Q2 2025 Steel Dynamics Inc Earnings Call

Investor Relations: Investor Relations, please go ahead.

Over to David lipchitz director investor relations. Please go ahead.

Operator: Good morning and welcome to Steel Dynamics' second quarter 2025 earnings conference call. As a reminder, today's call is being recorded and will be available on our website for replay later today.

Operator: 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.

Thank you, Holly. Good morning and welcome to Steel Dynamics. Second quarter 2025 earnings conference call. As a reminder, today's call is being recorded and will be available on our website for replay later today.

Operator: 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. 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 the anticipated project returns, and our steel, metals recycling, and fabrication businesses, as well as to general business and economic conditions.

Leading today's call are Mark Mill, 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.

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 meaning.

Operator: 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.

Speaker Change: They are intended to be protected by the private Securities. Litigation Reform, Act of 1995 should actually result turn out differently. Such statements involve risk and uncertainties related to integrating or starting up new assets. The aluminum industry, the use of estimates and assumptions and connection with the anticipated project returns and our steel Metals Recycling and Fabrication businesses as well as the general business and economic conditions.

Operator: You will also find any referenced non-GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled Steel Dynamics Report Second Quarter 2025 Results.

Speaker Change: Examples of disease 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.sec.gov. And if applicable in any later SEC, form, 10 Q. You'll also find any reference non-gaap Financial measures reconciled to the most directly comparable, gaap measures in the press release issue.

Mark Millett: And now I'm pleased to turn the call over to Mark. Super. Thank you, David. And good morning, everyone. Thank you for being with us on our second quarter 2025 earnings. As evident in our release, our teams achieved a solid second quarter performance. Most fulfilling to me was the team's overall safety. They achieved an all-time low, quarterly recordable, and last-time injury rate. 80% of our over 100 locations didn't even have a single recordable Supreme Achievement by the team, my sincere thanks to everyone. Although experiencing some challenges in the second quarter relating to the vendor oxygen supply that inhibited steel production, the Sinton team continued their program.

Speaker Change: Yesterday, entitled Steel, Dynamics reports, second quarter, 2025 results. And now I'm pleased to turn the call over to mark.

Speaker Change: Super, thank you. David.

Speaker Change: And good morning everyone. Thank you for being with us on our second quarter, 2025 earnings call.

Speaker Change: As evident in our release, our teams achieved a solid second quarter performance.

Speaker Change: Most fulfilling to me, was the team's overall safety performance.

Speaker Change: They achieved an all-time low quarterly recordable and lost time injury rates.

Speaker Change: In fact, 80% of our over 100 locations didn't even have a single recordable injury, it's a supreme achievement by the team my sincere. Thanks to everyone involved.

Mark Millett: They increased sequential earnings, achieving pre-tax break-even and another positive EBITDA course. We expect a steep acceleration of profitability for the remainder of this year. We believe we have reached an earnings inflection point for steel fabrication with expectations for increased profitability in the third quarter. which you've record quarterly medals, recycling ship. Justin Ibarra was $533 million. Biocarbon is in the midst of commissioning with expectations for product shipments to begin later in the third quarter. We were awarded the Volkswagen Global Group Award for Sustainability. testament to our low carbon steel program and its associated impact on us becoming the supplier of choice for auto groups expanding in the US.

Although experiencing some challenges in the second quarter relating to vendor oxygen supply that inhibited steel production the scent in team, continued their progress.

Speaker Change: they increased sequential learnings achieving pre-tax break, even and another positive fee, but our quarter

Speaker Change: we expect a steep acceleration of profitability for the remainder of this year and next,

Speaker Change: We believe we have reached an earnings inflection point for steel fabrication with expectations for increased profitability and the third quarter.

Speaker Change: Which you'd record, quarterly Metals, Recycling, shipments.

Speaker Change: Adjusted ibida was 533 million.

Speaker Change: Biocarbon is in the midst of commissioning with expectations for product shipments, to begin later in the third quarter.

Speaker Change: We were rewarded, the Volkswagen Global Group award for sustainability.

Mark Millett: And, aluminum is here. We shipped our first commercial quality aluminum flat roll coils on June the... Congratulations to absolutely everyone involved there, phenomenal. We are successfully executing on many fronts, and I'm proud of the entire Steel Dynamics team. There's no doubt they are the foundation of our company and remain our first and foremost priority. As such, we are focused on providing the very best for their health and safety. We're building a world-class safety culture. The team's dedication to our Tate Controller Safety Program is absolutely extraordinary and resulted in the record metrics this quarter. Continually inspired by the commitment of our team members, have one.

Speaker Change: Pestilent to our low carbon steel program and its Associated impact. On us becoming a supply of choice for auto groups expanding in the US.

Speaker Change: And aluminum is here. We shipped our first commercial, quality aluminum, flat. Roll coils on June the 16th. So congratulations to absolutely everyone involved their phenomenal phenomenal programs.

Speaker Change: So we we are successfully executing on many fronts, and I'm proud of the entire Steel Dynamics Team. There's no doubt they are the foundation of our company and remain our first and foremost priority,

Speaker Change: As such we have focused on providing the very best for their health and safety.

We're building a world-class safety culture.

Speaker Change: Our teams dedication to our take control of safety. Program is absolutely extraordinary and resulted in the record metrics this quarter.

Mark Millett: consider themselves family and challenge the status quo each and every day.

Mark Millett: But that said, there will always be more to do, as we strive for a zero-incidence...

Speaker Change: Continually inspired by the commitment of our team members have to 1. Another, they consider themselves family and challenge the status quo, each and every day.

Mark Millett: So with that introduction, Theresa. sales on the quarter.

Speaker Change: But that said there will always be more to do as we strive for a zero incident environment.

Speaker Change: so, with that introduction Theresa some uh,

Theresa Wagler: Thank you, Mark.

Theresa Wagler: Good morning, everyone. Thanks for joining us. Our second quarter 2025 net income was $299 million or $2.01 per diluted share with adjusted EBITDA of $533 million. Second quarter 2025 revenue of $4.6 billion was above sequential first quarter results due to higher realized steel pricing across the platform. Our second quarter operating income of $383 million was 39% higher than the first quarter results, driven by steel metal spread expansion, as pricing increased more than scrap raw material costs. As we discuss our business this morning, we continue to focus and execute on our transformational growth initiative. Our steel operations generated operating income of $382 million in the second quarter, over 65% higher sequentially due to average realized pricing increasing $136 to $1,134 per ton, while total shipments were modestly lower due to a decline in flat rolled shipments.

Theresa: Tells on the quarter.

Theresa: Thank you, Mark. Good morning, everyone. Thanks for joining us.

Theresa: Our second quarter, 2025 net income was 299 million or 2 dollars, 1 cent per diluted share which uh, with adjusted IBA 533 million.

Theresa: Second quarter, 2025 revenue of 4.6 billion. Dollars was above sequential first quarter results due to higher realized steel pricing across the platform.

Theresa: Our second quarter, operating income of 383 million was 39% higher than the first quarter results. Driven by Steel metal spread expansion as pricing increased more than scrap raw material costs.

Theresa: And execute on our transformational growth initiatives.

Theresa Wagler: Earnings from the steel platform were reduced in the second quarter by approximately $32 million due to a non-cash write-off of consumable assets. They were also negatively impacted as sentenced shipments were reduced by approximately 55,000 tons due to a reduced vendor supply of oxygen. which has since been restored. For those, for modeling purposes, for shipments in the second quarter, hot-rolled shipments were 930,000 tons, cold-rolled shipments were 114,000 tons, and finally, coated shipments were 1,387,000. For the second quarter, operating income for our meso-recycling operations was $21 million or $4 million lower than sequential first quarter results due to lower realized fares pricing as primes were down about $50 per ton and other grades $80 per ton.

Theresa: Our steel operations generated operating income of 382 million in the second quarter over 65%, higher sequentially due to average realized pricing increasing 136 to 1,134 per ton. While total shipments were modestly, lower due to a decline in flat rolled shipments,

Theresa: Earnings from the steel platform were reduced in the second quarter by approximately 32 million due to a non-cash write-off of consumable assets.

Theresa: They were also negatively impacted as sentence shipments were reduced by approximately 55,000, tons due to a reduced vendor supply of oxygen.

Theresa: Which has since been restored.

Theresa: For those, um, for modeling purposes for shipments. In the second quarter, hot rolled shipments. Were 930,000 tons, cold rolled shipments were 114,000 tons, and finally coated shipments were 1,387,000 tons.

Theresa Wagler: The price differential more than offset the team's record shipment. We are already the largest North American metals recycler for ferrous and non-ferrous metals and we're growing in support of our increased steel capacity and aluminum flat roll operations through new and expanded supplier relationships and through the use of innovative new separation technology. Our mills recycling platform is a significant competitive advantage for our steel, aluminum, and copper operations. Our steel fabrication team achieved operating income of $93 million in the second quarter. Lower than first quarter results has realized pricing decline modestly and steel substrate cost increased compressing margin.

Theresa: For the second quarter operating income from a meso recycling operations was 21 million or 4 million dollars lower than sequential first quarter results due to lower realized fairs pricing as primes were down about $50 per ton and other grades $80 per ton.

Theresa: The price, differential more than offset, the team's record shipments.

Theresa: We are already the largest, North American Metals recycler for Ferris and non-ferrous metals, and we're growing in support of our increased steel capacity and aluminum flat roll operations through new and expanded supplier relationships and through the use of innovative new separation Technologies.

Our military cycling platform is a significant competitive Advantage, for our steel, aluminum, and copper operations.

Theresa Wagler: Federal programs, manufacturing growth, and onshoring are expected to support domestic fixed asset investment in related flat and long product steel and steel joist and deck consumption in the coming years.

Theresa: Our steel fabrication team achieved, operating income of 93 million in the second quarter lowers in first quarter results as realized pricing decline modestly and steel substrate cost increase compressing margins.

Theresa: Federal programs, manufacturing growth, and onshoring are expected to support, domestic, fixed asset investment related, flat, and long product, steel and steel. Joist and deck consumption in the coming years.

Theresa Wagler: As for our aluminum operations, I also want to send a huge congratulations to the team on their first shipment. It truly is an exceptional accomplishment. Operating losses from the aluminum operations totaled $69 million in the first half of 2025.

Theresa: As for our aluminum operations, I also want to send a huge congratulations to the team on their first shipment. It truly is an exceptional exceptional accomplishment.

Theresa Wagler: We estimate comparative losses to be in the range of $40 million for the third quarter of 2025, which is consistent with second quarter results, then improving to between $15 and $20 million for the fourth quarter as we complete commissioning, commence product certifications, and ramp production. Based on current dynamics, we continue to believe we will achieve monthly EVDA positive results before the end of 2025. Additionally, in connection with startup, we will stop capitalizing interest expense associated with the aluminum project. As such, we estimate interest expense to increase to about $30 million in the coming third quarter and to the full $45 million in the fourth quarter.

Theresa: Operating losses from the aluminum operations totaled, 69 million in the first half of 2025.

Theresa: We estimate comparative losses to be in the range of forty million dollars for the third quarter of 2025, which is consistent with SEC. Second quarter results.

