Steel Dynamics, Inc.

Good day and welcome to the Steel Dynamics third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After management's remarks, we will conduct a question and answer session. and instructions will follow at that time. Please be advised, this call is being recorded today, October 21st, 2025, and your participants implies consent to our recording this call. If you do not agree to these terms, please disconnect. At this time, I would like to turn the conference over to David Lipschitz, Director, Investor Relations. Sir, please go ahead.

Thank you, Ali. Good morning, and welcome to Steel Dynamics' third 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. Leading today's call are Mark Millett, Chairman and Chief Executive Officer of Steel Dynamics, Theresa Wagler, Executive Vice President and Chief Financial Officer, and Barry Schneider, President and Chief Operating Officer. The other members of our senior leadership team are joining us in the call individually. Some of today's statements, which speak only as of this date, may be forward-looking and predictive, typically preceded by believe, expect, anticipate, or words of similar meaning. They are intended to be protected by the Private Security 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 anticipated project returns, and our steel, metals recycling, and fabrication businesses as well as to general business and economic conditions. Examples of these are described in the related press release, as well as in our annually filed SEC Form 10-K under the headings Forward-Looking Statements and Risk Factors. Found on the Internet at www.sec.gov and, if applicable, in any later SEC Form 10-Q. You will also find any referenced non-GAAP financial measures reconciled to the most directly compared GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports Third Quarter 2025 Results. And now I'm pleased to turn the call over to Mark.

Super. Thank you, David. Well, good morning, everybody. Thank you for being with us on our third quarter 2025 earnings call. Some may suggest hyperbole, but I've often said that we have the best teams on the planet, and they proved it once again in the third quarter. Operationally, they executed incredibly well while keeping each other safe and achieved pivotal successes in furthering our significant growth projects. Financially, even with some interim market headwinds and flat roll, we achieved a number of key operational milestones. We had a record steel shipments of 3.6 million tons. Revenues were 4.8 billion. Adjusted EBITDA was 664 million. And we had a healthy cash flow from operations of 723 million. At Sinton, I believe consistent operational execution has been achieved. It was a record quarter for shipments. Downstream coating and pre-paint product quality has matured, and the value-add product portfolio is expanding nicely. Industry participants are recognizing that this is the mill of the future. Our aluminum team continues to make strong progress in commissioning and ramping operations, receiving a number of quality certifications in September and October. In particular, our CAN sheet has been performing extremely well, with equivalent results to competitive material. Much more to do, but incredibly exciting performance today. And our biocarbon team shipped their first product in September. We're extremely excited to have this new tool in our decarbonization journey that will further reduce our carbon footprint from an already industry-leading low level. I continue to be proud of the entire steel dynamics team because they are just the foundation of our company and they continue to amaze me. And so we're laser-focused on providing the very best for their health and safety. It is an everyday conversation at every level. Our world-class safety culture continues to mature, and our team's dedication to our Take Control of Safety program is extraordinary and continues to produce strong results. Their commitment is inspiring. They consider themselves family and challenge the status quo each day to keep each other safe. But that said, there will always be more to do as we drive toward a zero-incident environment, as there is nothing more important for us. So with that, I'll hand it to Teresa and to Barry to give some color to the quarter.

