$STLD Steel Dynamics Q2 2026 Earnings Conference Call

Super. Thank you David and good morning everyone. Thanks for joining us this morning for our second quarter 2026 earnings call. As reported, our teams achieved a strong second quarter financial and operational performance. The quarter highlights included record quarterly steel shipments of 3.7 million tons, adjusted EBITDA of 921 million, and we achieved meaningful milestones across our aluminum and Sinton platforms. It's exciting to watch our long-term vision translate into operational success, customer partnerships, and growing value creation. We have an amazing team of people that achieve best-in-class performances each and every day, and I'm just simply honored to be one of them. But sadly, one of our new team members, Elijah Jones from New Process Steel, was fatally injured in an accident that occurred while work was being performed on equipment this past April. It is gut-wrenching for everyone to experience such an event and our prayers and thoughts continue to be with Elijah's family, friends, and teammates. We often say safety is our most important cultural pillar and value. Our world-class safety culture continues to evolve and our team's unwavering dedication to our take control safety philosophy must continue to strengthen even further. I'm continually inspired by the commitment of our team members demonstrating towards one another. They operate as a family supporting each other while challenging the status quo and striving for continuous improvement every day. We are resolute and committed to achieving a zero incident environment and will not be satisfied until that becomes a reality. But before I continue, I'd like Theresa and Barry to both add color to the quarter's results. So Teresa,