Then improving to be between 15 and 20 million for the fourth quarter, as we complete commissioning, commence product certifications, and ramp production.

Theresa: Based on current Dynamics, we continue to believe. We will achieve monthly Eva positive results before the end of 2025.

Theresa Wagler: Related to cash flow, during the second quarter of 2025, we generated cash flow from operations of $302 million. Working capital grew $131 million in the quarter as we grew inventories for our new aluminum investment.

Theresa: Additionally in connection with startup. We will stop capitalizing interest expense associated with the aluminum project as such. We estimate interest expense, to increase to about 30 million dollars, in the coming third quarter and to the full 45 million in the fourth quarter.

Theresa Wagler: In June, we repaid our $2.4% $400 million senior note that matured. We ended the quarter with liquidity of $1.9 billion, comprised of cash and short-term investments of $744 million, and our fully available unsecured revolvers. For the second half of 2025, we believe capital investments will be in the range of $400 million, with the majority related to the completion of our aluminum and biocarbon growth investments.

Theresa: Related to cash flow during the second quarter of 2025, we generated cash flow from operations of 302 million working. CA Capital grew 131 million in the quarter as we grew inventories for our new aluminum Investments.

In June, we repaid our 2.4% 400 million senior note that matured

We ended the quarter with liquidity of 1.9 billion comprised of cash and short-term Investments of 744 million and are fully available on secured revolver.

Theresa Wagler: In February, we increased our quarterly cash dividend 9% to $0.50 per common share, continuing our positive dividend profile. We also repurchased $200 million of our common stock in the second quarter, representing over 1% of our outstanding shares. On June 30, $1.2 billion remained authorized and available for share purchase. 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. Our capital allocation strategy prioritizes high-return strategic 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.

Theresa: For the second half of 2025, We Believe Capital investments will be in the range of million dollars with the majority related to the completion of our aluminum and biocarbon growth Investments.

Theresa: In February, we increased our quarterly cash dividend 9% to 50 cents per common share, continuing our positive dividend profile. We also repurchased million dollars of our common stock in the second quarter representing over 1% of our outstanding shares at June 30th.

Theresa: 1.2 billion remained authorized and available for share of purchases 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.

Theresa Wagler: Our free cash flow profile has fundamentally changed over the last five years, from an annual average of $540 million to $3 billion excluding our large strategic sentin and aluminum investments. 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 credit.

Theresa: A free cash flow. Profile has fundamentally changed over the Last 5 Years. From an annual average of 540 million to 3 billion dollars, excluding our large strategic senton and aluminum Investments.

Theresa Wagler: We're squarely positioned for the continuation of sustainable, optimized, long-term value For more information, visit www.FEMA.gov In alignment with the 1.5 degree scenario set forth in the Paris Agreement, we have an interim 2030 emissions intensity target, which represents a 15% reduction in our greenhouse gas intensity and a 2050 emissions intensity target.

We placed ourselves in a position of strength to have sustainable Capital Foundation, that provides the opportunity for Meaningful, strategic growth and strong shareholder returns while maintaining investment grade credit metrics. We're squarely positioned for the continuation of sustainable optimized, long-term value creation,

Theresa Wagler: We announced during the second quarter that each of our company's steel mills achieved Global Steel Climate Council product certification. For our customers, this means greater transparency and confidence when sourcing lower embodied carbon steel products. The GSTC certification verifies emissions data through a certified science-based standard aligned with the Paris Agreement.

Theresa: in alignment, with the 1 and a half degrees scenarios that force in the Paris agreement, we have an Inn room 2030 emissions intensity Target, which represents a 15% reduction in our greenhouse gas intensity and a 2050 emissions intensity Target

Theresa Wagler: Decarbonization is a meaningful part of our long-term value creation strategy, and we're dedicated to our people, our communities, and our environment. We're committing to operating our business with the highest integrity.

We announced during the second quarter that each of our companies steel mills achieved Global Steel, climate Council product certification, for a customer. This means greater transparency and confidence. When sourcing lower and body carbon steel products, the GSTC certification verifies emissions, data through a certified science-based standard aligned with the Paris agreement.

Theresa Wagler: In that regard, we grow in our excitement concerning our first biocarbon production facility as it transitions from construction to commissioning with expectations, as Mark mentioned, for production to begin in the coming month. We believe our first facility could decrease our Steel Scope 1 greenhouse gas emissions by as much as 35%, and more importantly, provide unique value and supply chain opportunities for many of our OEM flat-rolled steel customers. We uniquely have an actionable path that is more manageable and we believe considerably less expensive than may lay ahead for many of our industry peers.

Theresa: Decarbonization is a meaningful part of our long-term value creation strategy. And we're dedicated to our people, our communities, and our environment. We're committing to operating our business with the highest integrity.

Theresa: in that regard, we grow in our excitement concerning our first biocarbon production facility, as it transitions from construction to commissioning with expectations as Mark, mentioned, for production to beginning the coming months,

Theresa: We believe our first facility could decrease our steel scope 1 greenhouse gas emissions by, as much as 35%, and more importantly provide unique value and supply chain opportunities. For many of our OEM flat rolled steel customers.

Theresa Wagler: Our carbon reduction strategy is an ongoing journey and we're moving forward with the intention to make a positive.

Barry Schneider: Thank you. Thank you, Theresa. Our steel fabrication operations achieved a solid performance in the second quarter in a somewhat challenging environment, as steel input costs increased and customer hesitancy prevented any meaningful increase in volume. However, order activity remains solid with the order backlog increasing by 15% since the beginning of the year and now extending into 2026. Pricing for steel joists and deck bookings has remained relatively stable through the first half of the year.

Theresa: We uniquely have an actionable path. That is more manageable and we believe considerably less expensive. The May ahead for many of our industry peers. Our carbon reduction strategy is an ongoing journey and we're moving forward with the intention to make a positive difference.

Theresa: Thank you.

Teresa: Thank you, Teresa.

Teresa: Our steel fabrication operations achieved a solid performance in second quarter and is somewhat challenging environment. As steel input costs, increased and customer hesitancy, prevented, any meaningful increase in volume. However, order activity remains solid with the order backlog, increasing by 15% since the beginning of the year and now extending into 2026.

Barry Schneider: Based on the current market environment, we believe we have reached an inflection point in profitability from our fabrication operations and expect third quarter earnings to improve sequentially. We continue to have high expectations for the business based on continued on-shoring of manufacturing, recently announced significant privately funded manufacturing projects, and public funding for infrastructure and other fixed asset investment programs. 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 operations, critical and softer demand environments, allowing for higher through cycle steel utilization compared to our peers.

Teresa: Pricing for steel, joist and deck. Bookings has remained relatively stable, through the first half of the Year based on the current market environment. We believe we have reached an inflection point in profitability, from our fabrication operations and expect third quarter earnings to improve sequentially.

Teresa: We continue to have high expect expectations for the business based on continued. Onshoring of manufacturing. Recently announced significant privately funded manufacturing projects and Public Funding for infrastructure and other fixed asset investment programs. The long-term uplift from this backdrop could be considerable for all of our platforms.

Barry Schneider: It also helps mitigate the impact of lower steel. Earnings from our metals recycling operation were modestly lower in the second quarter, despite record shipments due to lower realized ferrous scrap prices, as scrap flows were steady and exports declined. We believe ferrous scrap prices have stabilized and are likely to remain relatively steady throughout the rest of the year, aside from the typical seasonal fluctuation. Additionally, the team continues to expand its access to recycled aluminum in preparation for the ramp-up of our aluminum flat-rolled operation. 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.

Teresa: Our steel fabrication platform provides meaningful, volume support for our steel operations, critical and software demands allowing for higher through cycle steel. Utilization compared to our peers. It also helps mitigate the impact of lower steel prices.

Earnings from our Metals Recycling, operation were modestly lower in the second quarter despite record shipments due to lower realized Fair scrap prices as scrap. Flows were steady and exports declined We Believe Ferris. Scrap prices have stabilized and are likely to remain relatively steady throughout the rest of the year. Aside, from the typical seasonal fluctuations, additionally, the team continues to expand, its access to recycled aluminum in preparation for the ramp up of our aluminum flat rolled operations.

Barry Schneider: Our metals recycling team is also partnering more closely with both our steel and aluminum teams to expand scrap separation capabilities to advance process and technology solutions. This collaboration helps mitigate supply risk by making more grades of ferrous and non-ferrous scrap usable for our steel and aluminum production. Additionally, it positions us to significantly increase the recycled content in our aluminum flat rolled products, unlocking enhanced earnings opportunity. The steel team delivered a solid quarter with shipments of 3.3 million tons. In the second quarter of 2025, the domestic steel industry operated at an estimated production utilization rate of 77%, while our steel mills operated at a notably higher rate of 85%.

Teresa: 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, our Metals Recycling team is also partnering more closely with both our steel and aluminum teams to expand scrap. Separation capabilities to advanced process and Technology Solutions.

Teresa: This collaboration helps mitigate Supply Risk by making more grades of Ferris and non-ferrous scrap. Usable for our steel and aluminum production.

Teresa: additionally, it positions us to significantly increase the Recycled content in our aluminum Flat Road products unlocking, enhanced earnings opportunities

Teresa: The steel team delivered a solid quarter with shipments of 3.3 million tons. And the second quarter of 2025 the domestic steel industry operated at an estimated production. Utilization rate of 77%.

Barry Schneider: This consistently higher utilization reflects our value-added steel product diversification, differentiated customer supply solutions, and strong support from our internal manufacturing business. Our elevated through-cycle utilization rate is a key competitive advantage, underpitting our growing cash generation capability. I realize steel pricing increased throughout our product portfolio in the second quarter, and just last week, long products saw additional price improvement. Overall, domestic steel inventories remain lean from a historical basis. However, coded flat roll steel volume and pricing compressed during the quarter due to an inventory overhang related to imports that were received just ahead of the final ruling related to the associated industry trade case.

Teresa: And strong support from our internal manufacturing businesses. Our elevated through cycle, utilization rate is a key competitive Advantage. Underpinning our growing cash generation capability.

Teresa: I realized steel pricing increased throughout our product portfolio in the second quarter. And just last week long products saw additional price Improvement, overall domestic steel inventories, remain lean from a historical basis.

Barry Schneider: Last fall, we and other industry participants initiated a trade case related to these products and have since received favorable preliminary countervailing and anti-dumping rulings.

Teresa: However, coded flat, roll steel, volume, and price and compressed during the quarter due to an inventory. Overhang related to Imports that were received just ahead of the final ruling related to the associated industry trade case.

Barry Schneider: We anticipate final rulings to be determined before the end of September. This uniquely positions us, as we are the largest producer of non-automotive coated flat rolled steel products in North America. Together with the announced Section 232 steel tariffs, these developments are expected to positively impact demand for lower carbon emission, US-produced steel. The underlying steel demand remains steady, however, customers continue to exercise caution in placing orders due to ongoing uncertainty related to trade policies and interest rates. That said, we believe steel prices will stabilize in the near term with potential for upward movement in the future.