Excellent. Thank you, Mark. Good morning, everyone. Thank you for joining us, and thanks to the teams for an exceptional performance. Our third quarter 2025 earnings per diluted share were $2.74, with adjusted EBITDA of $664 million. Both third quarter 2025 revenue of $4.8 billion and operating income of $508 million were higher than the second quarter results, driven by record steel shipments and metal spread expansion as scrap raw material costs declined more than steel prices. As we discuss our business this morning, we continue to focus and execute on our transformational growth initiatives. Our steel operations generated operating income of $498 million in the third quarter, 30% higher sequentially based on record shipments supported by an almost 20% improvement in shipments from Sinton and metal spread expansion. Average scrap costs declined $27 per ton, while average realized pricing only declined $15 per ton. For modeling purposes, this quarter's hot van shipments were 1,097,000 tons. Cold rolled shipments were 120,000 tons. And finally, coated shipments were 1,486,000 tons. Additionally, we also highlight that our three flat-rolled steel production divisions have planned maintenance outages in the fourth quarter, which could reduce volume by as much as 85,000 tons. For the third quarter, operating income from our metals recycling operations was $32 million, significantly above our sequential second quarter results. driven by near-record shipment supported by domestic steel demand and steady non-ferrous volume, coupled with metal spread expansion. We're the largest North American metals recycling, processing ferrous scrap and non-ferrous aluminum, copper, and other metals, and we're growing to support our increased steel capacity and aluminum flat-rolled operations through new and expanded supplier relationships and through the use of innovative separation technologies. Our metals recycling platform is a significant competitive advantage for all of our platforms. Our steel fabrication team achieved operating income of $107 million in the third quarter, 15% higher than second quarter sequential results due to increased volume coupled with relatively flat metal spread. Our joist and deck backlog extends through the first quarter of 2026 with solid pricing. And federal programs, manufacturing growth and onshoring are expected to support domestic fixed asset investment and therefore related steel joist consumption in the coming years. Congratulations to the aluminum teams in Columbus and San Luis Potosi, hitting so many early quality milestones. The energy and momentum are contagious. Related startup operating losses of $57 million were somewhat higher in the third quarter than previously expected as the teams continued construction and commissioning of various areas while also accelerating testing for beverage can and automotive products. We currently estimate comparative losses to be in the range of $40 million for the fourth quarter of 2025. Based on current expectations, we continue to believe our aluminum operations will achieve monthly EBITDA breakeven or better in the fourth quarter of this year. During the third quarter of 2025, as Mark mentioned, we generated strong cash flow from operations of $723 million. Of that, operational working capital was a funding source of $126 million. We ended September with liquidity of over $2.2 billion. For the fourth quarter of 2025, we believe capital investments will be in the range of $200 million. And early estimates for capital expenditures for the full year 2026 are in the range of $500 to $600 million. During 2025, we've repurchased $661 million of our common stock, or 3.4% of our outstanding shares. At September 30th, $1 billion remained available for share repurchases. Since 2017, we've increased our cash dividend per share by 223%, and we've repurchased $7.4 billion of our common stock. That's over 40% of our outstanding shares, all while maintaining investment-grade ratings and growing. These actions reflect the strength of our capital foundation and consistently strong cash flow generation capability. 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. Our free cash flow profile has fundamentally increased over the last five years to $3 billion, excluding our large strategic sentient and aluminum investments. We've truly 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. We recently announced 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 from us. And I'm incredibly proud and excited to announce that our biocarbon solution team safely produced and shipped their first biocarbon material in September, and it was successfully used as a carbon replacement at our Columbus Flat World Steel Division, providing an even lower carbon supply chain for our steel customers in the future. The team plans to continue to refine operations and increase production into the first quarter of next year. This achievement marks a pivotal step in our decarbonization journey and further demonstrates our ability to translate innovative concepts into tangible results. A personal thank you to all 73 BioCarbon team members. 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 are committed to operating our business with the highest integrity. We uniquely have an actionable path forward that's intentional and manageable, and we believe considerably less expensive than may lay ahead for many of our peers. We're squarely positioned for the continuation of sustainable, optimized, long-term value creation. Thank you. Barry?

Thank you, Teresa. Our steel fabrication operations improved their sequential results as volumes increased 12% sequentially, more than offsetting slight metal spread compression. Order activity remained steady in the quarter, and our backlog now extends through the first quarter of 2026. Pricing for steel joists and deck bookings remained relatively stable throughout the quarter. We continue to be optimistic for our steel joists and deck platform based on the continued onshoring of manufacturing, continued announcements of significant privately funded manufacturing projects, and public funding for infrastructure and other fixed asset investment programs. The long-term uplift of 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. It also helps mitigate the impact of lower steel prices. Earnings for our metals recycling operation were much higher in the third quarter as metal spreads improved and shipments were at near record levels. We believe fair scrap prices have stabilized and are likely to remain relatively steady throughout the rest of the year. aside from typical seasonal fluctuations. Additionally, the team continues to expand its access to recycled aluminum for our aluminum flat rolled operations. North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel, aluminum, and copper operations and for our scrap generating customers. Our metals recycling team partners closely with our metals production and manufacturing teams to expand scrap separation capabilities through advanced process and technology solutions. This collaboration helps mitigate supply risk by making more grades of ferrous and non-ferrous scrap usable for operating platforms and generally at a lower cost. Additionally, it positions us to significantly increase the recycled content in our products, unlocking enhanced earnings capabilities. The steel team delivered a solid quarter with record shipments of 3.6 million tons. In the third quarter of 2025, the domestic steel industry operated at an estimated production utilization rate of 78%, while our steel mills operated a notably higher rate of 88%. This consistently higher utilization reflects our value-added steel product diversification, differentiated customer supply chain solutions, 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. Overall, realized steel pricing slightly declined in the quarter due to lower flat-rolled steel pricing tied to lagging contracts, which more than offset increasing structural and railroad rail pricing. Overall, domestic steel inventories remain lean from a historical basis. However, coated flat-rolled steel volume and pricing compressed during the quarter due to an inventory overhang related to imports received earlier in the year prior to the positive related trade rule. We do believe that prices have bottomed out and will improve as we head into 2026. Last month, the ITC unanimously voted affirmatively on the final determination that imports of corrosion resistant steel from 10 countries injured the U.S. steel industry. 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 U.S.-produced steel products. The underlying steel demand remains steady. However, customers continue to exercise caution in placing orders to ongoing changes in trade policies. That said, we believe steel prices have stabilized in the near term with potential for upward movement in 2026. Our Sitton, Texas flat-rolled steel mill achieved higher earnings in the third quarter, driven by record shipments and a continued efficiency and quality gains. Congratulations to the team. The team continues to make improvements in yield, cost reduction, and quality. They are also continuing toward additional product development to expand our current flat-rolled steel capabilities. Meaningful progress has been made on unique high-quality API pipe grades, high-strength grade 100-110, pressure vessel quality, and OEM qualification packages for our automotive customers. We are seeing increased shipments from Citin's value-added coating lines, which are strengthening the facility's product mix and boosting its through-cycle earnings capabilities. Regarding the steel market environment, North American automotive production estimates for 2026 were recently revised modestly upward, yet currently remain modestly below 2025 forecasts. 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 US-based European and Asian automotive producers due to our superior carbon content capabilities. Additionally, numerous announcements have been made concerning a considerable volume of automotive production moving to the US from foreign locations in the coming years. We continue to grow market share in both flat rolled and SVQ steels within the automotive sector. Non-residential construction should benefit from ongoing on-shoring activity, recently announced domestic manufacturing projects, and continued infrastructure spending that are expected to further support fixed asset investment and construction-related demand. In the energy sector, oil and gas activity remains steady, with solar continuing to be very strong 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.-produced steel content requirements. With that, I'll return it to Mark Bellet.