Thank you, Barry. Thank you, Teresa. All well said. Consistently achieving such positive results year upon year doesn't just happen. It reflects the dedication of our teams and the effective strategies we've developed and executed over time. We've invested strategically to successfully achieve significant scale, high margin product and market diversification, efficient and unique customer supply chains, and synergistic operating platforms to optimize market opportunities throughout economic cycles. When combined with our performance-driven compensation culture, these strategies enable us to consistently achieve at the highest levels and outperform competitors across all market cycles. Our foundational focus on market and product diversification, particularly in higher margin value added products, supports stronger through cycle facility utilization and drives superior financial performance. We optimize cash generation which enables a balanced and consistent capital allocation strategy that supports growth, maintains financial strength and delivers compelling long-term returns to our shareholders. Our disciplined approach to capital investment continues to generate strong through cycle cash flow and supports one of the highest return on invested capital profiles in the industrial sector. The most recent and most significant current investment is in aluminum flat rolled products. And as I mentioned in the last call, the excitement and the pride of the aluminum team is absolutely incredible. It is inspiring to watch them transition from construction and commissioning into full scale production serving customers with the high-quality products they expect from Steel Dynamics. The team has outperformed all expectations, constructing and commissioning an incredible facility in industry-leading time. Competitors and customers alike that have toured the mill are amazed at the quality and the capability of the plant and the speed of product qualification. The teams are navigating a volatile aluminum market driven by the impacts of geopolitical conflict and domestic supply chain challenges. But despite these near-term challenges, they've remained focused on execution, customer service, and operational excellence. Beyond these temporary constraints, though, we're operating in a unique and highly favorable long-term market environment. The United States faces a significant structural supply deficit of more than 1.4 million metric tons of aluminum sheet. And that shortfall is forecast to widen as demand continues to grow across key markets. Combined with appropriate tariffs on imported aluminum products, this supply imbalance is further strengthening the value proposition for domestic producers. And we believe our aluminum platform is exceptionally well positioned to capitalize on the growing domestic demand, creating substantial long-term value for our shareholders. This investment is in clear alignment with our core competencies. Our construction capabilities have once again been proven. Both Columbus and the Cast House at San Luis Bisci are state-of-the-art facilities built cost-effectively and in record time. We're using our deep operational know-how in combination with the technical expertise of aluminum industry experts and our proven incentive-driven performance culture will drive higher efficiency and lower cost operations compared to the competitors. We also believe we have an advantaged commercial position. Two-thirds of our existing carbon flat rolled steel customers also consume and process aluminum flat rolled sheet. Our growth in the automotive sector will complement our existing steel position and provide customer material optionality. The beverage can market will provide counter-cyclical market diversification and a more stable earnings profile within the aluminum space will further enhance the consistency of our through cycle cash generation. Our metals recycling platform will facilitate higher recycle content. We're the largest North American metals recycler which includes aluminum. Our knowledgeable teams have developed new separation technologies amplifying the supply chain value while providing greater access to usable aluminum scrap. So production to date is confirming our expected cost differentiation when operating at our nameplate capacity and expected product mix through cycle. Expectation for normalized market conditions remains at $650 to $700 million plus another $40 to $50 million for our metals recycling platform. Operating experience today, albeit in ramp-up, is verifying the five key competitive cost advantages: labor efficiency, higher recycle content, higher yields, optimized logistics, all driven by a performance-based operating culture utilizing state-of-the-art equipment. This strategic investment is cost-effective and a high return growth opportunity providing Steel Dynamics with additional counter-cyclical diversification while further stabilizing and growing our cash generation capabilities. The customer base is proving to be eager for a new market entrant, one that is known to be innovative, customer focused and responsive. We view business relationships as long-term founded on trust with a continuous goal of creating mutual value, not just simply financial value, but we will provide new supply chain solutions, new products with preferred quality and service. That said, every startup and ramp up brings its share of challenges. I'd like to sincerely thank our customers for their patience and partnership as we continue to fine-tune our operations and optimize performance. Their trust and their support have been invaluable and we remain focused on delivering the highest quality products, reliability, and the service they deserve. The hot side is fully operational with the ability to run at rated capacity. Two of the three cold mills continue to increase production while the third and final cold mill started this month. This will allow us to have the full 650,000 metric ton annual capability. The first of two automotive continuous anneal and solution heat treat lines is fully operational. We achieved finish product qualification status with notable automotive manufacturers for 5182 and 5754 products and we are currently in trials for 6000 series alloys. I think you would agree it's an absolutely phenomenal achievement when you consider the mill has only been running for a little around 12 months. The second cast line is expected to start commissioning in the fourth quarter of this year. The team is incredibly excited with the earlier than anticipated product certifications. It is a testament to the incredible talent we have been able to embed in the team and the technical capabilities of the mill. There's great energy and great momentum. As we move through construction, commissioning and ramping of the various production units, we're encouraged by our progress with expectations for significant cost and product mix optimization benefits to occur in the near term. Daily volume operations will increase sharply in the second half of 26 and continue improving through 2027 as startup costs subside, utilization and yields improve and scrap content increases. The aluminum flat roll mill itself produced 84,000 metric tons in the second quarter which is approximately 50% of capability with expectations to exit 2026 at a monthly production rate of at least 90% capacity allowing for full volume capability in 27. So we remain highly enthusiastic about our current and future growth initiatives which we believe will continue to drive the high return growth momentum. We have consistently demonstrated this through cycle earnings potential of over 1.4 billion from our recent growth projects is becoming a reality. Capital funding is substantially complete and operational optimization is our focus for both our recent flat rolled steel and aluminum investments. I'm encouraged by the growing recognition among our teams, our customers and investors of the strength and consistency of our cash generation coupled with our disciplined high return approach to capital allocation. We believe the steel industry has undergone a fundamental paradigm shift in recent years supported by an increasingly mercantilist global trade environment. This will help maintain a more level playing field through continued and appropriate trade enforcement mechanisms. As Barry described already, we expect continued growth in fixed asset investment which remains a key driver of demand for metal products. New and re-shoring of manufacturing continues to gain momentum and together with growing fixed asset investment will continue to support non-residential construction activity. As decarbonization initiatives accelerate, the resulting increase in cost structures across the world will materially steepen the global cost curve, enhancing Steel Dynamics' competitive position and driving opportunities for market share gains and expanded metal spreads. Our highly diversified value added product capabilities provide us a distinct competitive advantage allowing us to leverage the evolving metals market environment and amplify our relative earnings power. In closing, as I've said many times before, our people are our foundation. I thank each of them for their passion, their dedication and commitment to our success. As they are committed to us, we are also committed to them. I remind each teammate listening today, nothing is more important than safety for you, your families, and one another. Please keep Elijah's family, friends, and teammates in your prayers and resolve to work even smarter and harder to achieve an incident-free workplace. I also thank our loyal customers. As I said previously, our partnerships are built on trust, delivering on our commitments and collaborating to create innovative solutions and value. And finally, I thank our suppliers and service providers. Your partnership, trust, and support are essential to what we do each and every day and to our continued success. So together, as a team, we look forward to creating new opportunities and shared success today and the years ahead. With that said, Matthew, we would love to answer questions.