Last fall we and other industry. Participants initiated a trade case related to these products and have since received favorable preliminary countervailing and anti-dumping. Rulings we anticipate final rulings to be determined before the end of September. This uniquely positions us as we are the largest producer of non-automotive coded Flat Road steel products in North America.

Teresa: Together with the announced section, 232 steel tariffs. These developments are expected to positively impact demand for lower carbon emission us produced Steel.

Barry Schneider: Our sit-in Texas flat roll mill achieved higher earnings in the second quarter, despite operating a lower utilization rate of 71%, due primarily to lack of sufficient oxygen. Supply Caused by a Vendor We believe this impact to our operations could be as much as 55,000 tons. Sufficient oxygen, as Theresa mentioned, has been restored, and the bill is operating very well. The team continues to make improvements in yield, cost reduction, and quality. They're also continuing towards additional product development to expand our current flat-rolled steel capabilities. Meaningful progress is being made on API pipe grades, high-strength grades, grade 100, 110, pressure vessel quality, and OEM qualification packages for our automotive customers.

Teresa: The underlying steel demand remains steady. However, customers continue to exercise caution and placing orders due to ongoing uncertainty related to trade policies. And interest rates that said, we believe steel prices is stabilized in the near term with potential for upward movement in the future.

Teresa: Our sit in Texas, flat roll Mill achieved higher earnings in second quarter, despite operating a lower utilization rate of 71% due primarily to lack of sufficient oxygen.

Supply caused by a vendor.

Teresa: We believe this impact to our operations could be as much as 55,000 tons. Sufficient oxygen is 3. Suspension has been restored and the bill is operating very well.

Barry Schneider: We are seeing increased shipments from SIN's value-added coding lines, which are strengthening the facility's product mix and boosting its through-cycle earnings capability. Regarding the steel market environment, North American automotive production estimates for 2025 were recently revised modestly downward, reflecting ongoing uncertainty related to trade discussions. Fortunately, our specific automotive customer base has not only remained stable, but have provided opportunities for growth. We have become a supplier of choice for many U.S.-based, European, and Asian automotive producers due to our current and planned future superior carbon content capability. Additionally, numerous announcements have been made concerning a considerable volume of automotive production moving to the U.S.

Teresa: The team continues to make improvements in yield cost reduction and quality. They're also continuing towards additional product development to expand our current Flat Road steel capabilities. Meaningful progress is being made on API pipe grades, high strength, grades grade, 10110 pressure, vessel quality, and OEM qualification packages for our Automotive customers. We are seeing increased shipments from sin's value added coding lines, which are strengthened and Facilities product mix and boosting its through cycle earnings capabilities.

Teresa: Regarding the steel Market environment. North North American Automotive production estimates for 2025 were recently revised modestly downward reflecting ongoing uncertainty related to trade discussions. Fortunately, our specific automotive automotive customer base is not, is not only remain stable, but have provided opportunities for growth. We have become a supplier of choice for many us-based, European and Asian Automotive, producers due to our current and planned future Superior carbon content capabilities.

Barry Schneider: from foreign locations in the coming years. Meanwhile, we continue to grow market share in both flat rolled and SBQ steels within the sector. Non-residential construction remains stable, despite broader predictions of a potential slowdown. So far this year, construction sector employment and spending have been stable. Pricing for most lawn products has generally improved, supported by strong backlog. Looking ahead, ongoing onshoring activities, recently announced domestic manufacturing projects, and continued infrastructure spending are expected to further support fixed asset investment and construction-related demand. In the energy sector, oil and gas activity remains steady, with encouraging signs of increased demand for both flat-rolled and SPQ products heading into the third quarter.

Teresa: Additionally numerous announcements have been made concerning its considerable volume of Automotive production moving to the US from foreign locations in the coming years.

Teresa: Meanwhile, we continue to grow market. Share in both flat, rolled and spq, steals within the sector.

Teresa: non-residential construction remains stable, despite broader predictions of a potential slowdown so far this year construction sector employment and spending have been stable

Teresa: Pricing for most long products is generally, improved supported by strong backlogs.

Teresa: Looking ahead ongoing on Shoring activities, recently and allow announced domestic manufacturing projects and continued infrastructure, spending or expected to further support fixed asset investment and construction related demand.

Barry Schneider: Additionally, solar is particularly strong currently, as producers attempt to benefit from expiring incentives. Overall, we remain extremely optimistic concerning steel demand and pricing dynamics for the domestic producers in the coming years based on the expected demand from new manufacturing and U.S.

Teresa: And the energy sector oil and gas activity remains steady with encouraging signs of increased demand for both flat, rolled and spq products heading into the third quarter.

Teresa: Additionally, solar is particularly strong currently. As the producers attempt to benefit from expiring incentives.

Barry Schneider: produced steel content requirements.

Mark Millett: With that, I'll return us to Mark Millett. Thank you, Mr. Schneider. I appreciate that. Well, as you've seen these past years, I believe it's more than evident that our performance-driven, team-based culture, in combination with a proven, diversified and value-added business model, drives consistently superior financial metrics. This consistently strong performance continues to support our cash generation and growth investment strategy.

Speaker Change: Overall we remain extremely optimistic concerning steel, demand and pricing Dynamics for the domestic producers in the coming years. Based on the expected demand from new manufacturing and US produced steel content requirements with that, I'll return us to Mark Miller.

Speaker Change: Like you Mr. Schneider, can you say that?

Speaker Change: Once you've uh, seen these past years, I I believe it's it's more than evident that our performance driven team-based culture in combination with a proven Diversified and value Ad Pro. Uh, business model, tries to consistently Superior Financial metrics

Mark Millett: allowing a balanced cash allocation strategy that has delivered high shareholder A disciplined investment approach continues to support a strong and growing three-cycle cash generation profile, while maintaining one of the highest return on invested capital amongst our peers. As mentioned, Sinton did face some auction supply challenges in the quarter, which have since been corrected and productivity has been re-established here around about 80% and growing. The facility continues to improve operational reliability, enhance its downstream operations. Despite the hurdles, Sendon increased its EBITDA, as we said, and we expect a meaningful positive shift in its financial performance for the remainder of the year.

Speaker Change: This consistently strong performance continues to support our cash generation and growth investment strategies allowing a balance cash allocation strategy. That is delivered, High shareholder returns.

A disciplined investment approach continues to support a strong and growing 3. Cycle cash Generation profile while maintaining 1 of the highest return on invested Capital amongst our peers,

Sinton: as mentioned Sinton, did face some oxygen supply challenges in the quarter, which have since been corrected and productivity has been reached that, uh, reestablished, uh, here around about 80% in growing

The facility continues to improve operational. Reliability, enhance, its Downstream operations.

Mark Millett: Four flat-rolled steel coating lines are also continued to increase volume and achieve high-quality standards. These types of high-return investments are key to our value-added product and supply chain differentiation strategy.

Sinton: Despite the hurdles sent an increased disease, we said and we expect a meaningful positive shift in its financial performance for the remainder of the year.

The 4 flat rolls Steel. Coating lines are also continued to increase volume and Achieve high quality standards.

Mark Millett: Theresa already shared the exciting update for biocarbon.

Sinton: These types of high return Investments are key to our value, added product. And supply chain differentiation strategies,

Mark Millett: This is an integral part of our sustainability program that is truly differentiating us in the eyes of the world. As I said, finally, we're incredibly excited to be officially part of the Limmel Flat Roll product. Our aluminum investments are compelling and parallel our entry into the then antiquated steel industry over 30 years. and there are distinct similarities. An industry with generally older, inefficient assets at a considerable cost disadvantage, and companies challenged to earn their cost of capital, thereby unable to reinvest in facilities and new technology due to lack of funds. We believe we have a significant competitive position with the...

Sinton: Theresa already shared the exciting update for biocarbon, this is an integral part of our sustainability program. That is truly differentiating Us in the eyes of our customers.

As they said, finally, we're we're incredibly excited to be officially part of the aluminum flat roll product supply chain.

Sinton: Our aluminum Investments are compelling and parallel our entry into then and equated steel industry over 30 years ago.

Sinton: And there are distinct similarities.

Industry with generally Oda and efficient assets at a considerable cost disadvantage and companies challenge to earn the cost of capital. Thereby unable to reinvest in facilities and new technology due to lack of funds.

So we believe we have a significant competitive position with aluminum.

Mark Millett: Unlike our entry into the oversupplied steel market, there is a significant domestic supply deficit of over 1.4 million tonnes for aluminum sheet, and this deficit is forecast to grow. In 2024, that deficit was supplied through high-cost imports, which are now even higher cost as the tariffs increased from 10% in 2024 to the current 50%. There's clear alignment with many of SDI's core competencies of construction and operational knowledge. Our ability to build large capital intensive assets has been proven once again. Phenomenal facility, the customers are in awe, our team did a great job. We have a deep experience operating mounting, rolling, and finishing facilities.

Sinton: Unlike our entry into the oversupplied steel Market, there is a significant domestic Supply deficit of over 1.4 million tons for aluminum sheet and this deficit is forecast to grow.

Sinton: In 2024 that deficit was supplied through high cost Imports which are now even higher costs. As the tariffs increased from 10% in 24 to the current 50% level.

Sinton: There's clear alignment with many of sdi's core competencies of construction and operational know-how.

Sinton: Our ability to build large Capital, intensive assets has been proven once again a Columbus. It's a phenomenal facility. The customers are in awe. Our team did a great job.

Mark Millett: A differentiating performance-driven culture will drive higher efficiency and lower cost. There's also excellent commercial alu... Two-thirds of our carbon flat-rolled steel customers consume and process aluminum flat-rolled We will have both steel and aluminum product offerings as we gain market share in the automotive And our new penetration into the counter-cyclical beverage can market sector is a new model. We can take great advantage of our raw material platform to drive higher recycling. As noted by Theresa earlier, we are the largest North American metals recycler, including a and we've developed new separation technology. allowing us to have access to usable aluminum scrap at lower cost.

We have a deep experience, operating, melding rolling and finishing facilities.

Sinton: Our differentiating performance-driven culture will drive higher efficiency, and lower cost operations.

Sinton: There's also excellent commercial alignment.

Sinton: 2 thirds of our carbon flat rolled steel customers, consume and process the aluminum Flat Road sheet.

Sinton: We will have both steel and aluminum product offerings as we gain market, share in the automotive sector.

Sinton: And our new penetration into the countercyclical. Beverage can Market sector is is a new market for us.

We can take great advantage of our raw material platform to drive higher recycled content.

Sinton: As noted by Theresa earlier, we are the largest North American Metals recycler including aluminum.

Sinton: And we developed new separation Technologies.

Sinton: Allowing us to have access to usable. Aluminum scrap at lower cost.

Mark Millett: Still confident in our earnings differentiation through cycle EBITDA of $650 to $700 million, plus $40 to $50 million for online. As we've discussed in the past, the four key areas of advantage are labor efficiency, higher recycle content, high yield, and optimized logistics.

Sinton: still confident in our earnings differentiation through cycle, but are a 650 to 700 million, plus 40 to 50 million dollars for Omni

Mark Millett: This strategic investment is a cost effective and high return growth opportunity, providing SDI with a new product offering and growth platform. And obviously, the project is no longer just a vision, it's here. The customer base is excited to have a new market entrant that is known to be innovative, customer focused and responsive to their needs. For us, business relationships are long-term, founded on trust and the continuous goal of creating mutual value. 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.