Super, Mr. Shire. I appreciate that. Thank you, Teresa. So, after many years, I think it's clearly evident that our performance-driven, team-based culture, in combination with a proven, diversified, and value-add business model, drives superior financial metrics. This consistently strong operating and financial performance continues to support our cash generation and growth investment strategies, allowing a very balanced cash allocation strategy that has delivered the highest shareholder returns, not only among our metals peers, but the best of domestic manufacturers. Our disciplined investment approach continues to support a strong and growing cash generation profile while maintaining a best-in-class return on invested capital. Our aluminum investments are now a reality and are extremely compelling. Initial operations and commercial activity are confirming our initial investment premise. We believe we will enjoy a unique commercial position. Unlike our entry into the oversupplied steel market some years ago, there's a significant domestic supply deficit of over 1.4 million tons for aluminum sheet. And this deficit is forecast to grow, even before tariffs. In 2024, that deficit was supplied through high-cost imports, which are now at an even higher cost as the tariffs increased from 10% in 2024 to the current 50% level. There's a clear alignment with many of SDI's core competencies, and construction capabilities have been once again proven. Both Columbus and SLP are state-of-the-art assets, and if you just think about it for a second, We shipped our first coil within 24 months of groundbreaking. And here we stand today, 27 months from groundbreaking, and we're shipping a prime product to the can sheet in automotive markets. That's an absolutely incredible, incredible performance. My hats off to the team down there, to Glenn Pushers and to Greg Wiggum, everyone, for making that happen. It's an absolutely beautiful, beautiful facility. Work of art. We also lever our deep operational know-how, have an extensive and successful experience operating melting, casting, rolling-type assets. And our performance-driven culture will drive higher efficiency and lower-cost operations, just as we did when we entered the steel industry some 30-plus years ago. It's demonstrated, and the teams will achieve it. We have an advantaged commercial position. Two-thirds of our carbon flat-road steel customers also consume and process aluminum flat-road sheet. Our growth and penetration into the automotive sector will complement our existing steel position and give customers product optionality. The counter-cyclical beverage can market, which in conjunction with the more stable earnings profile experienced through the years within the aluminum space, will further enhance the consistency of our through-cycle cash generation. Our raw material platform will facilitate higher recycled content. We have the largest North American metal recycle, including aluminum. We recycle already around about half a billion pounds of aluminum per year. And we've successfully developed new separation technologies, allowing us to have both more access to usable aluminum scrap at a lower cost. Operation experience thus far is confirming our earnings differentiation. We've advertised and do believe that through cycle EBITDA of $650 to $700 million is absolutely achievable, plus an additional $40 to $50 million for Omni operations. The key areas of advantage remain labor efficiency, higher recycled content, higher yield, and optimized logistics, along with our low-cost culture. There is no doubt the strategic investment is a cost-effective and high-return growth opportunity, providing SDI with additional diversification, further stabilizing and growing our cash generation capabilities. And for those that have been there, you understand it. The 650,000 metric ton project is no longer a vision. It's clearly here. 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. They see the vision and are energized by our culture, where they realize that they will be heard and can have a real impact. They have helped us build a phenomenal team that combines in-depth knowledge of aluminum flat roll operations, commercial markets, process technology, and custom service, complementing our SDI professionals that bring our performance-driven entrepreneurial culture. We're finding 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, as in Woodsteel, business relationships are long-term, founded on trust and the continuous goal of creating mutual value. Not simply financial value, but new supply chain solutions New products, better quality, and better service. We're seen to react with surprising speed. Many customers have just seen that with the recent supply-side challenges in the market. The timing of our ramp-up has been fortuitous, allowing us to help the market while accelerating our material qualification. We've received approvals for industrial and canned sheet-finished products and for automotive aluminum hotband earlier this month. This accelerated certification should allow us to shift our product mix to a higher margin mix in 2026, reaching optimization sometime in 2027. Three of the four melt casthouses are fully commissioned at Columbus and have produced 3,000, 5,000, and 6,000 series ingots for the industrial, can sheet, and automotive sectors for rolling mill commissioning, product development, and commercial shipment. The hot mill is completing its commissioning having run 3003 and 5052 industrial, 3104 can shoot, and 5754 auto grade material. The code reversing mill is in startup and is successfully producing 3003, 5052, and 3104 alloys. Tandem mill number one will be starting up in November. And then Tandem Mill number two and the cash line are on schedule to be available in the first quarter of 2026. And it's absolutely incredible if you walk through the plant, because the team is incredibly excited with the earlier than anticipated product certification. It is a testament to the phenomenal talent that we have on the team, and it is great energy, great momentum. We anticipate exiting 2026 at a rate of 75% capability, And we expect to achieve monthly EBITDA break-even sometime in the fourth quarter, increasing thereafter as we continue to ramp and optimize our product limits. Across our business, evolving market dynamics provide an opportunity for us to further enhance our earnings potential. The renewed focus on strategic mercantilist policies to ensure fair and sustainable competition will further improve market strength. The recent coated flat-rode steel positive trade determination will further curb core and prepain imports. We're seeing that already. The administration will continue to hold a firm position on 32 tariffs on steel and aluminum imports. And the inclusion of tariffs on steel content of derivative products, including fabricated structural steel, which has plagued the domestic industry for years, will be of substantial benefit. one has to consider that in 24, some 30 to 35 million tons of steel came in through actual products. And then last year, obviously the successful sunset reviews of Section 201 and 301 trade cases will remain in place for some years, stopping dumped Chinese steel from accessing our markets. We will benefit from growing fixed asset investment, which correlates directly with increased steel demand. Risk mitigation to address numerous supply chain dislocations is accelerated reshoring of manufacturing by many OEMs. AI and cloud computing will support the need for more non-residential construction along with data centers, chip factories, and battery plants. We believe there obviously will be associated positive stimulus through the inevitable interest rate reductions that should happen this year and next. And finally, decarbonization will materially steepen the global cost curve, providing steel dynamics with a meaningful competitive advantage to gain market share and increase margins. More importantly, we continue to be impassioned by our current and future growth plans, as they will continue to drive the high return growth momentum we have consistently demonstrated over the years. The earnings growth of these new projects is compelling. Careful spending for Sinton The four value add-lines and aluminum dynamics is largely spent for the projected future through cycle EBITDA contribution of over $1.4 billion. Steel dynamics has grown to an incredibly resilient, cash-generating business of scale and diversification, driven by the best teams, as I already said, in the world. The model has now demonstrated itself year after year, delivering financial metrics equivalent to best-in-class manufacturing companies. We are fortunate, and at the heart of that good fortune are our people. They are the foundation of everything we do, and I want to personally thank each of them for their passion, their commitment, and unwavering dedication. And we are committed to them, and I remind those listening today that safety for yourselves, your families, and each other is our highest priority, always. And 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 your value. Our new aluminum partners can expect the same level of commitment and collaboration. And to our suppliers and service providers, thank you. We value your continued support and the strong relationships we've built together. Our culture and business model continue to differentiate our performance, leading best-in-class financial performance. and is a circular metals business who are uniquely positioned to offer lower carbon supply chain solutions, enhancing sustainability while helping to mitigate cash flow volatility through all market cycles. This positions us to deliver superior shareholder returns and create lasting value for all stakeholders. So we look forward to creating new opportunities for all of us and today and in the years ahead. And with that said, Ali, we would love to open the line for questions.