Thanks for the question. As it relates to the pricing, the pricing that's going into the backlog right now is at improved levels, but that doesn't necessarily mean that that's realized in the second half of this year. Some of those projects are in the fourth quarter and actually being placed into 2027. So, you'll continue to see pricing, I think, remain pretty stable as far as from a realized pricing perspective. But the increases you should expect to see probably in the next six to nine months from a pricing perspective. Barry's nodding, so that means I got it right. But yeah, and then, you know, you also just take into consideration what we're seeing on the steel side of the equation for steel input costs. But that said, volume is expected to be really strong for the second half of this year and into next year for fabrication and volume helps offset some of that.

Satish, you cut out a little bit. You said for the 45% increase in order activity. What was the question? I'm sorry, you broke up.

Although the 45% increase is volume specific. It's not pricing specific.

Yeah, it shifted. The preeminent increase was can sheet. We're also finishing up automotive hot shipments and some industrial.

Yeah, you got to remember we're commissioning and ramping up and starting up, so there's no way, even though I wish it would be this way, that we'd be optimal in anything we do, in all honesty. Although the team is doing a phenomenal job where they are at this moment in time. We are using probably in the order of about 80% scrap for our can sheet, give or take a little bit. That will continue to grow. Automotive, I believe we're probably sort of 40-60, P1020 and scrap by this moment.

I would say operationally only incremental. The logistics of bringing, because we'll still be sourcing UBCs from the West Coast, although it'll only be about 60 or 70% as opposed to the 100% that would have gone in the mill. But that's just incremental cost. OpEx would be the same. Again, we took the $16 million right down for Benson costs, and the CapEx at Columbus is going to rise, I think, in the order of $10 to $20 million. And that's in all honesty more to do with inflation of construction contractors than anything else. But the move is not significant. But as you point out, obviously the ramp is delayed for internal supply.

Certainly first half of next year.

Good morning.

It's 650. The rolling mill has a maximum capacity of 650,000 metric tons per year.

Yes, but I would stress the 650 is nameplate, and our teams always seem to be able to squeeze a little bit more out of it, but that's not going to be seen for two or three or four years.

I can't give you the nuances of the differences in technology, in all honesty, between the cash line and kelp line, continuous annealing line with pre-treatment. It tends to lean, I think, towards more exposed automotive. The cash line that we have, the pre-treatment and everything, is fully capable of exposed automotive. I do believe, in fact I'm pretty damn sure, because it's already been shipped and qualified by a couple of the automotive guys over in the States.

Well, Tim, it's a great question. But we are fully focused on the job at hand, and that's just executing, getting things up and running. I would say there's absolutely no doubt, even as I said, even though we're in ramp-up, we can see that the plan will clearly demonstrate the $650 to $700 in a normalized environment. So if today's environment remains, then obviously there'll be some upside, but we're not contemplating that or not calculated that.

I would say yes, there are discussions. But going back to your point, Tim, the smelting, the primary aluminum that they're producing is just that, primary aluminum. I don't believe they intend to put in any ingot casting initially. So it's not actually affecting the ingot market.

It was sequential. It just ramped up month over month.

It was significantly higher in the June time frame. So we averaged 50% for the quarter. So it was probably closer to maybe that 60%. And again, the team feels super good about that given the fact that we started up about 9 months ago, and the fact that we're actually now producing automotive quality, can sheet quality, and we're ramping up pretty quickly. But I think what you should expect to see is in the second half of the year, that ramp is forecast to accelerate pretty dramatically as we get the third cold mill, because we need that cold mill to reach the optimal capability of the rolling mill itself. So more to come, but we think it should be a much steeper ramp in the second half of the year.

