking: SITN provides us with the opportunity, not just through proximity, but through the advanced product features that we have. So we have wider, and heavier products than we would typically have. And these products have been very well received in the various industries. I would tell you that the continued nearshoring of manufacturing to the United States is very apparent with the investments we see in Mexico and the customer base there. So it continues to go along with our strategy as being a great place to do business. And, you know, we're excited about it. Thanks, Barry. And then just to follow up, if I may, on the Alley Rolling Mill. Yeah, how comfortable are you with your ability to source, you know, 900,000 tons of scrap or whatever amount you need? I'm not as familiar with the alley scrap market, but it, you know, it doesn't seem like there's particularly a lot of excess scrap. And I guess, like, how much is, just for context, how much does OmniSource handle today? How many tons?

Speaker Change: Okay. Thank you one last one if I could on the aluminum project.

Speaker Change: Based on the two cycle estimate.

Speaker Change: The implied EBITDA of around 900 to $1000 per ton when you were coming up with that analysis.

Speaker Change: Are you able to share what you think the bottom and top quartile profitability might look like when we think about peak to trough.

Speaker Change: Yeah.

Speaker Change: No Martin or we're not we do mid cycle through cycle them and as we get more familiar I. You know, we just we don't provide that type of information.

Speaker Change: Okay, No worries thought I'd try thanks again for your time.

Speaker Change: Thanks Martin.

Speaker Change: Thanks. A great question. Obviously, I think we're advantaged by having the OmniSource Recycle Platform because today they are not only the largest or second largest ferrous scrap recycler, but they are clearly the largest non-ferrous recycler, and they recycle somewhere around 500 million pounds of aluminum. We also have a secondary aluminum operation here in Fort Wayne that will make 260 million pounds or thereabouts of secondary aluminum. So it's not a new environment for us. I think we've got a great team.

That concludes our question and answer session I'd like to turn the call back over to Mr. Millett for any closing remarks.

Well. Thank you everyone and thank you. Thank you Holly and thank you everyone on the call I guess, there's as John noted our is a happy shareholder.

Speaker Change: To be honest, everyone of SDI for happy shareholders, because we all are equity.

Speaker Change: Holders.

Speaker Change: As part of the compensation for each and every one of US collectively we do own a reasonable amount of our of our stock.

Speaker Change: We've actually hired some incredible talent to supplement our already incredible talent. And so sourcing the materials, we don't believe is a major issue. If you look at our strategy, there are two principal kinds of scrap streams, you might say. One is for the automotive industrial base. The other is for Canstall, and the UBC scrap is, Well, it's highly available in California. They're a deposit state.

Speaker Change: And I would just emphasize that we treat we treat your dollars just like there are our own and our will absolutely focused on continuing to to outstrip all competition relative to shareholder value creation through the cycle.

Speaker Change: But we can't do it on our own so that any customers listening at the thank you for your support we have loyal support.

Speaker Change: So there's a lot of aluminum UBC scrap generated up and down the west coast, currently either moving to Asia or to the Midwest. And similarly, in Mexico, a sort of UBC scrap arena. So that's why we're locating two facilities, two satellite facilities, in those scrap-rich areas, collecting the scrap at the source, melding it, and then the freight of then moving big solid slabs versus scrap to the Midwest is around about half the price. And so we're not only advantaging ourselves on the scrap collection side, but economically on getting that aluminum to the mill. Okay, thanks. Just one follow-up, if I may. This is probably a really dumb question, but I assume the facility could handle primary as well if required.

Speaker Change: It takes us through through the cycles.

Speaker Change: Suppliers can do it without you.

And go to stress, we have the best metals team in the World Oh people, perhaps do a phenomenal. Thank you for what you do each and every day.

For those that are around us on the call as well.

Speaker Change: Thank you for your support and have a great day Bye bye.

Speaker Change: Once again, ladies and gentlemen that concludes today's call. Thank you for your participation and have a great and safe day.

Speaker Change: We certainly will. And you don't have to, because you've got 900,000 tons of, Just to be clear, caste need, because the yield loss through the system, and when I say yield loss, it's not..., and the rest. Okay, thanks. Your next question for today is coming from Bill Peterson with J.P. Morgan. Yeah, hi, good morning.

Bill Peterson: Thanks for taking our questions. Just on SINTED, I think you mentioned hitting stride in the second quarter. How should we think about utilization for the full year? If I recall correctly, I think you had expected 80% for the full year at the last quarterly errands call. Is that still the target, Barry? It's my target, too.