Thank you. If you would like to ask a question, please signal by pressing the star key followed by the digit 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you pressed star 1 earlier during today's call, please press star 1 again to ensure our equipment has captured your signal. Also, we ask that you please limit yourselves to one question to facilitate time for everyone. Any additional questions can be addressed upon re-entering the queue. Thank you. Our first question is coming from Katia Jančić with BMO. Your line is live.

Hi, thank you for taking my question. Maybe starting on the aluminum rolling mill and the quality qualifications for the products you've received so far, can you talk a bit more what that means for your commercial activities? Specifically, does that open the door for you to start negotiating longer-term contracts?

Well, I guess, firstly, the accelerated qualifications that we've been receiving is absolutely incredible. incredible, given where we are on our learning curve, as you might recognize. You know, can sheet has been supplied to most of the principal can makers today for qualification. Early performance is, again, it's just incredible. And when the team sent me a video of the very first coil going through a can line, flawlessly, there's something to be hoped. And obviously, we're also having some good progress within automotive. I think what it does, it accelerates the value or the product portfolio mix into next year. And we've always said that we hit our target mix in 2027. I think we'll see that earlier in 27 than we were expecting.

But to answer your other question, Katja, we are negotiating longer-term contracts, both in the sheet, the CAN sheet, as well as in the automotive. So yes, that has helped, but we had considerable traction, I think, throughout the third quarter as we were starting up. So more to follow on that.

Maybe if I just can quickly squeeze one more. On the 26th, how should we think about the mix between industrial, can, and auto?

The most significant difference, Katja, is that earlier on, we wouldn't have expected to have very much volume in automotive, specifically. And we have full confidence, and we were getting to, I think, appropriate amount of mix as it relates to can sheet in 2026. As you'll remember, the optimized mix for us is it's 35% automotive. I think, is it 40% more? Sorry? 45%. 45% can sheet and the remainder industrial. So we feel pretty confident in that can sheet mix for 2026. But what's changed is we would expect to not reach full. optimization in automotive in 2026, but we'll provide more feedback as we get further certified, because as Mark pointed out, for automotive right now, we're just certified on the hot band side.

Perfect. Thank you.