Sinton: As we discussed in the past, the 4 key areas of advantage or labor efficiency, higher recycled content, higher yield, excuse me, and optimized Logistics.

Sinton: This Strategic investment is a cost-effective and high return growth opportunity, providing SDI with a new product offering and growth platform.

And obviously the project is no longer just a vision. It's it's it's here.

Sinton: The customer base is excited to have a new market entrant. There is known to be Innovative, customer focused and responsive to their needs.

Sinton: For us business relationships, are long term, founded on, trust in the continuous goal of creating Mutual value.

Mark Millett: They see the vision and are energized by our culture, where they realize they will be heard and can have an impact. They've helped us build a phenomenal team that combines in-depth knowledge of aluminum flat rolls, steel, aluminum operations, commercial markets, process technology, and customer service. complementing our SDI professionals that bring our performance-driven entrepreneurial culture. Conversations with existing and new customers remain robust as they need and desire new supply options. We have several automotive and beverage can producers that plan to aid us in the product development and rapid product certification as we ramp operations. In the interim, we will be selling a lot of industrial and can sheet products with the expectation to reach our optimized product mix sometime in 2027.

Sinton: 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.

Sinton: They see the vision and are energized by our culture, where they realize, they will be heard and can have an impact.

Sinton: They have helped us build a phenomenal team that combines indepth knowledge of aluminum, flat rolls steel, uh aluminum operations, commercial, markets process, technology and customer service.

Sinton: Complementing our SDI professionals that bring our performance-driven entrepreneurial culture.

Sinton: Conversations with existing and new customers. Remain reversed as they need and desire new Supply options.

We have several automotive and beverage can producers that plan to Aid Us in the product development and Rapid product certification as we ramp operations.

Sinton: with the expectation to reach our optimized product, mix sometime in 2027,

Mark Millett: Three of our four melt cast houses are fully commissioned at Columbus and are producing all three, five and six thousand series ingots for industrial, can sheet and automotive sectors. The Hot Mill and Coal Mill are in startup and are on schedule and have successfully produced 3,000 series industrial coils. The numerous thermostreamlines are also in various stages of commissioning and start-up, all on schedule. Based on our current pace, we anticipate exiting 2025 at a utilization rate of between 40% to 50% and exit 2026 at a rate of 75% as product certifications occur. We expect to be at EBITDA break-even to slightly positive before the end of 2025 and increasing thereafter as we continue to ramp and optimize our product line.

Sinton: 3 of our 4. Milk cast houses are fully commissioned at Columbus and are producing all 3 5 and 6. Thousand series ingots for industrial can sheet and Automotive sectors.

Sinton: The Hotmail and Co Mill are in startup and are on schedule and have successfully produced 3 3,000 series industrial coils.

Sinton: The numerous them streamlines are also in various stages of commissioning and startup all on schedule.

Sinton: Based on our current Pace, we anticipate exiting 2025 at a utilization rate, between 40 to 50% and exit 2026 at a rate of 75%, as product certifications occur.

Sinton: We expect to be at EA Break, Even to slightly positive before the end of 25 and increasing thereafter as we continue to ramp and optimize our product next.

Mark Millett: You have to be there, but there's a real sense of excitement across our company and the planet. Driven by a passion to build on a legacy in steel and lead a transformation in the North American aluminum. We're impassioned by our current and future growth plans, as they will continue to drive the high return growth momentum we have constantly demonstrated. The earnings growth of these new projects is compelling. The capital spending for Synton, the four value-add lines, and Aluminum Danax, largely complete with a projected future through cycle EBITDA contribution from these projects alone of over $1.4 billion.

Sinton: You have to be there, but there's a real sense of excitement across our company and the plan.

Sinton: Driven by a passion to build on a legacy and steel and lead a transformation in the North American aluminum Market.

Sinton: We're in Passion by our current and future. Growth plans, as they will continue to drive the high return growth momentum. We have constantly demonstrated

The earnings growth of these new projects is compelling.

The capital spending for Clinton the 4 value, add lines and aluminum annax. Largely complete with a projective future through cycle. Ibida contribution, from these projects alone of over 1.4 billion dollars.

Mark Millett: Steel Dynamics has grown to an incredibly resilient, cash-generating business of scale and diversification, driven by the best teams in the world. They will maximize opportunity as the industry continues to undergo a paradigm shift. where we have a renewed focus on strategic mercantilist policies to ensure fair and sustainable competition. It's already evident by the recent positive trade determinations for coded flat roll. and obviously all the 232 tariff initiatives on steel and aluminum. And importantly, the inclusion of tariffs on steel content and derivative products, particularly fabricated structural steel, which has plagued the domestic industry for years. We have risk mitigation to address supply chain dislocations as accelerated reshoring of manufacturing.

D amps has grown to an incredibly resilient cash generating business of scale and diversification driven by the best teams in the world.

Sinton: They will maximize opportunity as the industry continues to undergo a paradigm shift.

Sinton: Where we have a, A Renewed focus on strategic, mercantilist policies, to ensure fair and sustainable competition. It's already evident by the recent positive trade determinations, for coded flat roll.

Sinton: And obviously all the 232 tariff uh, initiatives on steel and aluminum.

Sinton: And an importantly, uh, the inclusion of tariffs on steel content are derivative products.

Sinton: Particularly fabricated structural steel, which has played the domestic industry for years.

Mark Millett: AI and cloud computing will support the need for more non-residential construction for data centers, chip factories, battery plants. along with growing fixed asset investment associated with public and private dollars. Decarbonization itself will materially steepen the global cost curve, providing Steel Dynamics with a meaningful competitive advantage to gain market share and increase margins.

Sinton: Have risked mitigation to address supply chain, dislocations. As accelerated reshoring of manufacturing.

Sinton: Ai and cloud computing will support. The need for more non-residential construction for data centers chip factories battery plants.

Sinton: Along with growing fixed asset investment, associated with public and private dollars.

Mark Millett: The evolving metals industry landscape provides an opportunity for us to further enhance our earnings potential.

Sinton: Decarbonization itself will materially steep in the global cost. Curve providing Steel Dynamics with a meaningful competitive advantage to gain market, share and increase margins.

Mark Millett: As we've said before, we really are blessed, and our people are the foundation and fuel of our success. I want to personally thank each of them for their passion, commitment, and unwavering dedication. And we are committed to them, and I remind those listening today that safety for yourselves, your families, and to each other is our highest priority.

Sinton: The evolving Metals industry, landscape provides an opportunity for us to further enhance our earnings potential.

Sinton: As we've said before we really are blessed and our people are the foundation of fuel of our success.

Sinton: I want to personally thank each of them for their passion commitment and unwavering dedication.

Mark Millett: I would also be remiss not to express my gratitude to our loyal customers, many of whom have been with us since the beginning. These partnerships are built on mutual trust, keeping our word, and delivering innovative solutions that enhance their value. Our new aluminum partners can expect the same level of commitment and collaboration.

And we are committed to them and I remind those listening today that safety for yourselves your families and to each other is our highest priority.

Sinton: I would also be remiss. Not to express my gratitude to our lower customers. Many of whom have been with us since the beginning.

Sinton: These Partnerships are built on, Mutual trust, keeping our word and delivering innovative solutions that enhance their value.

Mark Millett: And to our suppliers and service providers, thank you. We value your continued support and the strong relationships we've built together.

Our new aluminum Partners can expect the same level of commitment and collaboration.

Sinton: And to our suppliers and service providers. Thank you, we value your continued support and the strong relationships. We've built together,

Mark Millett: Our culture and business model continue to differentiate our performance, leading to best-in-class financial performance. And as a circular metals business, we're uniquely positioned to offer lower carbon supply chain solutions. enhancing sustainability while helping to mitigate cash flow volatility through all market cycles. Disposition us to deliver superior shareholder returns and create lasting value for us all.

Sinton: Our culture and business model continue to differentiate our performance leading to best-in-class financial performance.

And as a circular Metals business, we're uniquely positioned to offer lower carbon Supply Chain Solutions.

Enhancing sustainability while helping to mitigate cash flow volatility through all Market Cycles.

Mark Millett: We look forward to creating even more new opportunities for everyone today and in the years ahead.

Sinton: This position us to deliver Superior shareholder returns and create lasting value for us. All

Operator: And with that said, Holly, we would love to answer the questions of the group. Thank you.

Sinton: we look forward to creating even more new opportunities for everyone today and in the years ahead,

Speaker Change: And with that said, hahli, we would love to answer the questions of the group.

Operator: 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're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you pressed star 1 earlier during today's call, please press star 1 again to ensure our equipment has captured your signal.

Operator: 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 One moment while we poll for questions.

Speaker Change: Has captured your signal. Also, we ask that you, please limit yourselves to 1 question to facilitate time for everyone. Any additional questions can be addressed upon re-entering. The queue 1 moment while we pull for questions.

Carlos Alba: Your first question for today is from Carlos De Alba with Morgan Stanley. Yeah, hello, good morning. Just on the Ali business, congrats on producing and shipping the first coil.

Carlos: Your first question for today is from Carlos, the Alba with Morgan Stanley.

Mark Millett: Just wanted to maybe get a little bit more color on what drove the slightly lower utilization rate in 2025 and 2026, and also the delta in the EBITDA profitability, which I think before it was said that in the second half of the year will be EBITDA positive, maybe just the but it felt that now I felt that the EBITDA positive now is coming at the very back end of the year, whereas before maybe it was my expectation that it would be more because earlier in the second half of the year. Thank you. Honestly, I don't think there's any material change in our view, to be honest.

Carlos: Yeah, uh, hello. Good morning. Uh, um, just on the on the Ali business. Uh, congrats on, on producing and shipping the first coil. Um, just wanted to maybe get a little bit more color, uh, on what drove the slightly lower utilization rate, uh, in 2025 and 20206. Uh, and also the delta in, um, in the IB app profitability, which, um, I think before it was said that, uh, in the second half of the year will be, if the positive maybe just the semantics and it's still the same message. But, uh, it felt that. Now, the, I felt that the, the EBA positive now is coming at the very back, end of the year. Whereas before maybe um, it was my expectation, that it would be more cons earlier in the second half of the Year. Thank you.

Carlos: Well, listen, I I I I don't think uh there's any material change in our, our view to, to be honest. Um,

Mark Millett: I guess 50% 40 to 50% given that we're in a startup. I think having a specific number might be problematic, but there's no underlying change in our thought process, our mill capability, or anything to have that. Carlos, we still are confident that as we progress, we do believe that we're still going to be EBITDA positive in the second half of the year. I guess we got a little more specific in our notes saying in the fourth quarter, but whether that's September, October, November, December or, you know, October, November, I'm not sure that there's a significant difference.

I guess uh 50% 40 to 50% uh given that we were in a in a startup.

Carlos: um,

I think having a specific number is uh might be problematic but there's no underlying change. In our our thought, process our milk capability or anything to to to to have that change, I guess.

Operator: So I think the takeaway should be that we still have full confidence in the aluminum operation. The team's doing an incredible job and we weren't trying to message anything specifically otherwise. Fair enough. Thank you. Thank you both.

