Q1 2025 Steel Dynamics Inc Earnings Call
Speaker Change: Good day and welcome to the Steel Dynamics First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change: After management's remarks, we will conduct a question and answer session and instructions will follow at that time.
Speaker Change: Please be advised this call is being recorded today April 23, 2025 and your participation implies consent to our recording this call. If you do not agree to these terms please disconnect.
Speaker Change: At this time, I would like to turn a conference over to David Lipschitz, Director Investor Relations. Please go ahead.
David Lipschitz: Thank you, Holly. Good morning, and welcome to Steel Dynamics' first quarter 2025 Ernie's 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 on the call individually.
David Lipschitz: 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 Security's litigation reform act of 1995 should actual results turn out differently.
David Lipschitz: Such statements involve risks 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 are steel, metals recycling, and fabrication businesses, as well as general business and economic conditions.
David Lipschitz: Example to these are described in the related press release as well as in our annually filed SEC Forum 10K under the headings forward-looking statements and risk factors found on the internet at www.suc.gov and if applicable in any later SEC Forum 10Q.
Mark Millett: You will also find any reference non-GAAP financial measures reconciled to the most directly compared GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports 1st Quarter 2025 Results And now I'm pleased to turn the call over to Mark.
Mark Millett: Well, thank you, David. Good morning, everyone. It's good to be with you on our first quarter 25 of the early school.
Mark Millett: I will apologise in advance, I've got a crushing headcode so if I feel more sandal or rugged, please excuse that.
Mark Millett: But that said, our teams achieved a solid financial and operational performance in the first quarter. It continued to test it and I think to our business model in performance driven culture.
Mark Millett: The highlights included record steel shipments of 3.5 million tonnes and adjusted EBITDA of $448 million. And most importantly, our teams continue to operate safely.
Mark Millett: We've been successfully ramping our four new value-add flat-road steel coding lines with the expectation of full earnings benefit later this year.
Mark Millett: These lines represent an additional 1.1 million tons of higher margin product diversification, which further adds to our position of being the largest non-automotive coder in North America.
Mark Millett: The sentence team gained considerable momentum in the quarter, running at around 86% of capacity, and many times over 90%.
Mark Millett: The team also achieved positive EBITDA for the quarter, with expectations of a Steve Acceleration of Profibility for the remainder of this year.
Speaker Change: I'm very excited for the accomplishments of the team is made in the last six months, and there's absolutely no doubt it is the middle of the future, and Barry will go into some more detail during his opening comments.
Barry Schneider: Lunar Dynamics, successfully cast its first aluminum ingot in January at our Columbus, Mississippi facility, and in March at our Mexican Satellite Slab facility.
Barry Schneider: We're extremely proud and excited for the teams. Everything is on schedule for the systematic commissioning of the rest of the lines, with an expectation to ship commercial quality coils in June .
Barry Schneider: Again, I'm proud of the entire Steel Dynamics team. They are the foundation of our company and they continue to amaze me.
Barry Schneider: We're a single focused on providing the very best for their health and safety, and we continue building a world-class safety culture.
Barry Schneider: In particular, our team's dedication to our take control of safety program is extraordinary.
Barry Schneider: for actively engaged and safety at all times and at every level, keeping it top of mind in an active conversation each and every day.
Barry Schneider: I'm continually inspired by the commitment our team members have for one another. They consider themselves family and challenge the status quo each day.
Barry Schneider: That said, the all will be more to do as we drive toward a zero incident environment.
Speaker Change: for Theresa, would you like to give us some details on the corner?
Thank you, Marks.
Good morning everyone and thank you for joining us.
Speaker Change: I add my sincere thanks to the teams for another solid performance. Our first quarter of 2025 net income was $217 million or a $1.44 per deluded share with adjusted EBITDA of $448 million.
Speaker Change: First quarter, 2025 revenue of $4.4 billion was 13% higher than fourth quarter sequential results primarily driven by record steel shipments.
Speaker Change: First quarter operating income of $275 million was 16% higher than sequential results, also related to steel volumes. As we discuss our business this morning, we continue to focus and execute on our transformational growth initiatives.
Speaker Change: Our Steel Operations generated an income of $230 million in the first quarter, sequentially higher as record shipments, more than offset metal spread contraction. With an average realized external steel price decline of $13 per tonne, and an average scrap price increase of $16 per tonne.
Speaker Change: I do want to add my congratulations to the sentencing team. They've really turned a corner. I'm very excited for them.
Speaker Change: From a steel price perspective, as a reminder, approximately 75 to 80% of our flat-rolled steel business is tied to lagging contracts.
Speaker Change: Generally on average, about a two months in a year. So the more recent increases in flat-rolled steel pricing will positively impact the second quarter.
Speaker Change: We're modeling purposes for the first quarter of 2025, hot band shipments were $1,093,000, cold-rolled shipments were $116,000, and coated shipments were $1,403,000.
Speaker Change: and as a reminder, we'll continue to see that coded volume actually increased from a product mixed perspective as the four new lines start to have full utilization and the first quarter they were still only utilized on average around 50 to 55 percent.
Speaker Change: For the first quarter operating income from Remelder's cycling operations was $26 million, improving modestly as volumes and ferrous metal spreads increased.
Speaker Change: We're the largest non-ferrous metals recycler processing and consuming ferrous scrap, non-ferrous aluminum, copper and other metals.
Speaker Change: and we're growing in support of our increased steel capacity and soon to be aluminum flat-rolled operations.