Thank you. Our next question is coming from Tristan Gresser with BNP Paribas. Your line is live.

Yes. Hi. Thank you for taking my question. Just following up on aluminum, if you could provide maybe an update on the target exit run rate for this year or maybe what you expect in Q1 so we can get a better sense on what to expect in terms of volumes. And I think you were initially expecting positive EBITDA in Q4. So what drove the lower number? Any sorts of delay or anything you can share there? That'd be great.

So Tristan, I just want to clarify. So we are still expecting to be positive break-even to, sorry, EBITDA break-even to positive in the fourth quarter. So that hasn't changed. What has changed is the certification of the more complicated products is taking place more quickly than we expected. So there are some higher costs associated with that. So that was one of the things that I talked about in my opening comments as it relates to the third quarter impact. That said, we haven't been specific about how we're going to ramp in 2026, but what we have done is provided substantiation that we still are very confident in nexting the year, at least at a 75% utilization rate. And as it relates to 2025, there's just a lot of moving pieces right now, so we don't want to get into utilization because it depends on the product mix to a large extent.

Okay. All right. That's fair. And maybe just a quick one on the free cash flow. I mean, you have a very strong free cash flow. If you can talk a little bit about your priority in terms of capital allocation into next year, you mentioned CapEx will be between $500 million, $600 million. Is growth on the agenda for next year? And if so, what are the options? You may consider upstream steel, aluminum. Are you considering maybe different types of metallics asset that could be on play in the region? So any color there would be great. Thank you.

Mark can speak to what things might look like, but just to give you some specificity around the $500 to $600 million, Tristan. As a reminder, our sustaining capital is generally around $200 to $250 million, and then we still will have a tail associated with the aluminum project and a little bit on the biocarbon project as well. It just depends on the timing as we proceed through the end of this year. So that is a preliminary number, but Mark, I don't know if you want to give any context to what other growth opportunities we might be looking towards.

Which is generally on the cash allocation broadly, I think, you know, with our strong liquidity position and the through cycle cash generation that will come through next year and years after, we can retain our balanced cash allocation profile. So one can expect an increase in the dividend, I would think. Our positive profile will continue into next year. We feel that the company is selling at an incredible discount today relative to other potential investments one might make. So we'll continue to buy our shares back. And again, we're doing that not because necessarily our shareholders just want us to or we think it's a It's the flavor of the month. It really is buying a company that is discounted, a quality company that we know with a phenomenal team, phenomenal assets. Extending from that, we still have a team that is innovative and creative. They've got a pipeline of organic possibilities, both in steel and in aluminum, and that will access new products. new product lines for us. Now, those aren't massive $3 billion greenfield steel mills, but smaller projects, but very, very high return, high reward. And then, obviously, there's the possibility of M&A activity out there. But just one highlight, I guess. But you will continue to see us adhere to our disciplined investment approach. I think we have the highest return on invested capital in our space for a reason. We're disciplined and we buy good assets with real return, real future return. And you'll see that going forward.

All right, that's clear. Thanks a lot.

Thank you. Our next question is coming from Timna Tanners with Wells Fargo. Your line is live.

Hey, good morning. I wanted to follow up, if I could, on the aluminum questions. So you're starting up and getting qualified on hotband just when there's a player in the market that needs hotband. So could you address that ability to supply novellas, if possible, and then If you could just comment on the additional capex, I believe comparing the presentations that there's another $200 million that was attributed to the aluminum startup, if you could elaborate on that.

Well, Tim, again, thanks for your questions. We will not comment on where our material is going. I think the aluminum space is a lot more shielded from a confidentiality standpoint relative to steel. And so most of our relationships are under CA or NDAs. So I can't really speak to that. Other than it's absolutely phenomenal that the team in such a short period of time is accessing those sorts of markets. Relative to the CapEx, yeah, it did expand. Again, in all honesty, it's kind of late. the wind down of the project and just clearing up all the construction contracts. But I think more importantly, the last three months, it has been, in particular, it's been incredibly difficult to get electrical talent with all the data centers, et cetera, being built. We found our contractors sort of drifting away from us. And there was a substantial increase in the cost to cover that and maintain our schedule.

Got it. Thanks. If I could squeeze one more in. There was a comment yesterday that there's a view that customers would be switching away from aluminum back to steel because of the availability. Not something we'd heard before and just would be interested to get your thoughts on that as you're now in both markets.

Well, I think obviously if you're an aluminum consumer and you've seen the sort of supply chain risk that they've just gone through, you've got to ask that question. I think, and you've heard us say this before, as we got into the aluminum space and looking for, well, just looking or doing our due diligence for the ADI project, Automotive makers would have actually consumed more aluminum over recent years if there was more supply. Are they questioning aluminum? I don't think so. Aluminum is an incredibly important material for their future plans. We, coming into the marketplace, will allow them optionality and greater redundancies through the supply chain. So I think that issue or that question will sort of be mitigated going forward.

Got it.

Great. Thanks again.

Thank you.

Thank you. Our next question is coming from Lawson Winder with Bank of America. Your line is live.