Carlos: All right. Okay, great. Even our question. I, I didn't, I didn't quite hear that. No, no, Carlos. We still, um, are confident, um, that. As we progress, we do believe that we're still going to be even a positive in the second half of the year. Um, I guess we got a little more specific in our notes saying, in the fourth quarter, but whether that's September, October November December, or, you know, October November. I, I'm not sure that there's a significant difference. So I think the takeaway should be that we still have full confidence um, in the aluminum operation, the team's doing an incredible job and we weren't trying to message anything specifically otherwise.

Speaker Change: Fair enough. Thank you. Thank you both.

Katja Jancic: Your next question for today is from Katja Jancic with BMO Capital Markets. Hi, thank you for taking my question. Maybe on Sinton, can you disclose how much of EBITDA the mill generated in 2Q?

Speaker Change: Your next question for today is from katcha Janik with BMO Capital markets.

Hi. Thank you for taking my question. Maybe on sentence. Can you disclose how much of EA the male generated in 2q?

Mark Millett: Katja, I'm sorry, I think beginning at the end of, or the beginning of this year, we're not specifically giving the financial metrics as it relates to Stinson. Suffice it to say, it was significantly better than the first quarter. That said, there's still a step function increase that we're expecting in the second half of the year.

Speaker Change: And Ka, I'm sorry. We, um, I think beginning at the end of, or the beginning of this year, we're not specifically giving the, um, Financial metrics as it relates to senton, um, suffice it to say it was, um,

Mark Millett: And when we do look at the second half of the year, is the mill now at a point where it could generate closer to that $500 million annualized rate, or are there any lingering issues still? It's a good question, Katja. So, they're still not operating at that pace, given that they need to continue with the product development. As Barry mentioned, we're really excited because they're doing automotive grades now, API grades. And, but we need to be able to get the facility with the proper mix of that value added opportunity, and that will take some time.

Speaker Change: Significantly better than the first quarter. That said, there's still a step functioning increase that we're expecting in the second half of the year.

Speaker Change: And when we do look at the second half of the year is this the male now at a point where it could generate closer to that 500 million million annualized rate, or are there any lingering issues though?

Mark Millett: So, that will likely take through the 2nd, half of the year.

Mark Millett: So, I would do 2026 is that opportunity for Sentin to be at the, what we say, through cycle run rate to your point of around 500Million dollars. Thank you.

Ka: It's a good question Ka. So um, there's still not operating at that pace given that they need to continue with the product development, as Barry mentioned. We're really excited because they're doing Automotive grades Now, API grades, and, but we need to be able to get the facility with the proper mix of that value, added opportunity, and that will take some time, so that will likely take through the second half of the year. So, I would do 2026, is that opportunity for sin to be at the what we say, um, through cycle, run rate to your point of, you know, around 500 million dollars,

Speaker Change: Thank you.

Tristan Gresser: Your next question for today is from Tristan Gresser with Exane BNP Parabellum. Yes, hi, thank you for taking my questions. Maybe just to follow up on the aluminum venture, if you can discuss the market environment in which you'll be ramping up your new aluminum facility. I mean, it looks very different from what was the initial base case or initial market environment. So from a trade, from a demand perspective, where do you see the new opportunities and also maybe the risk associated? I think the, if anything, the environment has become even more positive, obviously. The deficit is, supply deficit is definitely there, that will continue to grow.

Tristan Crusher: Your next question for today is from Tristan Crusher with Exane BNP parabas.

Speaker Change: Yes. Hi, thank you for taking my questions. Uh, maybe just to follow up on the aluminum Venture, if you can, uh, discuss, uh, the market environment in which you'll be ramping up your your new aluminum facility. I mean, it looks very different from what was the initial base case or initial Market environment. So from a trade from a demand perspective uh where do you see the new opportunities and also maybe the the risk associated?

Mark Millett: And it's being supplied, obviously, by imports with a huge tariff attached to it. So us bringing volume on in that environment is very, very positive for us, and then, honestly, for the customer base as well. So I don't think we see any issues there. Conversations with our customers has been absolutely incredible. We've started to bring the larger folks through our mill, and I said it earlier, they are absolutely blown away by the facility and the capability. And I think even more so, our approach, as we talk through supply arrangements and product capability, they recognize that we truly do partner with the customer.

Speaker Change: Well, I I think the if, if anything the uh, the environment is is become even more positive. Obviously, uh, the, the, the the the deficit is, uh, Supply deficit is, is definitely there. Uh, that will continue to grow.

Speaker Change: And it's being supplied. Obviously, buy imports with a with a uh, with a huge tariff attached to it. Um, so us bringing bringing volume on in that environment is is a is a very, very positive, uh, for us and in all honesty for for the customer base, uh, as well.

Speaker Change: So, I don't think we we see any any issues there. I I think

Speaker Change: Conversations with our customers has been absolutely incredible. Uh, We've started to to bring uh, you know, the the larger folks uh through through our Mill. And I I said it earlier, they are absolutely Blown Away by the facility and and the capabilities.

Mark Millett: And I think they're finding that refreshing. So there's no blemishes, I guess.

Speaker Change: And I think you even even uh, even more. So our our approach, you know, as we talk through uh, a supply Arrangements, uh, and and product capability, they, they recognize that that we truly do partner with the customer, and I think that they're finding that refreshing

Theresa Wagler: I think we're excited, if not more excited today, than we ever have been. And Tristan, to add to what Mark just described as a more positive environment, when we modeled and projected the $650 million to $700 million of through cycle EBITDA associated with our aluminum investments, the spreads that we actually used from a product set are more conservative than what we're seeing in the market environment today. So there is a lot of upside opportunity.

So there's there's no uh, no, no blemishes. I can I, I guess I I think we're excited. If not more excited today than we ever have been.

Tristan Gresser: All right, that's, that's clear. And I was maybe referring to potential demand disruption, especially when it comes to can and beverage, we know prices, elasticity is what could be high. But I guess from your conversation with customers, it doesn't seem there is a risk there, if I understood correctly. Again, talking to the end consumers, not the can makers themselves, but they do not see that. There's still an overwhelming desire from a societal and environmental perspective to eliminate plastic bottles. There is a clear desire. can makers and from the from the bottlers and from Coca-Cola's, the Pepsi's, the beer guys, they're all wanting aluminum.

And Tristan, um, to add to what Mark just described as a more positive environment when we modeled and projected, the 650 million to 700 million dollars of through cycle, IBA associated, with our aluminum Investments, the spreads that we actually used from a product that are more conservative than what we're seeing in the market environment today. So, there is a lot of upside opportunity.

Speaker Change: All right, that's um that's clear and I was maybe referring to uh potential demand destruction, especially when it comes to can and beverage. What we know prices elasticity is what could be high. Uh but I I guess from you conversation with customers, it doesn't seem there is a risk there if I understood correctly.

Speaker Change: Again talking to uh uh the the end consumer is not what we can make as themselves, uh, but they do not see that the the there's a still a an overwhelming desire from a societal societal and environmental perspective to to eliminate plastic bottles.

Speaker Change: uh, and there is a clear desire, uh,

Speaker Change: and the kind makers and and from the uh from the bottlers and from uh the

Coca-Cola is the Pepsis the beer, the beer guys. They're they're all wanting aluminum right now.

Tristan Gresser: Okay.

Tristan Gresser: And maybe just then a follow-up on the tariff situation. I think you discussed it already in Q1, but wanted to see if there are any changes regarding your exposure to pig iron, if you could comment on how much do you source maybe from Brazil? And if, I mean, I understand with the 10%, it was not a big deal, but if we get 50% on pig iron imports from Brazil starting August, what could you do? What could you put in place to mitigate those impacts?

Tristan Gresser: And then I have a follow-up. All right, that's, that's very clear.

Speaker Change: Okay, um, and maybe just then a follow up on, on the Tariff situation. I think you, you discussed it already in q1, but wanted to see if there are any changes regarding your, uh, your exposure to pig iron if if you could comment on, how much do you Source, maybe from Brazil? Uh, and if, I mean, I understand with the 10%, it was not a big deal, but if we get 50% uh, on pig iron, uh, imports from Brazil, starting August. So what could you what could you do? What could you, uh, put in place to mitigate those impact? Uh, and then I have a follow-up.

Speaker Change: yeah, Tristan, this is Barry Schneider uh,

Barry Schneider: The the Big Iron topic is 1 that we're watching closely. Uh I I want to make it clear that our long products Mills do not use any iron substitutes or Big Iron. So this is a flat rolled issue. Uh and our 3, flat roll producing plants are Butler. Facility has an iron producing facility, where we use whey stock sides and recycled iron content to generate our pig iron. So the butler Mill is largely independent of the merchant trade.

Barry Schneider: Which brings us to the the products we do purchase. Uh, the Tariff is concerning.

Barry Schneider: Historically, uh, the United States government has not looked at raw materials, is something that would be tariff going away back to the, the founding of our country.

Uh the the 2011, the 301 and the 232 previously did not tariff pig iron coming into the country.

Barry Schneider: Uh we maintain a supply chain that has been uh under quite a bit of duress on the past 5 years. Historically, Big Iron was produced in Russia and Ukraine.

Barry Schneider: Uh, since Russia launched the war against Ukraine. Those materials have been

Speaker Change: Powerful benefits of having iron of having Omni as a captive scrap supplier to us that we can bring in the highest quality materials and continuously balance based on cost productivity and quality. So we'll manage as we always do. Um, there are alternatives, we can explore, and we'll continue to, uh, work with the government and uh, and hope that there is some kind of relief when it comes to raw materials in the Tariff strategy. So, to that point, uh, the specifics are are always changing based on the various cost inputs. It's literally a model are people can work every day. Depending on what as what scrap assets and iron assets, they have with their disposal. So we continue to. Look at it as a a challenge for us to thrive in our cultures developed, a good competency, and we attack it every day.

Mark Millett: And if you allow me the last one, just the big pictures on tariff on Section 232 tariffs. Do you think this time is different versus 2018? Are you confident we won't see a dilution in the tariffs and that those sectoral tariffs are going to stay? And I'm talking about steel, but also, obviously, now aluminum, Well, this is Mark.

Speaker Change: all right, that's, um, that's very clear and if you allow me a last 1, just to, uh, the, the big picture is on tariff, um, on section 222 tariffs and the, um,

Speaker Change: do you think this time is different versus 2018? Uh, are you confident? We won't see a dilution in the tariffs and that those sexual tariffs are going to stay and I'm talking about TL, but also obviously now aluminum

Mark Millett: I don't see. Well, I would say the situation will, there's no doubt though, it will change. But we do believe that TAFs will be a mainstay of the trade agreements going forward. I think the, you know, when you look at the first term of the administration, the renegotiation of NAFTA into the USMCA was an incredible advance on that relationship between Canada, Mexico and ourselves. You know, the increased domestic content and other things, then that really, really has helped the U.S., but even more importantly, North America as a whole.

Mark Miller: Well, this is Mark. I I don't see.

Mark Miller: Well, I I I would say the the the situation will there's no debt though, it will change.