Speaker Change: through new and expanded supplier relationships and through the use of innovative new separation technologies. And I want to congratulate the Army Source and NANOAL teams as they're increasing those separation technologies and we're actually adding capacity in the coming months.
Speaker Change: Our Steel Fabrication Team achieved first quarter operating income of $170 million, lower than sequential fourth quarter results as realized pricing declined a modest 4% and shipments
Speaker Change: Federal Programs, Manufacturing Growth, and Enjuring are expected to support domestic fix asset investment, unrelated flat and long product steel, and steel enjoys demand in the coming years.
Speaker Change: Pitting to our aluminum operations, a quick reminder, as we finish constructing the aluminum facilities, non-capitalizable expenses are required to flow through SGNA. As a result, our SGNA in the first quarter was higher by approximately $37 million.
Speaker Change: We continue to have expectations to achieve positive EBITDA in the second half of 2025 for the Illuminum platform and plan to operate the rolling mill at approximately 30% for the full second half of the year with an exit rate of 50%.
Speaker Change: and 75% for the full year of 2026 with an exit rate of 85%.
Speaker Change: Construction is coming to completion and commission, progressing extremely well. Approximately $2.4 billion has already been invested through March of 2025 with the remaining $300 million forthcoming.
Speaker Change: During the first quarter of 2025, we generated cash live from operations of $153 million.
Speaker Change: which was reduced by an annual company-wide provisiering retirement distribution of $165 million.
Speaker Change: Excluding this payment, Cashwell was $3.18 million in the quarter, with networking capital growing about $105 million as steel prices increased later in the quarter.
Speaker Change: We ended the quarter with strong liquidity of $2.6 billion. $2.
We invested $306 million in CAPEX during the quarter. [inaudible]
Speaker Change: For the full year of 2025, we still believe capital investments will be in the range of $800 million to a billion dollars with the majority related to the completion of our aluminum and bio-carbon strategic growth investment.
Speaker Change: As a reminder, our sustaining or what some call maintenance capital requirements are conservatively in the range of $200 to $250 million annually.
Regarding Cheryl
Speaker Change: Our cash generation is consistently strong based on our differentiated circular business model and highly variable low-cost structure. These actions reflect the strength of our capital foundation and the continued optimism and confidence in our future.
Our Capital allocation strategy prioritizes high return growth.
Speaker Change: 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. Our track record is proven and recognized. In the last five years our average... [inaudible]
Speaker Change: and, excuse me, our after-tax return on invested capital was 23%. And this was during a time frame of transformational growth and strong shareholder returns.
We opportunistically access the investment grade bond markets in March.
Speaker Change: and issued $1 billion of unsecured notes comprised of a five and a quarter percent, $600 million, ten-year tronch, and a five and three-quarter percent, $400 million, 30-year tronch.
Speaker Change: using the proceeds to pre-fund a $400 million note that matures in June of 2025 and for other corporate purposes.
Speaker Change: We really appreciate the receptiveness of the credit investors for our offering, allowing us an excellent outcome, and we sincerely thank you to all involved.
Speaker Change: A quick forecasting comment, as aluminum dynamics ends construction, so will the associated interest expense capitalization in the second quarter? So net interest expense in the first quarter was around $12 million.
Speaker Change: In the second quarter, it'll be closer to $30 million, and therefore, it's likely $40 million a quarter.
Speaker Change: Our free cash flow profile has fundamentally changed over the last five years, from an annual average of $540 million to most recently $3 billion if we exclude aluminum and sentin. Even if we include aluminum and sentin, it's still over $2 billion per year.
Speaker Change: We've placed ourselves in a position of strength to have a sustainable capital foundation that provides the opportunity for meaningful strategic growth and strong shareholder returns while maintaining investment-grade metrics. We are squarely positioned for the continuation of sustainable, optimized long-term value creation.
Thank you, Barry.
Thank you, Theresa.
Speaker Change: Our Steel fabrication operations had a solid performance in the first quarter. In fact, as Theresa mentioned, March represented the single highest month border entry volume in two years with whom it met with the momentum continuing in April .
Speaker Change: Our order backlog extends into the fourth quarter with attractive pricing levels.
Speaker Change: We continue to have high expectations for the business to the strong quoting and order activity, continued ensuring of manufacturing, recently announced significant privately funded manufacturing projects, and public funding for the infrastructure and other fixed asset investment programs.
Speaker Change: The long-term uplift from this backdrop could be considerable for all of our platforms. Our steel fabrication platform provides meaningful volume support for our steel mills, critical and softer demand environments, allowing for higher through-cycle steel utilization. But also mitigates the impact of lower steel prices. [inaudible]
Speaker Change: Our metals recycling operations improve earnings in the first quarter, as demand from North American Steel producers support at higher fair scrap volume. The team also continues to grow its access to recycled aluminum in advance of our aluminum flat rolled operations ramp up.
Speaker Change: Ferris scrap prices increased each month of the first quarter of 2025 before moderating approximately $40 for ton in April as weather improved supporting higher scrap flows. We currently expect prices to remain fairly stable throughout the year.
Speaker Change: The North American Geographic footprint of our metal recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating customers.
Speaker Change: Our battles recycling team is also partnering even more closely with both our steel and aluminum teams to expand scrap separation capabilities through both process and technology solutions.
Speaker Change: This helps mitigate potential risk of supply as more grades of ferrous and non-ferrous scrap become usable for our steel aluminum operations. It also provides us with a significant advantage to materially increase the recycled content for our aluminum flat-roll products and increase our earnings opportunities.