Great. Thank you very much, Operator. And good morning, Mark, Teresa, and Barry. It's nice to hear from you. Thank you for the update. And a sincere congratulations on the success at Aluminum Dynamics. What I wanted to do is just follow up, Mark, on your comments on capital allocation and that you noted that M&A might be a possibility. Can you give us a flavor of where there might be opportunities to improve the business through M&A, whether that be in downstream or upstream or raw materials or otherwise?

We would steer away from raw materials, I do believe. I think it would be aligned or parallel our previous commentary in downstream, strategic, sort of pull-through volume type opportunities where we can either lever or exploit our core strengths. So downstream in coding, painting, those sorts of value-add opportunities for sure. In value-add opportunities, manufacturing to some degree, as long as the volumes are there and it makes sense. But no, not upstream. Our raw material space with OmniSource, the largest North American recycler of ferrous and non-ferrous goods today, that's in great shape. You might see a little, from a regional standpoint, a a yard here or there, but no major thing. So yeah, downstream value-add as we pursued in the past.

Okay, fantastic. Thank you.

Thank you. Our next question is coming from Phil Gibbs with KeyBank Capital Markets. Your line is live.

Hey, good morning. Good morning, Phil. Sounds Sounds like based on your comments that rail is pretty strong. Any context just broadly you can give on that market and then maybe give us a feel for how much of the rail mix is a part of your structural shipments right now?

Phil, this is Barry. We committed many years ago to be in the rail market because it's essential that they have a reliable, high-quality supplier at all times. So When wide flange is strong, you might see a smaller ratio. But in general, we try to stay exactly where the customers need us to be. It remains within percentage points of where it always is coming out of Columbia City. And we're resolving our contract relationships for next year right now. But we anticipate growth in that segment. And the team is doing an excellent job with availability of trains to get the product distributed easier, quicker. And quality-wise, they're working on even better products coming in the next year or so based on some trials they've been doing. So it remains a good part of our business, but in the window that we always keep it. So we try not to surge it too much one way or the other.

Thank you. And I just have a follow-up on the flat-rolled side of the business, and specifically at Sinton, and just an update maybe on how the downstream lines are running and and how much yield improvement you have left there. And then, Teresa, I also missed the comments you made on the flat roll mix. Thanks very much.

Sure, no problem. I'll grab that, and then Barry can comment.

I'll comment on the downstream units. We're very excited about the quality that the team is getting out of the new lines that were added, as well as the existing paint and galvanizing lines. Galvalume is a very difficult product to make. The team has really risen to the occasion. There is a learning curve, and we went through that earlier this year to the point where we are seeing excellent yields, excellent produced prime products, and our distribution system, our customer base is going through approvals. A lot of the product there goes into contract-type business with OEMs, and those trials are ongoing and very good. So We believe Sinton will have the full breadth of a product mix to offer as the markets return. As I mentioned, there's a little overhang on the galvanized still out there. We think that's diminished. We think it's going to be behind us here in months. The imports coming in the country have substantially tapered off. So we believe the playing field is going to be level. And based on good feelings, we think next year is going to be outstanding for Sinton to really realize all the hard work they've been putting in.

So, Phil, for the shipment, the hot band was $1,097,000, cold rolled $120,000, and coated $1,486,000. Thanks, everyone. Thanks, Phil.

Phil, if I could just add, because the question around structural tended to be rail-centric. Just looking at the long products market in general, we're finding that to be incredibly strong and robust and believe that we'll certainly continue. Non-residential is in great shape. And we see on the fabrication side, there's a lot of engineering, permitting, detailing work going on. And it would be our view that come the first quarter in 26, we're going to see a nice return of that volume as well.

Thank you.

Our next question is coming from Carlos Valba with Morgan Stanley. Your line is live.

Yeah, thank you very much. Good morning, everyone. So I wanted to check, Mark, you mentioned that you saw some headwinds in the flat roll business. Has the situation improved as we get into the fourth quarter? If you can give us a little bit more color as to how that part of your steel business is shaping out.

Yeah, I think the... The headwind, obviously, was principally the inventory overhang, which, as Barry just suggested, it's eroding and should be depleted by the end of this fourth quarter. And with the almost non-existent import profile, first quarter should be in good shape. I think you started to see that hot band pricing softened through the quarter, yet in mid-September, it kind of turned up. And I think we will see a sort of slow but positive move through the end of this year. And as Barry said, we are quite, quite optimistic or robust for Q1 and Q2 throughout the rest of 26.

Fair enough. And then just maybe complimenting on the growth ahead, Given the early success that you have had on the aluminum business and your comments on demand being limited perhaps by supply, I noticed you didn't talk about potentially getting more into the aluminum business. Is this something that you might consider is too early? Any call on that?

Well, we want to make sure we walk before we run. I've got to say, the team down there is starting to sprint. They're incredibly excited, and I'm, honestly, incredibly excited by what those folks are doing. It's an incredible mill. There's absolute opportunity, Carlos, in aluminum. There's no doubt about it. We will see how things go over the next six, eight months or so, but there is definitely... definitely growth opportunity there, both in downstream. We could envision sort of exploiting or leveraging our pre-paint capabilities. It's one of our highest margin product lines today, and the team would be incredibly effective to coat the thousands or millions of pounds of aluminum that gets painted every year. And then we do believe there's still clear room for a larger asset, a mill asset.