Mark Miller: But we do believe that uh tariffs will be uh a a Mainstay of of the trade agreements going forward.

Mark Miller: I, I think the

Mark Miller: You know, when when you look at the the first time of the administration that renegotiation of NAFTA into the usmca uh was a was an incredible Advance on on that uh that their relationship between Canada and Mexico and ourselves.

Mark Millett: The USMCA is up for renegotiation again in 2026. And it's our belief that, you know, the tariff discussions and the trade policy discussions that have gone on between the three countries are a prelude to that. But we're confident that that will get renegotiated into an even better solution for the US. principally in preventing, having poured and melted language in the supply agreement such that it will prevent the leakage of Chinese and Asian and other unfairly traded commodities coming through Canada and coming through Mexico and into the States. So I think, net-net, I don't believe you see these levels as is today.

Uh, you know, the the increased um, uh, domestic content and, and and other things, then that really, really has helped the us. But even more importantly, that the the, uh, the North America as a whole

Mark Miller: The the usmca is up for renegotiation, uh, again in 2026 and it's our belief that uh, you know, that that the the Taft discussions. Uh, and the the the trade policy discussions that have gone on between the 3 countries are a Prelude to that.

Mark Miller: uh, but we're confident that that

Mark Miller: Will get renegotiated into an even better uh solution for for the for the US.

Mark Miller: Uh, principally.

Mark Miller: In preventing the uh, so having poured and melted uh, uh, language in in the, the supplier agreement such that it will prevent the, the leakage of Chinese and Asian and other unfairly, uh, tra traded Commodities coming through Canada, and coming through Mexico in into the states.

Mark Millett: But I think it's all going to lead to a much better, better trade environment going forward for the All right, thanks a lot.

Mark Miller: So I think net net. I I I don't believe you. You see these uh, the levels as is today. Um but I I think it's all going to lead to a much better better. Uh um uh trade environment. Going forward for the long term.

Mark Miller: All right, thanks a lot.

Phil Gibbs: Your next question for today is from Phil Gibbs with KeyBand. Hey, good morning. Good morning.

Your next question.

Mark Miller: today, is from Phil Gibbs with KeyBank

Phil Gibbs: Hey, good morning.

Barry Schneider: Can you explain the benefit of biocarbon and the potential ability to replace other materials? I think I just wanted a better understanding of what it brings to the table. Good morning, Phil. So, yeah, so what we initially intended biocarbon for is that it will allow us to replace a large portion, the first facility, not the entirety of our anthracite usage as carbon inputs for our steel making. So we'll be sending this to our own steel mills so that we can actually reduce the carbon footprint by as much as 35%, but there's also attributes related to the process where we produce some hydrogen as well.

Speaker Change: Good morning.

Can you explain, uh, the benefit of of biocarbon and the potential ability to replace other materials? I think, I just wanted a better understanding of of what it brings to the table.

Barry Schneider: So it's pretty unique. There'll be more to come as we start to ramp up the facility. It's very modular based so we can grow it. And what that could likely help us do in the long term is a couple of things. One, we've talked about in the past is... And we talked about pig iron for a bit already on the call this morning. And if we had additional supply of biocarbon, we could potentially have our own supply of pig iron in the U.S. And it would be considered, I'm going to use the terminology green, but it would be low carbon.

Speaker Change: Good morning, Phil. Um, so yeah, so what we initially intended, um, biocarbon for is that it will allow us to replace um, a large portion. The first facility not the entirety of our anthracite usage, as carbon inputs for our steel making. So we'll be sending this to our own, um, steel mills so that we can actually reduce the carbon footprint by as much as 35%. But there's also attributes related to the process where um we produce some hydrogen as well, so it's pretty unique. There'll be more to come as we start to ramp up the facility. It's very modular based so we can grow it and what that could likely help us do in the long term is a couple of things. Um 1 we've talked about in the past is

Mark Millett: So there's kind of a long investment thesis related to the biocarbon product for us. But it also, we've found with certain of our OEM customers, it's not something that we'll get into this morning, but they feel like there's a unique opportunity for different credits to inure to them as well from a carbon perspective, where it would really be a superior product that we could certify to in the flat rolled steel arena. So there's more to come for biocarbon. Just let us get started this quarter, and we'll keep talking about it. I appreciate that.

Speaker Change: Investment thesis related to the biocarbon product for us. But it also, we found with certain of our OEM customers. Um, it's not something that we'll get into this morning, but they feel like they're a unique opportunity for different credits to a newer to them as well, from a carbon perspective, where it would really be a superior product that we could certify to in the flat world steel Arena. So there's there's more to come for biocarbon. Just let us get started this quarter and and we'll keep talking about it.

Mark Millett: Go ahead Mark. Yeah, just to add to that, I think you need to look at it in the broader sense of a whole sort of sustainability Strategy and the Path to Carbon Neutrality. There's absolutely no doubt, but there's no dilution of focus, particularly from the European automakers. And as Barry said, the domestic auto sector has suffered a little bit. Our main volume is actually flowing through Mercedes and BMW and VW. A little bit maybe through Volvo, but nonetheless, we're very focused on the European supply. They have not taken their foot off the accelerator relative to the carbon footprint and to sustainability.

Mark Miller: I appreciate that. Go ahead Mark. Yeah, just to add to that. I I think.

Mark Miller: You need to look at it in a in the broader sense of of our whole sort of sustainability.

Mark Miller: Strategy and and the path to, to carbon neutrality.

Mark Miller: There there's absolutely no doubt.

Mark Miller: But there's, there's no dilution of of focus, particularly from the, the European automakers and as Barry said. And as Barry said, The Domestic Auto, uh, uh, sector is, is suffered a little bit.

Mark Miller: Our, our our on the main stay or main volume is actually flowing through uh Mercedes and BMW and VW. And

Mark Miller: A little bit, maybe through Volvo, but but nonetheless, we we're very focused on the European Supply.

Mark Millett: And I think if you look at the penetration that our team has achieved in auto, it's squarely driven by our sustainability position. And we're leveraging the fact that we already are, or already have, the lowest carbon footprint mills in the world today, and that's not us saying it. European manufacturers. So it is totally differentiating us in the market. And I think just the award from VW for sustainability here that Barry and... Volkswagen You know, went over to Europe to pick up. I mean, it was incredible. Thanks, Mark and Theresa.

Mark Miller: They, they have not taken their foot off the accelerator relative to to carbon footprint and to sustainability.

Mark Miller: And I, I think, if you look at the, the penetration that, that our team is, uh, is, is achieved in in Auto, is squarely driven by by our sustainability position. Um,

Barry Schneider: and we're, we're leveraging. The fact that we already are or already have the, the lowest carbon footprint, uh, Mills in in the in the world today. And that's not us saying that that's European manufacturers are saying it. So it is totally differentiating uh, Us in the in in in the marketplace. And I think just the the award from uh, VW for sustainability here. That that Barry

Speaker Change: and uh, Volkswagen uh

Speaker Change: You know, went over to Europe to to to pick up, I mean, it it it was a, it was incredible.

Mark Millett: And then as a follow-up, in terms of expectations for CINTA in the third quarter, they're expected to be sequential profit improvement, and if there is, what drives it, and then also What can we define as the dollar headwind associated with that loss of production in the second quarter at Simpson? Thank you. Thanks for all that added color there, everyone. Appreciate it. Good luck.

Mark Miller: Thanks, Mark, and and Teresa. And then as a follow-up,

Mark Miller: uh, in terms of expectations, for for sent in a third quarter, is there is there expected to be sequential Prophet Improvement and if there is what drives it and then also

Mark Miller: What do you what are what can we Define as the you know the dollar the dollar had 1 associated with that loss of production and the uh second quarter of sentence. Thank you.

Mark Miller: So, um, Phil a again, I know everyone's interested in, in the profitability of sent specifically. Um, I would say what's, what? We believe will drive the significant increase in, um, third and then fourth quarter.

Mark Miller: Earnings from sitting will be 1, um, volume volume, volume volume. So, we, we do believe that we're going to have, um, higher volume, but also higher value, added product mix, which is key to the profitability at sin. And we won't have had the curtailment of the oxygen. And we also had a maintenance outage in April. So, there are some key things. Um, high level that we have confidence in that will drive that increase profitability.

Speaker Change: And Teresa. I'd like to add to that the uh, the value added lines. Uh, having 2 galvanizing facilities down there now and 2 paint lines. Uh, the cost of quality of starting those facilities up uh they're they're expensive products to make. So as we ramp up and get more yielded product to the to the marketplace that that really significantly reduces the loss costs of the Lost cost in making high quality. So we're very excited about where the teams are getting with the, the yields and the percent Prime that they ship to Marketplace. We're also very excited about the anti-dumping, countervailing, duties. Because the, when you really look at the, the inventories, that that surged ahead of the add CBD rulings. Uh, we've been competing with a lot of Warehouse material that came from 10 different countries in the into our country and those those inventories remain and are slowly being worked out, the promise of having a actual final rulings here by

Speaker Change: Is really becoming professional painters, and and coders. So, uh, we're excited about that that future position because of the, the improvements, the team makes every day.

Speaker Change: Thanks for all that added uh caller there. Everyone appreciate it. Good luck.

Alex Hacking: Your next question is from Alex Hacking with Citi. Yeah, thanks. You mentioned that you expect Fab to see an inflection point. Is that being driven by price or volume or both? Thanks.

Your next question is from Alex hacking with City.

Yeah, thanks. You you mentioned that you expect Fab to see an inflection point is is that being driven by Price or volume of both? Thanks.

Mark Millett: Good morning, Alex. The primary driver of the inflection point for fabrication in coming up here in the third quarter is volume, but there's also stability in the price, which is very supportive. Okay, thanks. Can I ask a follow-up or just stick to one? Go ahead, everyone else's. All right. So I guess, you know, Barry, in your comments, you talked about, you know, some of the enhanced sourcing technology that's available with with aluminum scrap, right, and the potential there that you could source more for your for your rolling mill. Um, you know, in a world where Canada's 50% tariff on primary material, it's a big if right going forward, but we'll see.

Speaker Change: Good morning, Alex. Um the primary um driver of the inflection point for Fabrication in um coming up here in the third quarter is volume but there's also stability in the price which is very supportive.

Okay. Thanks. Um, can I ask a follow-up? Or just stick to 1?

Speaker Change: Go ahead. Everyone else is

Speaker Change: all right, um,

So, I guess, you know, Barry in your comments, you talked about, you know, some of the enhanced sourcing technology that's available with, with aluminum scrap, right? And the potential there that you could Source more for for your, for your Rolling Mill.

Barry Schneider: Could you maybe quantify or discuss like the opportunity for Steel Dynamics and more broadly for the U.S.? to use more of the scrap that we basically currently export, because we can't sort it all for various other reasons. And just, is this something that could be material for Steel Dynamics? Thank you. The investments that Omni have made have really been focused on the existing scrap supply streams. In the United States, over 70% of the steel generated is from arc furnaces and recycled scrap. So the more value we can extract, the more those products can find their way back into a high-quality application.

Speaker Change: Um, you know, in a world where Canada is 50% tariff on primary material, it's a big, if right going forward, but we'll see.