Speaker Change: The Steel Team had a strong quarter, achieving record shipments of 3.5 billion tons.
Speaker Change: During the first quarter, the domestic steel industry operated at the utilization rate of approximately 75% while our steel mills operated 89% [inaudible]
Speaker Change: We consistently operate at higher utilization rates due to our value added steel product diversification, our differentiated customer supply chain solutions, and the support of our internal manufacturing businesses.
Speaker Change: This higher-through cycle utilization of our steel mills is a key competitive advantage, supporting our strong and growing cash generation capability and best in class financial metrics.
Speaker Change: Regarding the flat-roll steel markets, pricing and order entry have stabilized levels much higher than we saw in the second half of 2024. However, there has been some hesitation with certain customers awaiting more market certainty.
Speaker Change: Overall, inventories remain historically lean, but increased imports kept incremental buying at bay in certain product areas, specifically for coated flat-rolled steel products.
Speaker Change: We leveled a trade case related to these products in the third quarter of 2024, and we recently received favorable preliminary counterbeiling and dumping rulings, which has already slowed the imports of unfairly priced coated steel flat-roll products.
Speaker Change: This along with the announced 232 tariffs should positively impact demand for lower carbon emission, US-produced steel products. This position does incredibly well as we have the largest producer of non-automotive coated flat-roll steel products in North America.
Speaker Change: Answer the log product steel market. They also improved in the first quarter with demand for most sectors stable or improving. Prices have increased over last several months with solid order entry and improving backlogs. [inaudible]
Speaker Change: Our Sitten Texas Flat-Roll Mills production and reliability continue and approve in the first quarter operating at 86% utilization and at the time it's over 90%.
Speaker Change: As Mark said, they achieved positive EBITDA for the quarter. We expect to see significant increases in sentence earnings contributions as they continue the second quarter and again the second half of the year. As the team further improves yield, lowers their cost structure and improves the cost of quality.
Speaker Change: We also continue to work on product development as sitting to expand our existing flat-roll product offerings. Currently, API pipe grades and high-strength steels are in various stages of development in the operations.
Speaker Change: Also, the additional two new value-added coating lines are increasing volume, improving sentence value-added product backs, and through cycle earnings capabilities.
Speaker Change: Regarding the steel markets environment, North American automotive production estimates for 2025 recently revised lower, with uncertainty due to the impact of recently discussed auto and auto park tariffs. However, there's ongoing discussions of these being softened as well.
Speaker Change: Fortunately, our specific automotive customer base has remained stable with us growing automotive market share and both flat roll and SPQ stills.
Speaker Change: Non-residential construction remains stable with slowdowns across some industries. However, as I mentioned earlier, we have seen pricing for structural beams, engineered bars and merchant bars increase over the last several months with expanding backlogs.
Speaker Change: Additionally, on-shoring, large recently announced domestic manufacturing projects and infrastructure spending should provide further support to fix acid investment and related construction
Speaker Change: As for the energy market, oil and gas activity remains steady, with recent signs of increasing activity for both flat road steel and SBQ. We also see ongoing demand in the solar markets, which we are very active.
Speaker Change: Looking forward, we remain optimistic regarding steel demand and pricing dynamics for the remainder of 2025.
And with that, I'll surrender the microphone.
Sousa Rendered [inaudible]
Speaker Change: Thank you, Theresa, thank you, Barry. Well, I think the last six months, a great example of the resiliency of our business model.
Speaker Change: A performance-driven team-based culture in combination with a proven, diversified and value-ad business model drives the superior through-cycle financial metrics.
Speaker Change: Allowing a very balanced cash allocation strategy that has delivered the highest shareholder returns in our industry.
Speaker Change: Our disciplined investment approach continues to support a strong and growing through-cycle cash generation profile while maintaining the highest return on and invest the capital among our peers.
Speaker Change: Again, the four flat road steel coating lines are increasing volume and performing very well from a quality perspective.
Speaker Change: These types of high return investments are key to our value-added product and supply chain differentiation strategies.
Speaker Change: As we mentioned, Synton continues to perfect its operational reliability and downstream operations. They were EBITDA positive in the first quarter with expectations for a material positive shift in financial contribution this year.
Speaker Change: and most recently, the volume of growth strategy is months away from contributing to our earnings.
Speaker Change: I think the aluminum investment premise is especially compelling and parallels our disruptive entry into steel industry some 30 years ago.
Speaker Change: We see a Mark in Environment in Illumum similar to the domestic steel industry back then.
Speaker Change: They've had a difficulty earning their cost of capital and hence little additional investment in facilities and technologies taken place. No significant expansion in the past 40 plus years.
Speaker Change: But unlike our entry into the over-supplied steel market back then, there's a significant North American supply deficit for aluminum sheet and it's growing.
Speaker Change: who's clear business alignment between our steel and aluminum operations.
Speaker Change: We're leveraging SDI's core competencies in construction and operational know-how, and exploiting that with our performance-driven culture, driving higher efficiency, lowest-cost operations.
Speaker Change: It also levels Omni's recycling footprint, being the largest North American aluminum scrap recycler.
along with his new separation technologies. [inaudible]
Speaker Change: This meaningful investment is a cost effective and high return growth and diversification opportunity for us.
Speaker Change: And the project is no longer just a vision, but it's a reality.
Speaker Change: Construction of the Expansive Mill in Columbus, Mississippi is nearing completion and is in commissioning phase being executed at an extraordinary pace.
Speaker Change: The Illuminum Industry is finally realising we're here, and we will be a force to be reckoned with.