Yeah, just as a reminder, Carlos, and I know some of you would have this top of mind, but for those that may not, you know, even prior to 50% tariffs, the deficit of flat-rolled sheet in the U.S. was over a million and a half metric tons. We're only adding $650,000, and I think there's another project that may add another incremental amount, but that deficit's growing, and that's without tariffs. So then when you place that 50% tariff into the equation, it just really does. We would never invest based on that, but the point is that there's a real need structurally independent of trade action.

Thank you very much.

Thank you. Our next question is coming from Andrew Jones with UBS. Your line is live.

Hi, a couple of questions. Just firstly on Sinden, just to get an idea as to how much that's adding to the EBITDA. Can you give us any sort of breakout for the profitability of that? And I've got a second question on tax, if you want to answer that first.

Sure, Andrew. And as soon as you said taxes, both Barry and Mark looked away. Now, I think I want to, so sentence specifically, Andrew, as a reminder, we've said that there are through cycle EBITDA capability on an annual basis, but it's through cycle. So we're not making a determination where the market is at this point in time is between $475 million and $525 million. And what I want to do is take a step back because I think there's a bigger picture item that it would be helpful to discuss a little bit. And that's that Mark mentioned, and we've talked about in the past, that in the last five years, the fixed asset investments in aluminum, in Sinton, and in the four flat roll coating lines has been over $5 billion, just about $5 billion. Associated with those three projects, is about 1.4 billion of through cycle EBITDA capability. And we really haven't been able to utilize that up until this point. And so as we think about 2026 and we think about where the facilities will be from a maturity standpoint, including the ramping of aluminum, of that, you know, incremental additional earnings power, you know, we think that we should have the ability to access on a through cycle basis. So again, we're not making a determination of what that market will be like, but if it were through cycle, we really think we would have the ability to access somewhere at least no less than 60 to 65% of that number. So there's a lot of earnings potential that people may not understand is incremental structurally to steel dynamics because of the investments we've made over the last five years.

Yeah, that's why I'm asking Western, I guess. I'm just wondering, you know, what the annualized contribution was in the third quarter, and therefore what's the delta of Sinton specifically going forward?

So we won't give that specific information. Suffice it to say, Sinton was EBITDA positive, but not to the magnitude of that through cycle number.

And then you said you had a tax option? Yeah. Yeah, no, it's about the deferred tax movement on the cash flow, which boosted free cash this quarter. Just wondering if you could explain the origin of that and, you know, how you're – what the moving parts are in becoming quarters with regard to tax, because I guess – you've got a few things obviously flag this 250 mil um impact for the you know the alley project and you've also i mean there's obviously this big beautiful bill accelerated depreciation stuff going on i mean can you give us an idea for how we should think about like effective tax rates and the actual equivalent of the actual cash tax profile in the coming quarters

Yes, certainly. So it was a big boost to the third quarter because that's when we were able to adjust for the tax bill changes, which included additional research and development benefits, as well as, most importantly, the acceleration and depreciation as our aluminum assets are getting placed into operations. So that benefit of $147 million you're referring to Most of that was in the third quarter. You won't see that magnitude of increase in the fourth quarter. The way you should model cash taxes for 2025 is probably at a rate of about 8% to 9%. And then for 2026, I would model cash taxes closer to 15% to 16%. And the effective rate probably closer to 23%.

Okay. That's super clear.

Thank you. Thank you. Our next question is coming from Mike Harris with Goldman Sachs. Your line is live.

Yeah, thanks for squeezing me in. As we look at you consuming more biocarbon material to lower your carbon footprint, how should we think about what that could potentially do to your cost structure?

Oh, it's a good question, Mike. So from a cost structure perspective, it really probably won't have a material impact for you to be able to observe from the outside in. It is a joint venture, so we are transacting as we would at a market price to our steel mills. The joint venture is with Amium, who has the IP associated with it. But what it does offer is an opportunity for us to offer an even lower carbon product. And we do believe, we're already seeing some customers that are providing premiums. Not something that we're talking about at this point more broadly in specifics, but we think it'll open the door for even more opportunity on market share, specifically in OEMs, specifically more in the flat roll side of the business. So there's a lot more we'll talk about as it relates to biocarbon in the future. They should be operating... continuously here starting in November, so it'll take a minute before we're supplying, you know, as much into the steel mills as we'd like. But you shouldn't see a dramatic impact on the cost side at this point.

Okay, that's very helpful. And then just one last one, if I could. Of the record shipments you saw in the third quarter, were there any material one-time sales included in that?

No. Nope. It was just ramping up of Fenton, and then we had some record shipments at a couple of other of our flat roll facilities, as well as really a lot of strength and demand, as Mark pointed out, in the structural arena.

Okay, perfect.

Thanks a lot.

Yep, thanks, Mike.

Thank you. Our next question is coming from Bill Pedersen with J.P. Morgan. Your line is live.

Yeah, hi, good morning, and thanks for taking my question as well. I wanted to talk about the steel mill shipments in the fourth quarter. You called up the 85K planned maintenance, but I guess is there anything else that we should be taking under consideration? For example, you know, other things, seasonal trends, or also taking into account imports, which seem to be at a very low level or maybe potentially abating further. Trying to get a sense on how to think about shipments relative to maybe the last five years of flat to down 5%.