Tristan, I would say as Teresa mentioned, our contracts have a lagging nature to them. So much of most of those are turning over into the higher pricing that we've seen through Q2. So we look forward to pricing increasing. We do believe scrap will go sideways. As far as other cost structures, we haven't seen significant impacts on any of our cost streams. So we manage all those for the long haul. And right now we're really concentrating on making sure we're on time for our customers and running at high utilization rates.

Just to correct me if I'm wrong, Barry, but just to calibrate that spread, I think we began the year it was like a hundred bucks, a little less than $100 between galvanized and hot rolled coils, and now it's 200.

Yeah.

Good morning.

Yeah, it's all part of the learning curve, I would say. And as you perfect the different units through the mill, you find challenges or obstructions as you go. We actually left material on the floor that we couldn't ship for a variety of different reasons. No Achilles heel or whatever, but just a couple of little packaging issues, just miscellaneous stuff. So the 53 could have quite easily been 60 and would have been at the bottom of that range. But no major issues. It's just a matter of the team working out all the bugs.

Significantly improved.

Thank you, Sam.

So that was specific just so there's clarity. It wasn't really contracts per se. It was specific to steel fabrication business and their quoting and what's going into the backlog. And so I think that, and Barry, you can correct me, but I would expect to start to see some improvement in the fourth quarter and certainly into 2027, but those projects are further out than near-term. Is that fair, Barry?

And perhaps just to add to that, you got an environment today where there's pretty ample supply of scrap in the country, even with the additional capacity that's come online over the last few years. You got low imports, low exports today relatively. So that's holding scrap in country and perhaps not having a massive impact now, but longer term, the good news with the new capacity coming online, Nippon, the Hyundai Pasco plant, they're all adding DRI capacity, which helps the iron unit sort of balance in the country. So we don't see any major change in scrap to be honest.

Thank you.

So from the perspective of exiting the year at at least 90% utilization rate, absolutely. We feel even more confident about that given the performance of the team in the second quarter and more recently. And especially with the onset of bringing the third cold mill online here in August. So that will be a key to that. As you think about profitability in the second half of the year, yes, we've been approaching EBITDA-positive, but we would expect to be earnings positive in the second half of the year as well.

Well, as always, John, phenomenal questions or thoughts. The hot band substrate requirement that has grown over the years and likely will grow a little more obviously is a potential growth avenue. But I would suggest given the dynamics within the supply-demand balance out there, it wouldn't be a typical mill if we were to do it. But it wouldn't be a mill that we're going to build anytime soon. On the steel side, I think Barry and the team have got a pipeline of some pretty damn neat value-add niche opportunities. And as you've always known, we don't strive to build and grow just to be big. We want to maintain that high-margin, niche product supply chain strategy. So we do have steel projects along those lines, and aluminum obviously has great potential for growth. It doesn't necessarily, or our past history isn't to go and build a big mill and then just copy that same thing. We've only been in the industry obviously for whatever it is now, two years. But we again see smaller value-add niche opportunities that would have great return on invested capital profiles. So a big steel mill anytime soon? No. Massive 650,000-ton aluminum mill probably not here in the very near future, but there's plenty of opportunities for us to grow.

Good morning.

Super. Thank you, Matthew. Appreciate everyone's interest and support today. And just would like to, as always, thank our customer base. We can't do what we do without you, and particularly on the aluminum side, your patience with us and your support has been extraordinary. Service providers, phenomenal. We can't do without you guys either, guys and girls. Employees, I just my hats off to you. I said it at the very beginning, I'm honored to be part of the team. You do a phenomenal job. I just want to really, really stress that we need to continue to work smarter, harder, and be committed to getting to that zero-incident safety environment. And to shareholders and investors, we treat your money as it's our own. And we hopefully have demonstrated a good responsibility there, and we're going to continue to do that in the future. I don't think there's ever been a time where I am more excited for the team given the step-function increase in cash generation that we're going to see from these new assets with the growth opportunities that the team has identified going forward. It's nothing but phenomenal what they're going to achieve. So thank you. Thank you, everyone.