Steel Dynamics, Inc. — 2024 Q1

Martin, the way that you and others are able to actually calculate what you call conversion costs is a little bit difficult. But yes, with the increasing production at Sinton, which we expect to continue to improve into the second quarter and the second half of the year, you will see that the additional volume will help compress costs across the spectrum, but product mix is also something that you need to take into consideration when you think about flat versus long. But we would expect to see that the conversion rate, as you calculate it, would continue to reduce. I can't speak to the exact magnitude thereof.

I'll go backwards. That's the easier way. From a CapEx standpoint, as I mentioned in my sort of preliminary thoughts, virtually everything is now contracted out. We did, and you saw here some months ago, we did bump it up to that $2.7 billion with the knowledge of some inflationary pressures. Those are all baked in to that $2.7 billion, and we see no expansion on that number going forward.

Yes. I guess the -- from our perspective, and I will let Theresa and Barry chip in here in a little bit, but from a shipment standpoint in Q4 and early Q1, shipments kind of leveled off at pre-COVID levels. We've seen some general seasonality and there's some regional weather impacts here and there.

I think something that I would point out in addition to what Mark said. If you look at -- and take into consideration that volumes are, to Mark's point, at a pre-COVID level, but earnings were still, from an operating income perspective, about over $1,200 per ton.

A lot of these public the CHIPS Act and the IRA Act, there's a lot of work that has to happen upfront. And once those projects are -- owners are identified and engineering companies are identified, that's when this starts flowing into all the steel products, but specifically, when we look at the joist and deck, once it's a concrete kind of a plan on what's going to be built, the time line is actually pretty quick.

Carlos, I would say, as you look at the mix across line products, as we make sections that are lighter sections, that's more responsive to what the marketplace is right now. So we've had a pretty robust level of order input. And Structural and Rail has performed pretty well.

Carlos, that's still under discussion. Obviously, it's a -- we're a new mill. And so there's a balance between them making sure that they feel confident that the volume is going to be there. But as I said earlier, we have commitments in place that will support -- in large part, support the first 12 to 18 months of our ramp-up.

Well, I think it's, in large part, some of the seasonality and just the weather-related issues, Timna. The -- and you saw some price adjustment here in the marketplace, whatever that was, 2 months ago? 6 weeks, 8 weeks ago. And again, that wasn't necessarily market pressure that was just absorbing sort of some discounting that leaked into the marketplace over the prior month, 2 months. We feel confident moving forward for the rest of the year in that space.

Yes, Timna, the -- all 4 of the process lines at this point have actually run product. We staged the start-up to best utilize our teams and also to really focus on improving the start-up process for the other lines. So a paint line in Terre Haute is up and running well, shipping prime product. We expect that, that ramps up through second quarter, third quarter, getting up closer and closer to what the final production will be.

As we had talked, we're about 70% through first quarter. We did take some time for a significant outage in April that was planned to, among other things, address the power problem we had with the primary side voltage at the plant. So we see a really good path to 80% progressing through operational by the end of the year, getting up in the capacity.

We had talked about the primary side power last year and having some transformers that needed to be replaced. And that equipment has very long lead times. Our team was able to secure some shorter-term solutions that we've engineered into place and done the construction. So now that the outage is over, we could put that equipment in with the power off. We look to bring the new transformer support, so that the plant has full operational capacity.

I will start. I would just reiterate what I've always said in past calls. Coated products are gaining more and more market share just generally. And there are some pretty dynamic changes within the marketplace that is even added to that. If you think about the solar market, which is absolutely huge, huge today. You're consuming around about 25 tons of coated product per megawatt.

I'd like to add to that, Mark, too, that the teams have been diversifying our coated profile. So we have many different kinds of coatings that we offer. And those various product lines provide a very good supply solution to our customers. So the whole supply chain has been maturing for these products, and it allows us to move our tons to balance our production needs as well as where the markets are interesting.

Lawson, I don't think that we're talking about comparing to 2023 levels. I don't know if you were speaking specifically about pricing, if you are speaking about volume. But the pricing that's in the backlog and the current spot pricing that we have, they are converging, to your point, which would be expected as pricing stabilizes.

Tristan, this is Theresa. We're not specifically giving guidance on any of our segments from an earnings perspective. We don't do that, but I'll talk to you about certain levers. So, we do expect, as Mark said earlier, and you would see this normally, but we will have higher volumes, both across fabrication steel and mills recycling, as we move through the year, which is generally the case in the second, third quarter environment as you move out of the seasonality into stronger demand periods.

Well, today, we haven't seen any, I don't believe, Barry, any direct impact to our business. We grew substantial market share in Mexico last year. We shipped, I think, 600,000 tons or so down there. I think it's more of a wait-and-see situation. It's sort of a tit for tat going back and forth. But I think again, just as you saw with the U.S. MCA some years ago, the U.S. and Mexico are huge trading partners, and these things get worked out.

Well, I think our position on the carbon border adjustment mechanisms, we don't see any meaningful change in American policy. There definitely is a lot of interest in Europe and the EU will continue to go forward with their plans. After the election, we would expect that there will be some kind of a united front to find out how to keep trading with Europe. We do believe that's a good thing for us as these develop, particularly with our incredibly low sustainability position. So we have a great position to lead into these kind of tariffs.

Bill, this is Barry. I think each project is so different. There's a lot of variables. And we provide materials to all these different types of projects. So depending on what the owner is looking for, where the data center might be located, that will affect the steel intensity.

Yes. The biggest chunk of capital will relate to, obviously, the aluminum investment. And we would expect to see those tick up in the second and third quarter, as equipment continues to arrive and they hit certain milestones. So you should see the bulk of that additional CapEx or remaining CapEx being in the second and the third quarter, probably about equal and then probably go down to about the same level you saw in the first quarter and the fourth quarter.

Well, I wish it was all absolute strategic, but some of it is just luck or bad luck, John. But firstly, the satellite mills will -- or slab plants will be pretty well focused on UBC. And so the Columbus mill itself will have to produce the 5000, 6000 automotive stuff and some of the industrial stuff.

I've been -- I won't tell you the language my dad used some time ago, but he called me a lucky critter, let's just put it that way. And I've been lucky all my life, and you need luck in life. So -- and the biggest luck I have is being surrounded by a phenomenal team, to be honest. So...

Super. Thank you, Matthew, and thank you for those that remain on the call and even greater thanks for those that support us, our shareholders. For us, hopefully, we've articulated that we have a very, very constructive near term on the markets, the start-up at Sinton and other sort of growth opportunities, the 4 lines.