Speaker Change: The customer base across all sectors is excited to have a new market entrance that is known to be innovative, customer centric and responsive to their needs.
Speaker Change: For us, business relationships along to them, founded on trust and the continuous goal of creating mutual value.
Speaker Change: We strive to be a differentiated supplier each and every day.
Speaker Change: As our aluminum growth has become a reality and our reputation permeates the industry, aluminum professionals with vast experience have joined us in this exciting project.
Speaker Change: and it's exciting to see they see the vision and are excited by our culture where they see that they themselves can make a major contribution.
Speaker Change: They are helping us build a phenomenal team that combines the in-depth knowledge of aluminum flat-wheel operations, commercial markets, and process technology along with customer service.
Speaker Change: complementing ISDI professionals that will bring our performance driven culture to
As many of you know, the physical assets. David Lipschitz.
Speaker Change: will be a state-of-the-art 650,000 metric-turn aluminum flat road facility in Columbus, Mississippi with about 300,000 ton of canned sheet, 230,000 ton eventually of auto and a 130,000 ton of industrial construction products.
Speaker Change: We will, in Columbus, have onsite, melt cast, slab capacity of around 600,000 metric tons, supported by two satellite recycle aluminum slab casting centers located in UBC scrap ridge regions.
Speaker Change: The project scope includes additional script processing and use segregation technology to maximize the luminary cycles content.
Speaker Change: The team is executing exceptionally well. The team successfully cast their first industrial on beverage can in Goods and Columbus, Mississippi in January , and have since then been developing practices for the 3,000, 5,000 series alloys.
Speaker Change: and in San Luis Poticee and March, they cast their first and gets also.
Speaker Change: We plan to continue commissioning throughout the facilities during the coming months and to produce commercially viable products in June 2025.
Speaker Change: Relative to cost differentiation, we expect through cycle annual EBITDA of $650 to $700 million plus $40 to $50 million for Mattel's Recycling Platform.
Speaker Change: The most significant savings relative to our competition center on four key areas.
Speaker Change: Labor Savings, Higher Recycle Content, significant process yield improvements and logistics.
Speaker Change: And while walking the platform, you can feel the excitement as our teams recognize their ability to revolutionize the North American aluminum industry as we did in steel.
Speaker Change: We're impassioned by our current and future growth plans as they will continue to drive the high-return growth momentum we have consistently demonstrated over the years.
The Owning's Growth of these new projects is compelling. [inaudible]
Speaker Change: The capital spending for Sinton, the four value add lines, and the aluminum dynamics facilities largely spent with a projected few future through cycle EBITDA contribution of some $1.4 billion or more.
Speaker Change: Steel Dynamics has grown to an incredibly resilient, cash-generating business of scale and diversification, driven by the best teams in the world.
Speaker Change: In the last five years, we've invested billions of dollars in organic strategic growth.
Speaker Change: and a return on invested capital at 23% compared to the S&P 500 at only 12% and certainly way better than our industrial peers.
Speaker Change: We've increased our cash dividend over a hundred percent. We've repurchased over thirty percent of our outstanding shares and over forty percent since 2017.
Speaker Change: All the while maintaining best-in-class investment credit metrics and creating outstanding value for our customers and suppliers, our teams and our shareholders.
I'm excited as investors.
Speaker Change: Clearly seen now, the power and consistency of our through cycle cash generation, combined with our consistent and high return capital allocation strategy.
Speaker Change: It is our belief that the steel industry has undergone a paradigm shift in recent years.
Speaker Change: There's a pervasive sense of mercantilism that will provide a level plan field through continued and appropriate trade mechanisms.
Speaker Change: We've seen that in the recent coated flat road steel positive trade determinations.
recent Trump administration steel and aluminum moves.
with the terrorists. [inaudible]
Speaker Change: Risk mitigation to address numerous supply chain dislocations of accelerated reshoring a manufacturing.
Speaker Change: AI and cloud computing will support non-residential construction, data centers, data centers, chip factories, and battery plants.
Speaker Change: Alarm a growing, thick-stasted investment associated with public and private dollars.
Speaker Change: and decarbonisation were materially steep on the global cost curve, providing Steel Dynamics with a significant competitive advantage to gain market share and increase metal spreads.
This evolving mental's business environment should amplify our earnings capability.
So as you see, we are blessed with good fortune.
Speaker Change: are people being our foundation. I thank each of them for their passion and dedication.
Speaker Change: We are committed to them and I remind those listening today that safety for yourselves, your families, and each of the highest priority.
Speaker Change: I'll be remest not to thank our lower customers, many of whom have supported us since our inception.
Speaker Change: As I said earlier, these partnerships are based on trust on doing what we say we will do and creating new solutions to enhance the value proposition.
on you and Luminum Pandas will experience the same.
Speaker Change: and also to our suppliers and service providers who we value and trust. Thank you.
Speaker Change: Our culture and business model continue to differentiate our performance lead into best in class financial metrics.
Speaker Change: for a circular metals business providing enhanced lower carbon supply chain solutions and in turn mitigating volatility in cash flow generations through all market cycles.
Providing an enhanced shareholder returns and value to all participants.
Speaker Change: We look forward to creating new opportunities for all of us today in the years ahead.
Speaker Change: So with that said, Holly would love to open the lines for questions.
Speaker Change: Thank you. If you would like to ask a question, please signaled 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.
Speaker Change: If you press star one earlier during today's call, please press star one again to ensure our equipment has captured your signal.