Speaker Change: Could you maybe quantify or discuss, like the, the opportunity for Steel Dynamics and more broadly for the US to use. More of the scrap that we basically currently export, because we can't sort it off of various other reasons. And just, this is something that could be material for Steel Dynamics. Thank you.

Barry Schneider: So our teams are very focused on all of the different technologies together. We continue to see value with partnering with our customers to be able to segregate that scrap at the very beginning of the supply chain. Those are all products that the American steel producers are very good at getting. OmniSource separates us from the rest because it's such a captive loop that we provide real-time benefit from the scrapyards, the suppliers, right into our melt shops. So, the secret of getting that value is having a system that allows you to know when you can get the best products into the furnace, 24 hours a day, seven days a week.

Speaker Change: Uh, the the Investments that I'm the have made have have really been focused on the existing scrap Supply streams, uh, in the United States, over 70% of the steel generated is from Arc furnaces and recycled scrap. So, the more value we can extract the, the more those products can find their way back into a high-quality application. So our our teams are very focused on, uh, on all of the, the, the different Technologies together. Uh, we continue to see value with partnering with our, our customers, to be able to segregate that scrap at the very beginning of the supply chain. Uh, those are all products that, uh, the American, you know, steel producers are very good at getting

Barry Schneider: And that's the competency our teams have worked very hard together, and having a scrap and steel company that are so closely partnered has really allowed us that benefit. So, we'll continue to do that. That's where value is. Anytime we can find higher value recycled content, that's what we're all about. And to add to that, obviously, P10-20, the tariff is appreciating the cost of that. The increased recycle content obviously is compounding, but also UBCs today are selling around, it's got back to where they were a year or so ago, 58% discount. It's a 58% discount over a bigger number, and so the spread opportunity is enhanced in our minds quite considerably.

Speaker Change: OmniSource separates us from the rest because it's such a captive Loop that we provide real-time benefit from the scrapyards the suppliers right into our melt chops. So the secrets of getting that value is having a system that allows you to know when you can get the best products into the furnace. 24 hours a day, 7 days a week. And that's the competency. Our teams have worked very hard together and having a a Scrap and Steel company that are that are so closely partnered has really allowed us that benefit. So we'll continue to do that. That's for value is anytime we can find higher value, recycled content. That's what we're all about.

Speaker Change: And, and to add to that, obviously, p1020. The the the the, the entire app is is appreciating the uh, the, the cost of that.

Speaker Change: so that

Speaker Change: The The increased recycle content uh, obviously is is uh, is compounding. But also, you know, ubc's today are uh, selling around uh, you know it's got back to to where they were a year or so ago you know a 58% discount. Um

Speaker Change: Is 58% discount of a bigger number. And and and so the the the spread opportunity is is is enhanced uh in our minds uh quite considerably.

Lawson Winder: Your next question for today is from Lawson Winder with Bank of America. Great, thank you, operator. Good morning, Mark, Theresa, Barry, nice to hear from you. And thank you for the update. On the coated steel overhang that you discussed, are you seeing this overhang dissipate at all now into Q3? And could this potentially mean a sales flow through benefit into Q3 25? So could we be potentially modeling an unusual pickup in sales in Q3?

Speaker Change: Your next question for today is from Lawson were with Bank of America securities.

Barry Schneider: I wouldn't call it unusual, I would think it's more returning to levels that we would historically have seen with spreads between coated and hot roll products. We do see the inventories winding down, and more importantly, we don't see more material coming in behind that. And I think that's the significance of the anti-dumping CBD cases. Those are based on existing trade law and have a long-term window where we look at sunset reviews to watch behavior of certain countries and companies within those countries. So to establish these precedents now in and amongst the 232 discussions, this creates a level playing field where we can do what we do best, and we see it as a...

Great, thank you, operator. Good morning, Mark, Theresa Barry nice to hear from you. And thank you for the update on the coded steel. Overhang that that you discussed. Are you seeing this? Overhang, uh, dissipated all now into Q3 and could this potentially mean, a sales flow through benefit in in the Q3 25? So, could we be potentially modeling, a an unusual pickup in sales in Q3

Speaker Change: Countries. So, to establish these precedents now, uh, in and amongst the 232 discussions, this creates uh, Level Playing Field, where we can do, what we do best and

Barry Schneider: returning to the normal profitability levels you would see with these value-added products. Okay, sure. Thanks, Barry.

Speaker Change: I see it as, uh,

Speaker Change: Returning to the normal profitability levels. You would see with these value added, uh, products

Barry Schneider: If I could just add one follow up on the oxygen availability. Can you elaborate on what was driving the supplier's decision to limit that supply and then just like stepping back and looking at this from like, from like a sourcing point of view is, is that market particularly tight in the in the southwest that that somehow prevents you from finding a backup supply? Well, I think when you think about the Texas community, the petroleum industry is very large down there, as we all know. So we had the opportunity to actually receive the oxygen through a pipeline agreement, whereas sometimes we would more typically have an air separation plant on our site.

Speaker Change: Okay sure. Thank thanks. Mary. If I could just add 1 follow up on the uh oxygen availability. Can you elaborate on what was driving the suppliers decision to limit that supply? And then just like stepping back and looking at this from like a from from like a a sourcing point of view is is is that market particularly tight in the uh in the southwest that that that somehow prevents you from finding a backup Supply.

Speaker Change: uh, well I I I think when you think about the the, the Texas, uh, Community the, the

Barry Schneider: So this provided us with a good alternative, we believe. We believe it is a good long-term alternative. But when there was a maintenance problem at the supply facility, the entire region, to some extent, actually backed off of what they consumed. So we are definitely evaluating whether or not we can invest other technologies on site that make it more reliable. This isn't something we would anticipate being a regular event. Quite surprised that it happened, but happy how we worked through it. And so we'll always look at supply chain problems, but we think we have a good supply chain solution here.

Speaker Change: The, uh, petroleum industry is very large down there as we all know. Uh, so we had the opportunity to to actually receive the oxygen, uh, through a pipeline agreement. Whereas sometimes we would, uh, more typically have a air separation plant on our site. So this provided us with a good alternative. We believe, We believe it is a good long-term alternative. But when there was a uh, a maintenance problem at at the supply facility, um, the entire region to some some extent actually backed off of what they consumed. So uh, we are definitely evaluating whether or not we can invest other

Barry Schneider: And going forward, we don't expect it to be an issue.

Mike Harris: Thank you. Your next question is from Mike Harris with Goldman Sachs. Yeah, good morning, and thanks for taking my question.

Speaker Change: Technologies on site, uh, that make it more reliable. This isn't something. We would anticipate being a regular event. Uh, quite surprised that it happened but happy, how we work through it. And, um, so we'll always look at, uh, supply chain problems. But we think we have a good supply chain solution here and, uh, going forward, uh, we, we don't expect it to be an issue.

Speaker Change: Why thank you.

Your next question is from Mike Harris with Goldman Sachs.

Mike Harris: Just one for me here. You guys highlighted that your steel and aluminum products have overlapping customer bases, but what about the internal sales organization? Is that the same or is it a separate sales force? And if the latter, how should we think about the potential SG&A impact as you ramp up?

Mike Harris: Yeah, good morning. Thanks for uh taking my question. Just uh, 1 from me here. Uh, you guys highlighted that you're still an aluminum products have overlapping uh, customer bases. But what about the uh, internal sales organization? Is that the same or is it a separate, uh, sales force? And if the latter, how should we think about the potential sgna impact that you ramp up on aluminum?

Mike Harris: So, Mike, your specific question around ramp-up of the SG&A, you actually are going to see the opposite, uniquely, because up until this point, because we were in construction, all the costs that weren't capitalizable related to the project actually had to be recorded in SG&A. Now that we're in startup, you're going to start to see those operational costs be appropriately in cost of goods sold. So you're going to see a decline overall in SG&A on the income statement. Okay, thanks. That's good color.

Mike Harris: I would, actually we, we, we have independent sales teams, there are certain, uh, markets where our people will overlap for. Sure, because we have such good relationships. So there are some construction areas and, and an automotive where our teams will work closer together. But, uh, the, the materials are quite different, uh, particularly in automotive where the product has to be developed. So it, we believe it will be positive, but it doesn't allow us to have just 1 Sales team, it will be unique.

So, Mike, your specific question around ramp up of sgna. You actually are going to see the opposite uniquely because up until this point because we were in construction, all the costs that weren't capitalizable related to the project actually had to be recorded in sgna now that we're in startup. Um you're going to start to see those operational costs be appropriately and cost of goods sold so you're going to see a decline overall in sgna on the income statement.

Mike Harris: Okay, thanks. So that's uh good color.

Andrew Jones: Your next question for today is from Andrew Jones with UBS. Hi all. Just firstly on the fab side, you're talking about stable prices into 3Q. I mean, obviously, post tariffs, the substrate prices obviously moved up quite a bit when those were first introduced. I mean, do you expect to pass on those higher substrate prices, like into 4Q later in the year? Or have we sort of met buyer resistance given current demand levels? I've got a second one that I'll follow up.

Mike Harris: Your next question for 2.

From Andruw Jones with UBS.

Andruw Jones: Hi all um have a couple just firstly on the Fab side, you're talking about stable prices into 3 Cube. I mean obviously post tariffs, the substrate prices is obviously moved up quite a bit. Um when there's the first introduced, I mean do you expect

Barry Schneider: Good morning, Andrew. Related to the substrate costs, yes, steel prices, as they go up, we only keep around 8 to 10 weeks of steel substrate on the ground in our fabrication operations, so it will go up. But what one has to remember is that volume has a significant cost compression in fabrication. There's not a lot of fixed asset investment. It's more manpower, and so with that, as we have incremental volume, really that profitability drops very quickly to the bottom line, and that's the main driver for what we expect to see for improved profitability in the second half of the year.

Andruw Jones: Some of those higher substrate prices like into 4 later in the year or have we sort of met bio resistance. Get them, uh, current demand levels. Uh, I've got a second 1 with, uh, have an offer with afterwards.

Good morning Andrew um related to the the substrate cost. Yes. Um steel prices as they go up, we only keep you know around 8 to 10 weeks of Steel substrate on the ground in our fabrication operations so it will go up. But like 1 has to remember is that um volume has a significant cost compression and Fabrication. There's not a lot of fixed asset investment. It's more manpower. And so with that, as we have incremental volume really that profitability drops very quickly to the bottom line. And that's the main driver for what you, we expect to see for improved profitability in the second half of the year.

Barry Schneider: But you don't see any scope for really increasing price in the current environment. No, I didn't say that, but we don't really talk about pricing commercial aspects or my commercial team is going to get excited with me. So no, that shouldn't be your takeaway. Yeah, sure.

Andruw Jones: But you didn't see any scope for really increasing price coming.

Andruw Jones: Pricing commercial aspects or my commercial teams, going to get excited with me. Um, so no, I that would shouldn't be your takeaway.

