The operator introduces the Steel Dynamics First Quarter 2024 Earnings Conference Call and explains the recording and question-and-answer session procedures. David Lipschitz, Director of Investor Relations, introduces the speakers and reminds participants that the call is being recorded. Mark Millett, Theresa Wagler, and Barry Schneider are leading the call, with other senior leaders joining individually. Some statements may be forward-looking and are protected by the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties related to integrating or starting new assets, the aluminum industry, project returns, and general business and economic conditions.

In the first quarter of 2024, Steel Dynamics achieved strong financial and operational performance, with near record steel shipments and the successful operation of new value-added coating lines. The Sinton project is making progress and the company is also investing in aluminum flat roll production. The company's strong financial metrics and high return on invested capital are a result of their passionate and performance-driven culture and focus on high-margin value-added growth. The company's EBITDA per employee is significantly higher than their competition, a testament to their effective business model. The CEO, Mark Millett, is proud of the team's achievements.

The company's strong performance in the first quarter of 2024 was driven by the dedication and hard work of their employees, who are prioritized for their health and safety. Despite already having a good safety record, the company is continuously striving for zero injuries. The first quarter results showed a significant increase in net income, revenue, and operating income, with positive industry fundamentals and a focus on transformational growth initiatives. The Sinton, Texas flat rolled steel division operated at 70% capacity and generated positive earnings, while the steel operations saw strong operating income due to high shipments and increased product pricing.

The company's first quarter results for hot rolled, cold rolled, and coated shipments were 1,062,000 tons, 130,000 tons, and 1,220,000 tons respectively. Operating income from metals recycling operations was $23 million, and the company is the largest North American metals recycler. The steel fabrication segment had strong operating income of $178 million, but it was lower than the previous quarter due to weather and lower shipments. The company's backlog for joists and deck extends through the third quarter of 2024 with strong forward pricing. The company expects increased domestic fixed asset investments to support their steel and fabrication businesses. They generated $355 million in cash flow from operations in the first quarter, but this was reduced by a profit sharing contribution of $265 million. The company ended the quarter with strong liquidity of $3.1 billion.

The company plans to invest $2 billion in capital in 2024, with a focus on aluminum flat rolled investments and a biocarbon facility. They have increased their cash dividend and have a share repurchase program in place. Their capital allocation strategy prioritizes strategic growth and shareholder returns while maintaining investment grade metrics. The company has seen a significant increase in free cash flow over the past five years and has a strong track record of return on invested capital. They are committed to sustainability and have a joint venture with Aymium for renewable biocarbon products.

The company's joint venture facility is expected to significantly decrease their steel emissions and their sustainability and carbon reduction strategy is ongoing. The steel fabrication operations performed well in the first quarter with a solid order backlog and stable pricing. The company expects continued growth in construction spending and their fabrication platform provides volume support for their steel mills. The metals recycling operations also saw improved earnings due to increased demand from North American steel producers and the company's geographic footprint provides a competitive advantage.

The company's Mexican recycling operations provide a competitive advantage for their raw material positions and support increased procurement of aluminum scrap. The steel and aluminum teams are working closely together to expand scrap separation capabilities. The steel team had a strong quarter with near record shipments and higher utilization rates. The company's value-added steel product diversification and customer supply chain solutions contribute to their strong cash generation and financial metrics. While flat rolled prices weakened early in the first quarter, they recovered in March and April. The team at Sinton is also making significant improvements in operating efficiency.

In the first quarter, the company saw improvements in production and commissioned two new coating lines, which will support increased volume and margins. The North American automotive industry is expected to see continued growth, while non-residential construction and energy markets remain steady. The company is optimistic about steel demand and pricing for 2024. Their strong operating and financial performance supports their cash generation and growth strategies.

The four value add flat rolled steel coating lines are now online and in various stages of startup, with the line in Sinton being a major success. The aluminum strategy is also showing promising growth, with discussions ongoing with numerous customers for colocation at the site. The Columbus, Mississippi plant will have a capacity of 650,000 metric tons and will serve the beverage and packaging, automotive, and industrial markets. Two satellite facilities will support the main mill by processing scrap and maximizing aluminum recycled content.

The metals recycling team has successfully developed a sorting solution for aluminum scrap, providing a competitive advantage for the company. Their startup plans remain on track and are expected to generate significant annual EBITDA. The market environment for aluminum flat rolled supply in North America is favorable, and the company's core competencies and recycling footprint will be leveraged for cost-effective growth. The company is enthusiastic about their future growth plans and their track record of high return growth.

Steel Dynamics has had the highest after-tax return on invested capital within the S&P 500 materials companies for the past five years, with an average of 32% in the most recent three years. This is a testament to the company's disciplined and intentional growth strategy, which focuses on providing sustainable and growing cash generation through differentiated value-added supply chain solutions. The company is optimistic about the future, with market dynamics supporting increased demand for its products. The company's teams are its foundation, and safety is their highest priority. Steel Dynamics is no longer just a steel company, but an industrial metals business that provides supply chain solutions to essential industries, leading to best-in-class operating and financial metrics. This diversification has helped mitigate cash generation volatility in all market cycles, as seen in the past quarter.