Barry Schneider: No, we continue to strive for 80%. The team is doing, as Mark said, a phenomenal job. It's a big challenge to bring such a big asset up all at once. Transformer problems have been unfortunate, but we have several fixes in the works.

Barry Schneider: Approaching the problem from both the resilience and the getting back to full power capacity, so we remain confident that the operational levels we're going to see 80% is the target the whole team's aware of. We're all incentivized to make that happen.

Barry Schneider: And not to complicate the math, but if you think about it in January, we're approaching 75% utilization right now, that's 75% of maximum, even though the team is handcuffed because of the lower power input. So we're quite confident to get to that 80% for the year. Okay, thanks for that. We'll plug in 84 percent. No, I'm just joking.

Speaker Change: Just on the, I guess, things like onshore and the infrastructure bill. You said, you know, this is an expectation to benefit in 2024. I guess, have you seen orders? When do you expect to see orders?

Speaker Change: Do we think of this more as a second half, 2024, to really kind of benefit you? And then between, I guess, onshoring and infrastructure specifically, which you've seen being more impactful for you this year? Richard, just from a product mix, so to speak, the infrastructure growth... you know, on the solar, it's already there. Solar has exploded, renewables exploded last year, and continues to grow dramatically.

Speaker Change: We were advantaged hugely both in structural for the torque tubes and also for flat roll, for support. We're starting to see, I don't think we can be specific on how that ramps up, but directionally, we're starting to see orders from bridge makers currently. So that's the start, at least from my perspective, the start of a ramp up. We also see in the long products, a lot of, let's call it, foundational types.

Speaker Change: You know, Structural Sales, and even though it's a smaller division, steel in West Virginia is very full of us right now with stuff that is tangential, whether it's solar fields, the support steel that goes into the ground, or fork trucks and things like that that go into these new factories and these new warehouses and data centers. So we do see a good bounce from that. We also see the pipeline industry in the States picking up orders, some cases for carbon sequestration lines, as well as some major pipelines. So those markets are awake, and we see a lot of inquiry activity that is very exciting for us. Thanks for watching! And just, I want to encourage you that there are some of you on the phone right now that may not understand that the Infrastructure Program and the IRA and anything related to roads and bridges and construction, they don't only benefit long products, they benefit long products, they certainly benefit our steel and joists and deck operations, but additionally, the flat roll operations have exposure to that as well, whether it's through HVAC systems or pipe and tube, And there's a lot of impact on the flout roll side, and I would encourage you to think about that perspective as well.

Speaker Change: Your next question for today is coming from John Tumazos, a private investor. Thank you very much. Could you, uh... give us a little feedback on the potential 2025 CapEx? And with Sentin and the four coating lines and the aluminum and the carbon projects behind us, Woodard, some of the leading candidates for the next capital investment going forward. And in particular, could you talk about growth in recycling where? Aluminum, copper, and zinc have much lower global recycling rates.

Speaker Change: Steele. Well, Mark points at me. John, it's good to hear from you. We do have projects in mind for 2025, but I'm not sure that we're prepared to go into that today.

Speaker Change: I would say from the perspective of capital spending, as I mentioned earlier in the call, aluminum will probably have a tail of somewhere between, call it, $200 and $250 million. Our teams are consistently bringing us wonderful ideas that have high returns associated with them. Again, I'll point back to our ROIC. They do a good job of giving us those projects that have really great returns. The number for 2025, I would say, would be a minimum of $500 million, something like that, because you do still have some sustaining capital as well, which for us is very low at around $160 million, but there's still some benefit there. Mark, I don't know if you want to add any additional comments to that. Yeah, no, I kicked it to you just to get the CapEx part, not the whole thing. But no, John is right, and Theresa just mentioned it. We have an absolutely incredible team that continues to be innovative. If you were to,

Mark D. Millett: I don't know, just be with us, or be with that team. It's incredible. We have a new digital printing technology that we're exploiting. Again, not big dollars, but it's going to be an incredibly high-margin, neat little business. We have two.

Mark D. Millett: Suffice it to say, two product segments that we're not in today in flat roll that we're exploring, and they have a couple of innovative things there. So the pipeline in steel is still there, for sure. I think also... and we've got to walk before we run, but for aluminum, you know. I see that growth kind of paralleling the growth in steel. We get on the front end, make the basic substrate, so to speak, and then from a processing standpoint, for instance, there's a massive, massive amount of aluminum that gets pre-painted.