So you guys are so crafty. You always try to come at it from a different angle. And that's a compliment, Bill. For the fourth quarter, we just wanted to call out the maintenance because generally we don't have all the maintenance in the same quarter as we are this time, so we felt like it was impactful enough to call out. But we do still believe there's going to be seasonality, whether it's the same as it's been the last five years. I can't really comment to that. But you will see seasonality in the volumes in addition to what you're seeing from a maintenance perspective. Barry, Mark, do you have anything to add?

The outages are just our regular attempt to keep our assets performing at the absolute tip-top condition. We plan them long in advance, and this is strange that we have all the mills taking some time in the fourth quarter. But all are great projects that continue to make our shops the safest in the industry and most efficient possible.

Okay, thanks for that. I'm not sure if this is crafty or not, but I just want to think about your overall strategy in auto. I know you're an emerging player in aluminum, but thinking about your steel, is this a market where you're looking to gain share? And if so, how should we think of that unfolding in the coming years? Or is really this business going to kind of grow with your existing partners, assuming they grow their U.S. footprint in order to avoid tariffs?

We are real excited about the automotive business that we're doing. I think the opportunity for our customers to purchase a low-carbon content product really enhanced our relationship early. And since starting to do business with us, our teams operate very efficiently, very smoothly, and without much bureaucracy. So I believe our teams have a great position relationship. They've been working really hard this past year with all the tariff changes to allow us to continue to do what we do best for the automotive industry. We do see it growing. When we built Sinton, that was part of the design to be close to the Mexican automotive base with some high-value steel products. The facility was designed with that in mind. So as that ramps up and we have OEM packages in to all of our customers from that facility. We anticipate the growth organically happening. We see it as good products, and we're appreciative that the customer base recognizes that. We received an outstanding award from Volkswagen in the second quarter, which was really a surprise, and we were absolutely thankful to receive that. But it really highlights our position. We have a very low carbon footprint. We have a very engaging position going forward that doesn't change our cost structure. We've engaged on renewable energy and nuclear energy across our flat roll platforms. So we are ideally situated to grow our business there. And we're going to grow it where it makes sense and listen to our customers and have great discussions with them.

Yeah, thanks, Barry, Teresa, Mark, for all the great color on this call. Thanks again.

Thank you.

Thank you. Our final question today will be coming from John Tumazos with Independent Research. Your line is live.

Thank you.

Hi, John. Good afternoon. Could you explain the $27 drop in scrap costs, given that the steel business is strong? Calvert, Alabama starts up a new melt shop right now, et cetera. Is it from lower iron ore and coal prices and China selling lots of slabs and other steel, et cetera? And then second, would a reasonable guess for aluminum be 240 to 250 a pound sales realization with the big Midwest premium and maybe

a $1.40 production cost with 93-cent UBCs?

Well, taking number one, the scrap dropping off $27, obviously, John, as you know, scrap is, in my mind, the most transparent fluid commodity out there, and it's just supply and demand. And honestly, $27 in the broad scheme of things, it's more noise than anything else. Directionally, I think it's important, but it's more noise. In the old days, $10, $15, $20 move would be monumental today. It's not too much. But again, in the dynamics of scrap, with the segregation technologies out there today, the ShredOne and all these things, there's greater optionality of flow, and I think that's just bearing fruit. And we've always said, uh always suggested that we we don't have a major concern that the others have had over the years that oh my goodness uh yeah yeah flat roll is going to continue to to uh to grow and scrap is going to be a problem in fact if you look at a lot of the new projects coming online they're uh Most of them, anyway, are having some CRI-type virgin iron associated with them. So even though the production capability of the domestic industry is increasing, the scrap consumption is not at that same rate. So we still remain confident that... scrap will remain at a reasonable level, and that going forward, spreads will remain very high, if not increase, to be honest, going forward. Relative to your question on aluminum, I will refrain. To be honest, it's a little bit more complicated, as you can appreciate also, It depends on which grade. Is it automotive? Is it cash? Is it industrial? It's all over the map. Suffice it to say, we do believe that our returns that we've advertised are more than achievable.

I'm glad to be a shareholder. Thank you.

Thanks, John.

John, we appreciate you being a shareholder all those years and challenging us, for sure. And just to finish up, I would like to thank all shareholders that support us that are on the call. As I often joke to them, if you're not a shareholder, you should be, because we will endeavor to perform well and use your dollars just as though they were our dollars. A couple of just point out customers that are on the line, thank you, thank you for your support. Particularly would like to welcome any Ali customers that are on the line. It's been a pleasure to engage with you and just in the last three, four, five weeks of market chaos in your space, it really has been refreshing for us and hopefully refreshing to you because we do bring a different approach from a sort of a customer relationship standpoint we truly will partner with you going forward and lastly any SDI folks on the call absolutely hats off to you you do a phenomenal job each and every day you do make a difference You are the best steel metals team on the planet. Just make sure you keep safe and keep each other safe. Thank you all.

Thank you. Once again, ladies and gentlemen, this does conclude today's call.

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