Andrew Jones: And just on, I mean, follow up on something I know everyone's asked a lot of questions about it, but I don't know if you can give us a ballpark utilisation in 2Q or a ballpark for where the sort of proportion of value add was at in 2Q. And like, just as we go into 3Q, 4Q, how much that's likely to uplift so we can understand the sort of potential for profitability improvement. I don't have it top of mind specifically from a percentage basis, Andrew. What I would suggest is if you look at, we give you the coded volumes for flat roll products, and if you look at the coded volumes over the last kind of four quarters and look at how it's kind of trailed down because of that inventory import situation that we've had in flat roll, take that into consideration with, we consider most of structural and most of engineer bars value add, you'll get a pretty good indication of the room we have to grow that volume in the second half of this year, but I'm sorry, I just don't have those metrics top of mind.

Speaker Change: Sure, sure. And uh, just on, um, I mean follow up on things and I know everyone's asked a lot of questions about it, but the um, I don't know if you can give us a ballpark utilization to Q or a ballpark for where the sort of proportion of value add um was that in 2q? And like just as we go into 3 Q4 Q how much as likely to uplift so we can understand the sort of potential for um profitability Improvement.

Speaker Change: I don't have it top of mind.

Specifically from a percentage basis. Andrew what I would suggest is, if you look at, um, we give you the coded volumes for a flat roll products. Um, and if you look at the coded um, volumes over the last kind of 4 quarters and look at how its kind of trailed down because of that inventory, import situation that we've had in flat roll. Um, take that into consideration with we consider, um, most of structurals and most of engineered bars value add, you'll get a pretty good indication of the room. We have to grow that volume, um, in the second half of this year, but I'm sorry, I just don't have those metrics top of mind.

Mark Millett: And this is a question just on the alley business. I mean, you obviously flagged the more supportive market conditions that we're seeing now. I mean, it might be difficult to answer it, but that's 650 to 700. I mean, what would that look like if we put everything on the spot today? I mean, do you have any sort of ballpark for, you know, for how profitable that operation could be at Fulcrum Fast? Andrew, I'm sorry, that's not something that we would we would share at this point. We're still leaning in. We like to talk through cycle.

Speaker Change: And uh, this is a question just on the Alley business. I mean, you obviously flagged the more supportive market conditions that we're seeing now. I mean, maybe I mean, it might be difficult to answer it but the, um, that 650 to 700, I mean, what would that look like if we, if we put everything on spot today? I mean, do you have any sort of ballpark for, you know, for how profitable that operation could be at full capacity?

Mark Millett: That's how we make our investment decisions, both from an acquisition perspective and from greenfields. So we're, we'll stick with the 650 to $700 million on a through cycle basis and then let our results speak for themselves in the coming months.

Speaker Change: Yeah, I'm sorry. That's not something that we would. We would share at this point. We're still needing in. We like to talk through cycle. That's how we make our investment. Um decisions, both from an acquisition perspective and from Greenfield. So we're we'll stick with the 650 to 700 million dollars on a through cycle basis. And then, let our results speak for themselves in the coming months.

Mark Millett: Excellent. Cool.

Mark Millett: Thank you very much.

Speaker Change: Excellent.

Speaker Change: Cool, thank you very much.

John Tumazos: Your next question is from John Tumazos, a private investor. Thank you for taking my questions. First, you mentioned some aluminum alloy numbers in your presentation. And they were unfamiliar to me. Maybe if David could. circulate a message afterwards repeating the alloy numbers and maybe what their chemistries are. That would help to educate us on aluminum. More important.

Speaker Change: Your next question is from John to Mo's a private investor.

John: Thank you for taking my questions. Uh, first you mentioned some aluminum alloy numbers in your presentation

Speaker Change: and they were unfamiliar to Me, Maybe if David could um,

Speaker Change: Circulate a message afterwards, repeating the alloy numbers and maybe what their chemistries are.

Speaker Change: That would help to educate us on aluminum.

Mark Millett: In terms of qualifying for can sheet and auto sheet in aluminum, what are the dimensions of qualification or the theaters the customer scrutinizes? Do you have to separately qualify the cleanliness of the scrap, the slab metallurgy, gauge and shape, ductility, surface, coatings? Teach us what the hurdles are.

Speaker Change: More important.

uh, in terms of qualifying for can sheet and auto sheet in aluminum,

What are the?

Speaker Change: Dimensions of qualification or the theaters, the customer scrutinizes. Do you have to separately qualify the cleanliness of the scrap, the slab metal energy gauge and shape, ductility surface coatings.

Speaker Change: Teach us what the hurdles are.

Mark Millett: Super, John. It's always good to talk to you because you always seem to be the last question. I don't know why that is, but nonetheless, talking about the series 3000, 5000, 6000, those are the principal grade groups. So 3000, you got, and I'm not super expert on this, but they tend to be a lot of the industrial grades and the can sheet grades. 5000 series is more of a heat treated, and then 6000 tends to be focused principally in automotive. So those are just the different sort of grade groups that one has. The relative to quantification.

Speaker Change: Super John. And it, uh, it's always good to talk to you because you always seem to be the last, the last question. I don't, I don't know why that is. But then nonetheless, uh, talking about the, the, the, the, the, the, the series, um, uh, 3,000. 5,000. 6,000 those. Those are the principal, uh, uh, grade groups. So 3,000, you got, uh, and I'm not, uh, super expert on this but, uh, yeah, 3104 3103 3000, they, they tend to be the, the, a lot of the industrial grades. Uh, and the, the can sheet grades, uh, 5,000 series is, is, is more of a heat treated and then 6,000 tends to be.

Speaker Change: Focused, uh, principally in in uh, in in in automotive. So those are just the, the different sort of great groups that, uh, that 1 has

Mark Millett: It's not dissimilar to qualifying steel, in all honesty, relative to, from a process standpoint. They will, in the automotive world, a little bit more detailed, but they will look at the whole process from start to finish and add the ISO or whatever, and the automotive quality criteria. Can sheet, a little different, that tends to be sort of an in-use type of qualification. Obviously, cleanliness for a can sheet, given that it's real, real thin, and it holds beer at pressure, the cleanliness is crucial there. But no great difference, I would say, John, relative between steel and aluminum.

The relative to, to qualification.

Speaker Change: Um it's it's not dissimilar to qualify and steal in in all honesty, uh relative to from a process standpoint.

Speaker Change: They, they will in the automotive world uh a little bit more detail but they they will look at the whole process from from start to finish and have the, the the iso or whatever. Uh, and um the the automotive uh quality.

Speaker Change: Uh, criteria. Um

Speaker Change: Given that it's real real thin and it holds beer at pressure. The cleanliness is is uh is is crucial there. Uh, but no, no great difference. I I would say John uh, relative between steel and and the aluminum

Mark Millett: Thank you.

Speaker Change: Thank you.

Bill Peterson: Your next question is from Bill Peterson with JPL. Hi, good morning, everyone. Thanks for sticking me in. Thanks for all the information.

Speaker Change: Your next question is from Bill Peterson with JP Morgan.

Barry Schneider: A lot of my questions have been asked, but I wanted to ask about utilization for the mill. So, I guess, outside of the normalization of Sentin coming off the oxygen supply issue, how should we think about mill shipments in the third quarter? Does the demand environment you see today support a return of utilization approaching or exceeding 90% in the third quarter? Yeah, I think if you if you if you look at overall utilization quarter of a quarter, it was a little disappointing for us, but it was a confluence, principally of the oxygen issue in Sinton.

Yeah. Hi, good morning everyone. Thanks for taking me in, thanks for all the information. A lot of my questions have been asked but I wanted to ask about the utilization uh, for the mill. So I guess outside of the normalization of sentence coming off the the Oxford Supply issue, how should we think about mil shipments? And that they're quartered? There's the demand environment. You see today? Support a return of utilization or exceeding 90% in the third quarter.

Barry Schneider: And then we had our scheduled maintenance outages, actually, all three mills in the quarter. So Butler, Columbus, and Sinton. So I think, yeah. A large portion of that will turn into the third quarter.

Speaker Change: Yeah, I I think if you, if you, if you look at the overall utilization quarter of a quarter, um, it it was a little disappointing uh, for us but it was a Confluence principally of uh, the the, the auction and issue and sentiment. And then we had uh, uh our our schedule maintenance outages, actually all 3 mils uh, in in the quarter so Butler Columbus and um, and sent them so. So I think uh,

Speaker Change: A large portion of that will, uh, will will will turn into into the third quarter.

Barry Schneider: Okay, thanks for that. And I know you don't like to get precise on pricing in the downstream fab business, but wanted to see if there's anything you wanted to call out in terms of mix impacts, mix between joist and deck as it may relate to some of the projects you're expecting in the third quarter. Just anything that we should be mindful of. Thanks for the question, Bill. That shift, I know you know fairly well that we've started to get more and more into deck, but consistently now, probably for at least the last year, it's basically about 50% deck and 50% joist, and I don't see that changing in the second half of the year.

Speaker Change: Okay, thanks for that. And I know you don't like to get precise on on spicing in the downstream table business, but wanted to see if there's anything you wanted to call on in terms of mix impacts uh mix between joist and deck as it may relate to some of the uh projects. You're expect expecting the third quarter, just any anything just uh that we should be mindful of

Speaker Change: Thanks for the question bill um that that shift I know. Um, you know, fairly well that we started to get more and more into deck. But consistently now, probably for at least the last year, it's basically about 50% deck and 50% joist. And I I don't see that changing in the second half of the year.

Barry Schneider: Perfect. Thanks again for the color and for speaking to me.

Operator: Thank you.

Speaker Change: Perfect. Thanks again for uh, the color. And for speaking with me again,

Thank you.

Operator: That concludes our question and answer session.

Mark Millett: I'd now like to turn the floor back over to Mr. Millett for any closing remarks. Super. Thank you, Holly. And just quickly, thank you to everyone on the call today. Thank you for listening and for your time. For those that are investing in us, thank you for your direct support. Would love to have everyone else that does not join the family.

Speaker Change: That concludes our question and answer session. I'd now like to turn the floor. Back over to Mr. Mallet for any closing remarks

Mark Millett: And talking of family, team members, SDI folks out there, thank you, thank you, thank you for a phenomenal job each and every day. And remember to be absolutely safe for yourselves, for your colleagues, and for your family in general.

Mr. Mallet: Thank you, Holly and just, uh, quickly. Thank you to everyone on the call today. Thank you for, uh, for listening and for your time for those that are investing us. Thank you for your, your direct support. Uh, would love to have everyone else that that's not uh, join join the family.

Operator: And to the new members or joiners and partners to SDI through Illuminum, we look forward to working with you in the future. And hopefully we'll show that we are a totally differentiated company for you to work with. So thank you, everybody. Have a good day. Be safe.

Mr. Mallet: Uh, and talking to family uh team members SDI uh uh folks out there, thank you, thank you, thank you for a phenomenal job each and every day and remember to be to be absolutely safe for for yourselves, for your, your your colleagues and for your, for your family in general and, uh, to to the, the, the new, uh, members, uh, or or join us, uh, and, and partners, uh, to SDI through the aluminum. Uh, we look forward to working with you, in, in the future and, uh, hopefully we'll show that we are a totally differentiated uh, company for you to to, to work with. So thank you, everybody have a good day, be safe.

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

Mr. Mallet: Once again, ladies and gentlemen.

Mr. Mallet: Be great and safe day.