Speaker Change: 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. Please hold while we pull for questions.
Speaker Change: Your first question for today is from Katja Jancic with BMO.
Katya Jancic: Hi, thank you for taking my questions. Maybe starting on your raw materials or metallic needs, can you talk about how exposed you are to importing those?
Katya Jancic: Tap and Trade Actions to date, specific to Steel and Illuminum, are extremely beneficial for us.
Katya Jancic: One has to recognize, even before this present term, section 201, 301, anti-circumvention, and other past cases are still firmly in place and prevent impact from China.
Katya Jancic: and I think the recent core case, and I know I'm deviating from the raw materials but just given you a broad picture, you know, the recent core case which is the trade action against
Speaker Change: It's going to be very impactful. In fact, it's already impactful. It covers, I think, Barry 10, yeah, 10 Asian countries, and about three, four million tons of dumped coated steel. And that will be very beneficial to us.
and I think the derivative products.
actions.
Speaker Change: are extremely beneficial. There are, I think, some two to three million tons.
The fabricated structural steel items coming through to our shores.
Speaker Change: and that's an appreciable volume. That market is probably somewhere 6 to 8 million tons and suppressing that will have a major impact for our long-products platform.
Speaker Change: and then just generally the tariffs on supply chains already is providing, I think, a positive momentum from a reshoring standpoint.
Relative to role materials in particular.
Speaker Change: Obviously, scrap is not included today and all my comments are as of today. One doesn't know necessarily what may happen in the days, weeks and months ahead.
Speaker Change: But the scrap flowing across the border is not an impact to us. We bring about 700,000 tons of scrap in from Canada and about 400,000 tons up from Mexico, but that remains unaffected.
Speaker Change: P1020 which will be consumed in our aluminum facilities that the Tarrers tend to be absorbed through the Midwest Premium.
Speaker Change: and passed on to the customer base, so that has a little impact. We will have a little impact from tar of some pig iron, if they remain in place.
Speaker Change: We, just as we did at the onset of the Ukrainian war, when Pekai I'm pricing went...
Schlimer Off-Getting, and availability was challenged.
Speaker Change: We, we increased our prime scrap and more importantly our sort of what we call shred one a low residual scrap and reduce that that pig iron content or appetite so that that will be reduced.
Speaker Change: and then there will be some impact on the aluminum slab coming up from Mexico. That'll be incremental this year because of obviously we're ramping up and the volume is not going to be very large.
Speaker Change: So I think in general, we are well positioned relative to our peers.
and I take it.
Speaker Change: It sets the stage for the renegotiations. The USMCA gets renegotiated in 2026. I wouldn't be surprised if that got pulled forward, but I think there will be a very, very positive outcome for the country when that occurs.
Okay, thank you. I'll hop back into the queue.
Speaker Change: Your next question for today is from Timna Tanners with Wolf Research.
Timna Tanners: Yeah, hey, good morning, and I hope you're feeling better soon. I wanted to ask if I could about what change that sentence from prior guidance, you know, you talked about it not being even positive than it was, and then if I could also, are you still looking to produce exposed automotive eventually there, any updates? Please, it would be great. Thanks.
Mark Millett: Timna, real quick, can you just re-ask that first part of your question about what change, can you just...
Clarify that a little bit.
Yes, so initially you had talked about sitting not being...
profitable, I think, in the mid-quarter update.
and then in the...
Mark Millett: and the results you talked about are being profitable. So just wanted to understand that and maybe what's improved there and can continue to improve going forward. Thanks. Okay, thank you.
Mark Millett: So, from a change perspective, I'm going to let Barry get into the details of the sentence because we are really excited, that's why we congratulate the team and hopefully somebody down there is listening but from the perspective of what change we were just really trying to see where the end of the quarter fell out and obviously they were more exposed to spot pricing than Columbus and Butler are. So, some of the price appreciation on the flat roll side was actually able to be captured in the March time frame. [inaudible]
Mark Millett: where it will be more lagging at Butler and Columbus, so it was nothing that was significant, but it was very exciting for us to have an even a positive quarter heading to operating and come in the second quarter.
and really at the...
Mark Millett: The team, Maturen, and bringing the line utilization rates higher has allowed us to capture that market quicker, as Theresa mentioned. With the long-term projection of automotive exposed, we are very excited about the product we produced down there. I think it's early to be talking about exposed, but we are developing...
Mark Millett: really good practices so that we continue to make our customers happy as we ramp the facility up and we introduce new products. So I wouldn't rule it out, but it's not something we're advertising at this minute.
Okay, next time. Thank you.
Speaker Change: Your next question for today is from Carlos DiAlba with Morgan Stanley .
Carlos, your line is live.
Speaker Change: Yeah, sorry, I was so mute. Thank you very much. On the fabrication business, I think I've heard that the March had the strongest order entry in two years. Does this mean that the volume that we saw in Q1 marked probably the bottom and it should increase from here and if not the second quarter maybe the third quarter? Because we did notice that the Schumanns in the first quarter, and I understand the seasonality, but they were the lowest I think since 2015.
in 2017.
on a par-alibation. [inaudible]
Speaker Change: Thanks, Carlos. I'll let Barry add. What I would say is we've been talking about this. We talked about it kind of the whole quarter that for fabrication the first quarter because there was still some hesitancy around what was happening with the administration, what steel costs would be, where interest rates were that there was some hesitancy from a customer perspective of actually, you know, having those jobs proceed forward.
Speaker Change: and so we knew there'd be some open patches, if you will, and those generally get filled with smaller projects that have a little bit lower pricing dynamics.