Mark D. Millett: That's an expertise of ours. You can see. We'll see growth and expansion there. And you've witnessed it, John, almost personally over the years and shared our history, but we've clearly demonstrated the ability to be innovative and grow, and I would emphasize grow in a very disciplined, intentional manner. That's the only way you can get the return on invested capital numbers that we achieve. So both organically, but also through acquisition.

Mark D. Millett: There will continue to be opportunity there, but you will see us remain very, very disciplined, very, very intentional. We're not going to overpay for anything, and we're going to retain the best financial metrics in our industry. As we build our financial models, If in 2025 the CapEx fell to somewhere, let's just say for discussion in the range of $500 to $1 billion, should we. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28, the share buyback dollars.

Mark D. Millett: From the levels of the last several years, given the drop, So, John, we want to be super clear that we see the share by that. So this is a very good tool for us to be able to use, and you've seen that. So very much the dividend we've been increasing, and we increase it with increases in our structural cycle cash flow generation when projects come online, and then we do it pretty aggressively. We want to keep that positive momentum. But then we use that share buyback program during periods of excess cash flow when we maybe have less growth in mind. But we still are very much a growth company, to Mark's point, whether that's through greenfield assets or whether that's through acquisitions. But at the same time, we have the luxury that we don't have to sacrifice the share repurchase program. We absolutely can execute on all those things, and that's what you'll continue to see us do in 2024 and 2025, absent extraneous things. Thank you very much. I'm happy.

Mark D. Millett: Excellent. Your next question is a follow-up question coming from Martin Englert. I appreciate the time for the follow-up. Just two quick ones here.

Martin Englert: Over the last four years, the seasonal sequential 1Q gain in external seal volumes averaged about 7% quarter on quarter, based on what you're seeing with order intake in the new year here. And then also, taking into account the continued rampant Sinton and value-added lines, should we expect anything? At the core, similar on a sequential basis around 7% and then layer in the additional volumes from ramping assets. Martin, we can't give directionality. Obviously, we had outages in the fourth quarter at two of our steel mills, and we won't have those in the first quarter. We've just mentioned that SITN is going to be ramping up aggressively in the first quarter.

Martin Englert: So, all in all, absent any significant market moves, you should expect to see incremental volume from our steel operations. And, as Barry pointed out, with the additional value-added lines, you're going to start to see that product mix get richer and richer, so it'll go more into the processing lines. And you'll eventually see some really great spread enhancement throughout the year as well.

Speaker Change: What were the outages in 4Q, and did I assume that you mentioned them because it did have an adverse impact on volumes? Martin, they're not, they weren't, they were just normal outages. We take outages at our flat roll mills and at our long product mills. They weren't anything that were, so we didn't note them as far as from a volume perspective, but obviously, when you have outages, it does impact volume, but there was nothing of significance to note.

Speaker Change: Okay, thank you. One last question, if I could, on the aluminum project. Based on the two-cycle estimate, I think it implied EBITDA of around $900,000 to $1,000 per ton when you were coming up with that analysis.

Speaker Change: Are you able to share what you think the bottom and top quartiles of profitability might look like when we think about peak to drop? No, Martin. We do mid-cycle through cycle. And as we get more familiar, you know, we just don't provide that type of information.

Mark D. Millett: No worries. Thought I'd try. Thanks, Martin. That concludes our question and answer session. I'd like to turn the call back over to Mr. Millett for any closing remarks.

Millett: Well, thank you, everyone. And thank you. Thank you, Holly.

Speaker Change: And thank you, everyone on the call. I guess, as John noted, he's a happy shareholder. To be honest, everyone at SBI is a happy shareholder because we all are equity holders. And that's part of the compensation for each and every one of us.

Speaker Change: Collectively, we do own a reasonable amount of our stock, and I would just emphasize that we treat your dollars just like they're our own, and we'll absolutely focus on continuing to outstrip our competition relative to shareholder value creation through the cycle. But we can't do it on our own, so any customers listening out there, thank you for your support. We have loyal support, and it takes us through the cycles. Suppliers can't do it without you, and I've got to stress, we have the best metals team in the world. Our people are absolutely phenomenal.

Speaker Change: Thank you for what you do each and every day, and for those that are owners on the call as well, thank you for your support. Have a great day. Once again, ladies and gentlemen, that concludes today's call. Thank you for your participation, and have a great and safe day.