The company is focused on providing value for its customers, team members, and shareholders. They are looking forward to creating new opportunities and are open to questions. A question was asked about the decline in conversion costs in the steel sector and the company expects them to continue to decrease with the ramp-up of production at Sinton. They also mentioned the Greenfield aluminum project and the timeline for achieving EBITDA break-even.

The speaker addresses the level of commercial commitments and arrangements achieved so far and mentions that the CapEx guidance remains at $2.7 billion despite inflationary pressures. They are confident in meeting customer demand and reaching EBITDA break-even by the end of the year. In regards to fabrication, order entry has improved and pricing is stable, but there is still downward pressure. The speaker is hopeful that they can reach positive growth in fabrication in the second quarter.

Mark Millett and Theresa Wagler discuss the recent performance and future prospects of joists and deck products in relation to federal programs such as the CHIPS Act and IRA battery plants. They note that shipments have leveled off at pre-COVID levels, but booking rates and backlogs are increasing. They also mention slight quarter-over-quarter price erosion, but overall, they have a very constructive view of the long-term prospects for fabrication. Wagler adds that earnings are still strong, even at pre-COVID levels, indicating a structural shift in the market. Barry will discuss how these products fit into public funding programs.

Barry Schneider discusses the impact of the CHIPS Act and IRA Act on the steel industry, stating that once projects are identified and engineering companies are chosen, the timeline for production is quick. He also mentions that they have seen a decline in long steel volumes, but attributes this to a mix of products that are more responsive to the current market. Structural rail has performed well, and production is balanced between rail and structural products.

The market space has changed from direct relationships between fabricators and mills to a service center type relationship. This is due to the recent busy years in construction spending. The company has a healthy backlog in long products. They are still in discussions with customers for the aluminum project. The volumes for long products were down in the first quarter, but this may be due to weather-related issues and the rest of the year is expected to be consistent with past years.

The company has recently seen some price adjustments in the market, but they are confident about the rest of the year. All four of the new process lines are now up and running, with the paint line in Tahoe ramping up and the galvanizing line in Sinton already making a high contribution. The second galvanizing line in Tahoe will come up in Q2 and the paint line in Sinton will mature by the end of the year, with all four lines expected to contribute significantly by Q2.

During the third and fourth quarter, the company expects to see improved utilization rates at the Sinton plant, with a goal of reaching 80% by the end of the year. The team has been working through challenges and remains focused on safety. A planned outage in April addressed a power issue with the primary side voltage, and the team has secured shorter-term solutions while waiting for long lead-time equipment to be replaced. The new equipment will allow for full operation of the plant and remove any restrictions on melting furnace capacity. The company expects to fully utilize the new equipment by the end of May.

The April outage was an opportunity to work on the high-voltage bus and fix the problem that contributed to it. The company is excited to have this issue resolved soon. The CRC and HRC spreads have been strong due to the increasing market share of coated products and dynamic changes in the marketplace. The company is also diversifying its coated product offerings to provide a good supply solution to customers.

The company has invested in their supply chain for their products and believes that the spreads between coated and hot roll will be attractive. They have seen an increase in their fabrication order backlog and pricing is converging to pre-COVID levels. They are not giving specific guidance for the upcoming quarter.

In the second and third quarters, the company expects higher volumes in fabrication steel and mills recycling due to stronger demand. There may also be additional support from public funding in the second half of the year and in 2025. The company also expects the price differential to diminish and input costs to increase in the second quarter. The company has a unique perspective on the situation in Mexico, as they sell volumes and are building there, but they are also a U.S. steel producer. The company is monitoring the situation and considering their options if the trade situation worsens.

Mark Millett and Barry Schneider discuss the impact of trade tensions between the US and Mexico on their business. Millett mentions that they have not seen any direct impact yet, but they are keeping an eye on the situation. He also mentions that the US and Mexico are important trading partners and any issues will likely be resolved. Schneider adds that there is potential for carbon-based tariffs in the future, but they do not expect any major changes in American policy. They are also monitoring imports and addressing any competitive challenges that may arise.

The speaker discusses the steel intensity of data centers and how it compares to warehouses. They explain that each project is different and there are many variables that affect the steel intensity, such as location and design. They also mention that they have solutions for different engineering firms and are interested in providing solutions for the growing demand for data centers.

The timing of the aluminum slab melt shops and rolling mill is a combination of strategic planning and luck. The satellite mills will focus on UBC while the Columbus mill will produce automotive and industrial products. The Mexican facility is being prioritized due to the timing of its property purchase.

Mark Millett discusses the success of the company's recent permitting process and credits it to a combination of luck and a strong team. He also expresses excitement for the near-term market outlook and long-term competitive position, highlighting the company's efficiency, balanced product portfolio, and pull-through volume from downstream operations. Millett also mentions the company's strong sustainability and low carbon footprint as a major advantage.

The company's flat roll mills in Butler and Columbus are gaining traction in the automotive industry due to their low carbon footprint. The upcoming Texas mill is expected to have a similar impact. This puts the company in an advantageous position compared to other steel producers who are spending billions to reduce their carbon footprint. The conversion to electric arc furnace and DRI facilities by European companies is likely to increase their conversion costs, putting the company at the very bottom of the global cost curve. This will lead to higher through-cycle spreads and positively impact earnings. The company's success is attributed to its culture and technology, and the CEO thanks employees, customers, and service providers for their support. The call concludes with a message of gratitude and well wishes.

This summary was generated with AI and may contain some inaccuracies.