Speaker Change: So we definitely are seeing strengths in the second half of the year as it relates to fabrication and that's the momentum you're seeing in March and April , but I'll let Barry further comment.
Barry Schneider: Yeah, the activity we're seeing is robust and it's the type of projects that we do very well in with New Millennium.
Barry Schneider: So we do see those projects materializing and we also see some of the projects that have been...
Barry Schneider: temporarily on hold status with the uncertainty. Some of those are starting to free up. So we anticipate growing forward through second quarter and into the second half of the year as what we see today comes into realization.
Your next question is from Tristan Gresser with PNB Paragraph.
Tristan Gresser: Yes, hi. Thank you for taking my question. Just a quick follow-up on the downstream side. Does that mean that with the visibility you have and backlogs into the end of the year, do you expect volumes to improve on a year-on-year basis, starting Q2 or maybe in H2?
Tristan Gresser: Tristan, yes, we do expect to see based on what we can tell today and the order activity and the current macro environment that we're all watching day to day, we absolutely expect volumes to be higher year over year.
All right, thank you, and-
Speaker Change: My question then is more on the demand side of the equation. Could you discuss a little bit by end markets what has been the recent developments since the tariffs were announced in nearly April ? You mentioned you had a strong Q1 and now there is some uncertainty, so I'm curious to see the order activity how it's been in the past two weeks.
Speaker Change: and also how we should add a very strong shipment figure in Q1, how we should think about shipments into Q2.
Longer-term contracts
Speaker Change: People trying to cement their supply chains and when you look at specific marketplaces like construction goods
Speaker Change: Our painted products are doing very well. We see resilient demand out there.
Speaker Change: We see opportunities for growth with the HVAC industry. We support
Speaker Change: We saw it uptick February and March and some of it we think was a little bit buying ahead of uncertainty of tariffs but now we're seeing some demand fill back in there so we continue to be pretty excited about what we see at HVAC
Speaker Change: The appliance business we do is pretty steady, and I think that much like automotive.
Speaker Change: particularly with the North American players that we're associated with. So we were very, very excited about that. We're seeing a lot of activity for
Some of them.
Speaker Change: Some of the rail business we do is also very steady. So last year was slow with Class 1 railroads, but we're starting to see that pick up again and
Speaker Change: in 2025 here. So again, we see a lot of pockets where things are good. So in spite of the perhaps reception of the industry, people are still trying to make things go and our team is really good.
Speaker Change: When things get tight like this, our relationships come back, and our relationships help support how we go forward. So in times like this, we're excited about the opportunity to grow and to, you know, enrich those relationships we've worked so hard at building. So all in all, with what we see today, we're excited about where 2025's going.
Speaker Change: All right, that's very helpful. So just to confirm normal seasonality in Q2 seems a fair base case.
David Lipschitz, John Tumazos,
in terms of voileans. [inaudible]
Speaker Change: I'm sorry Tristan, can you say that again? Normal seasonality into Q2 for Steel Shipments seems like a fair assumption.
Speaker Change: So, we've got a lot of different things happening right now to Barry's point. So, we've got Sinton Growing, Organic Market Share, and especially the core cases can't be under discussed as far as the positive impact. And since we're the largest coder of not automotive plattled field in North America, it's specifically impactful to us in a very positive way. So, I would not expect to see shipments go backward if that's what you're asking.
Thank you. Thanks a lot.
Speaker Change: Hi, thanks for taking my question. I actually have a more strategic question.
You've obviously spent a lot of time on...
Speaker Change: your existing organic growth that's sitting in the aluminum mill and the value add lines, all of which are
Speaker Change: Getting close to the finish line now, so you're going to start to generate higher through cycle cash flows. You've talked about being excited about your current growth plans as well as your future growth plans. And I'm wondering what happens next? You know, you'll be presumably you're on a higher through cycle cash flow run rate. [inaudible]
Speaker Change: You've talked in the past about doing more in non-steel recycling, including I think you talked about in copper, but copper in aluminum.
Speaker Change: if I was to invite back shares as well. I mean, do we get into a situation where Steel Dynamics becomes an even bigger capital return story, or is it about the next leg of growth?
Speaker Change: Sorry, secondly on the next leg of growth. If you look at growing in the US steel industry, are you worried about investments from sparring steel mills built in new capacity here?
Speaker Change: to sort of circumvent tariffs and ultimately that leaving little opportunities for you to grow and steal domestically. So really just kind of question around medium to long term strategy. Thank you.
Well, I think, let's say,
Speaker Change: We were absolutely blessed. We have a great team and the strategic initiatives they've put in place over the last five, ten, fifteen years is why we're here today.
Speaker Change: and as you you're rightfully say we're going to have a very very strong cash position moving forward has all these recent projects come to fruition.
Speaker Change: It's going to allow us a continued sort of balanced cash allocation strategy. I don't think it's going to change.
Speaker Change: and we will use all the tools in our toolbox to improve shoulder value.
I think you will see...
Speaker Change: Growth and Aluminum, for sure, as you've seen it in steel.
Speaker Change: You know, a lot of the things that evolved through our life cycle and steel, you know, downstream, value add, processing, coding, painting can be done in the aluminum world as well. So that will continue.
and Steel itself, for sure there's still plenty of open. [inaudible]
Speaker Change: Still plenty of opportunity there. Our teams are incredibly innovative and there are market spaces and niches that we don't play in today, that we intend to penetrate.
Speaker Change: Grow just to be big. We always grow, if you look at both our organic and our inorganic growth, we always differentiate ourselves and you'll continue to see that value add profile going forward.
Speaker Change: I would just add to that right now, and the teams are doing it. We're in a period of execution and optimization of these large or gross projects that we've had. So we don't see billions of dollars of CAPEX in the near term, but we do see the cash flow coming, so that will allow opportunities for shareholder returns to continue at a really strong rate.
Speaker Change: It also allows us, though, we don't want to forget about the fact that we are inquisitive, so we do look at transactions from time to time as well, we're just really disciplined and that's what differentiates us from our peers, so there's still a lot of opportunity for growth.
Speaker Change: while distributing, I know, strong shareholder returns on a through cycle basis.
Speaker Change: I guess it was also wondering in terms of the mechanism for capitol returns in five
Speaker Change: But having a higher thru cycle dividend that could be funded by the higher thru cycle cashews might actually be...
Speaker Change: and even more compelling point of differentiation, and how does the board? The board is ready.
Speaker Change: and the management team think about the allocation of those capital returns. And it's a possible that you just go, you change your dividend and pay out model based on the higher two cycle cash flows. Thank you for answering my questions.
Speaker Change: on a three cycle basis. So you should expect to see David Englert as you have seen in the past.
Speaker Change: to fruition through organic or transactional growth, such as aluminum, such as sentin. You will see more significant dividend increases. So I think we are following that philosophy. We want to keep dividends on an absolute basis meaningful yet conservative and we complement that with the share-by-backs. So the board looks at it that way as does management because we want to be responsible so that that dividend's never at risk.
History, thanks again.
Speaker Change: Your next question for today is from Bill Peterson with JP Morgan.
Bill Peterson: Good morning. Thanks for taking the questions and a nice job on the quarterly execution. I wanted to ask about downstream margins and how to think about it in the second quarter.
Speaker Change: You know, we think about the lag, input cost, higher steel prices. You think this will overshadow the prices, stabilization or improvements you've spoken to about in the past? Just try to get a subscribe if you think about margins in the quarter and looking ahead.
Speaker Change: Well, we generally, as you know, build don't give a specific guidance as a release to things like that. I would just point you to some of the drivers to consider. So one of the drivers is that fabrication generally keeps 8.
Speaker Change: to ten weeks of inventory or substrate inventory, maybe twelve weeks.
Speaker Change: on the ground. So, as we've had escalating flat-rolled steel prices, you will see higher steel input
Speaker Change: going into fabrication. But that can also be a premise or a driver for increased profitability or increased pricing on the product side. And we have seen stabilization there. So later in the year we definitely think there's opportunity for growth whether that comes sooner or later is hard to say.
Speaker Change: The other thing that I would remind you of is that volume is really, really impactful in our fabrication operations because
Speaker Change: It really is about people and so as you have more volume, that margin expands pretty dramatically, pretty quickly because of the cost compression. So I can't give you specific guidance as it relates to the fabrication operations. I would just say for the year we're feeling very strong.
Your next question is from Mike Harris with Goldman Sachs.
Mike Harris: Yes, thanks, and good morning. There was a couple of times during the call where my sounds cut out, so if you answer this, apologize in advance but...
under the non-cash adjustment. [inaudible]
Speaker Change: Can you provide a bit more color on what's behind the 19 million end?
Speaker Change: Unrealized Gain Launces and maybe speak to how we should think about the potential impact for the balance of 2025.
Speaker Change: Yeah, absolutely. So you might just require vacation to make sure I'm answering your question. You're speaking about Adjusted EBITDA, correct? That's correct. Yeah, so that relates to we have a risk commodities team where we manage risk around the amount of scrap copper finished product copper at our copper rod and wire mill and aluminum. And so that was just an unrealized loss. [inaudible]
Speaker Change: in the first quarter, related to the sharp moves and non-fairs pricing.
Speaker Change: Generally, that will come back then in the following quarter. So if you look at that quarter over quarter, you're going to see over a period of a year, 18 months, 24 months, it doesn't have that much impact, but that's what it was related to specifically in the first quarter. It's just an unrealized hedging loss. It's just an unrealized hedging loss.
Speaker Change: Okay, so just a timing issue that nets itself out over the course of the years. A good way to look at it. That's a great way to look at it. Okay, perfect, thanks a lot. Thank you.
Speaker Change: Your next question for today is from Andrew Jones with UBS.
Mark, can you hear me okay?
Hello.
Andrew Jones: Are you there? Andrew? Yes, I'm Keemi. We can now.
Andrew Jones: Okay, great. Thanks for the follow-up. I mean, you were asked earlier about the italics exposure in where you hurt your point, you know, you can use more time to scrap and reduce fat exposure, but you give us a, you know, an actual number for how much pig iron was.
Andrew Jones: who's consumed maybe in 2024 or your kind of expectations in 2025 with the ramparts of Simpson prior to these coming in just so we can get an idea for the impact that's going forward.
Andrew. That's a moving target for us. Thank you very much.
All the time are looking at...
Andrew Jones: and the economic balance for what our raw material charges are. So when we speak to the fact that we're working on segregation sorting techniques,
Andrew Jones: That allows us to get what would normally be cut grade scraps into a cleanliness level where we can use them.
more abundantly.
So we're constantly making that decision each month.
Andrew Jones: When it comes to pig iron, we look at that same balance, and in many cases it helps the operations besides just quality. It also can be productivity enhancing. So our teams are really good at having different scrap mixes in the mills at every moment of the day, and having the right resources to make the best decision at the time.
Andrew Jones: So we could go anywhere from 8 to 25% on a pig iron and we will make those decisions based on what the market pricing are of those different units.
Andrew Jones: Our Butler-Indiana Facility has an iron facility on site, iron dynamics [inaudible]
Andrew Jones: that has been an outstanding asset to have the last five years specifically.
Andrew Jones: because we're able to create iron for the Butler plant out of waste materials.
Andrew Jones: So that technology has allowed us to be a little bit more independent.
Andrew Jones: and down south it's sitting in Columbus. Those assets, again, are continually looking at what the product makes, requires, and what the cost may be. So to this point, we've had great supply from our offshore pig iron suppliers.
Andrew Jones: We've been very, you know, we continue to be transparent and have discussions. We think those pricing mechanisms will resound themselves through the year.
Andrew Jones: So, short term, we haven't done anything out of the ordinary. [inaudible]
Andrew Jones: It's a large volume to just stock up on, and obviously we don't want to build our working capital, but we feel pretty good that as the situation is unfold, we'll continue to find metallics at that competitive price. Everybody in the arc first community is buying these same materials.
Andrew Jones: It's a matter of how effectively you can use them on a day-to-day basis. And that's again where I think our team excels.
and being able to make those choices and be informed. [inaudible]
A lot of hard work goes into doing that, so...
You know,
Andrew Jones: The flat-roll mills are the only mills that bring offshore metals in, the pig iron, all our long-products mills are 100% scrap-based, so that's the impact if you look at what our flat roll is versus the long-groom.
Speaker Change: No, that's clear, that's clear. And just to talk to you on that working capital point, the build that we saw in the quarter in working hours, that purely a function of pricing with scrap and other inputs moving up through a quarter, or were there any other kind of overlays on that?
Speaker Change: You know, remember the working capital build, if you exclude the one, the professor in payment that gets paid every March every year, was really only a build of about $100 million, and that really was associated with pricing moves, more on the steel side actually, than on metallics. And I guess the takeaway that we would want everyone on the call to have, is that as it relates to our current position,
Speaker Change: with raw materials, with demand, the entire set of selling products and getting the raw materials into sell those products and the current tariff setter in place.
Speaker Change: We feel a really well positioned and we don't see a material financial impact in the negative. We actually just see a net upside as relates to customers pricing, etc.
Okay, thank you.
Your next question is from John Tumazos, a private investor.
Thank you very much.
to concerning your original business plan for the Illumina Middle.
Speaker Change: with the current aluminum tariff economics, the Midwest premium doubled roughly from 20 to 40 cents on the plus side.
Speaker Change: The UBC price had been about a 30 cent discount to LME.
Now it's only a nickel.
when you balance out the input output analysis.
or the current economics, better the same or worse.
then for your original business plan a couple years ago.
Speaker Change: Great question and a convoluted algorithm to spit out the answer, John . I would say that we feel
Speaker Change: that were the exception of the slab coming up from Mexico, and we'll see how that pans out. The economics remain in place.
So is that mean it's all a wash?
Speaker Change: with the exception of where the tariff impact might be on slab coming up from Mexico.
Speaker Change: Thank you, fighting out at enough. But as I said earlier, for this year, that's incremental because we're just ramping up and the volumes are going to be relatively small.
Speaker Change: and I don't believe that the current tariff regimen is going to be in place much longer than through this year.
I recall May 1992, my old firm raised $100 million for the king.
Speaker Change: Haslet, Castor and Devonport, Iowa for Q1X, maybe that's owned by Alaris now.
Speaker Change: What are the aluminum rolling mills of 30-year or younger vintage, the good competitors that you'll be competing with?
Speaker Change: Less of age than 30 years is that the question because I think I think I think I think I think I'll I think of awareness built one. I'm just trying to remember with what are the ones that are. [inaudible]
I'm going to be your newer competitors.
To be honest, I-
Speaker Change: I don't think there will be no close competitors to us. I mean, if you look at the technology, the scale, the efficiency, the increased recycle content that we'll be able to have
Speaker Change: and just a culture, John , you follow this for many, many, many years now.
You know, the combination of taking state-of-the-art technology [inaudible]
Speaker Change: and just exploiting it with people that are impassioned, that are insensitive, to drive every every cent out of the cost structure and maximize metal spread.
Speaker Change: We are confident in that, the investment premise that would be put forth.
Speaker Change: Yes, thank you, hats off to everything you're doing, graduates, and over like 40 or 45 years.
Speaker Change: since there's been a meaningful high-tech expansion, and like I said it earlier.
Speaker Change: It's reminiscent for us gray hairs that have been around for a while. It's reminiscent of us getting into the steel business 30 years ago.
Speaker Change: Back then, the prior mill was Burns Harbors in 1961. I mean it's the same set of circumstances that we're going to hopefully disrupt.
Speaker Change: That concludes our question and answer session. I'd now like to turn the call back to Mr. Millett for closing remarks.
Mark Millett: Super, thank you, Holly, and I will be quick for our employees that remain on the call.
Speaker Change: Again, absolute heartfelt thanks for what you do each and every day for us. Thank you for your commitment and your passion and my sincere wish that stay safe. Again, thank you to the customers and service providers out there.
Speaker Change: and for those that are shareholders, again, thank you for your trust and your support.
Speaker Change: V2, our large shareholders, so we know exactly how you think I believe.
Speaker Change: and we work on your behalf each and every day to improve your value. So thank you, everyone, be safe, take care, bye bye.