Steel Dynamics, Inc (NASDAQ: STLD) Q4 2025 Earnings Call dated Jan. 26, 2026
Corporate Participants:
David A. Lipschitz — Investor Relations Director
Mark D. Millett — Co-founder, Chairman, and Chief Executive Officer
Theresa E. Wagler — Executive Vice President and Chief Financial Officer
Barry T. Schneider — President and Chief Operating Officer
Analysts:
Katja Jancic — Analyst
Lawson Winder — Analyst
Tristan Gresser — Analyst
Timna Tanners — Analyst
William Peterson — Analyst
Philip Gibbs — Analyst
John Tumazos — Analyst
Carlos de Alba — Analyst
Presentation:
operator
Good day and welcome to the Steel Dynamics fourth quarter and full year 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, January 26, 2026 and your participation 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 Mr. David Lipchitz, Director Investor Relations. Please go ahead.
David A. Lipschitz — Investor Relations Director
Thank you. Elie Good morning and welcome to Steel Dynamics fourth quarter and full year 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, Teresa Wagler, Executive Vice President and Chief Financial Officer and Barry Schneider, President and Chief Operating Officer. The other members of our senior leadership team are joining us on the call individually. Some of today’s statements, which speak only as of this date, may be forward looking and predictive, typically preceded by believe, expect, anticipate or words of similar meaning.
They are intended to be protected by the Private Securities Litigation Reform act of 1995 should actual results turn out differently. Such statements involve risk and uncertainties related to integrating or starting up new assets, the aluminum industry, the use of estimates and assumptions in connection with anticipated project returns and our steel, metal, 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 10K under the headings Forward Looking Statements and Risk Factors Found on the Internet at www.sec.gov and if applicable in any later SEC Form 10Q.
You will also find any reference non GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued this morning entitled steel Dynamics reports fourth quarter and full year 2025 results. And now I’m pleased to turn the call over to Mark.
Mark D. Millett — Co-founder, Chairman, and Chief Executive Officer
Super. Thank you David and good morning everyone. I hope you’re all a little warmer than we are in the Midwest and Indiana here in Fort Wayne. But nonetheless we appreciate you taking the time to to join us for our fourth quarter and full year 2025 earnings call. As you have seen, our teams achieved a solid 2025 financial and operational performance in what was a challenging market environment through the year. This is a testament to our diversification the scale and circular manufacturing business model that we have. The highlights were record annual steel shipments of 13.7 million tonnes, cash from operations of $1.4 billion and adjusted EBITDA of $2.2 billion.
And most importantly, we had another strong year in terms of safety at Sinton. Consistent operational execution has been achieved. The downstream value add coating and pre paint product quality is matured at Aluminum Dynamics. We have produced and shipped finished aluminum flat rolled products for the industrial and beverage can markets as well as hot band for the automotive sector. Although there’s still work ahead, the team has strong momentum positioning us well as commissioning continues in operations ramp. As always, I’m extremely proud of the entire Steel Dynamics team. They are the foundation of our company and there’s no doubt their passion, innovative spirit and commitment drive our success and they inspire me each and every day.
I’m also very excited actually to welcome our new team members joining us through the final acquisition of new Process Steel which occurred this past December. We are certainly excited to grow with you. As I mentioned, the most gratifying achievement was having a strong safety performance. Our world class safety culture continues to evolve and our team’s dedication to our tape controller safety philosophy is extraordinary. I’m continually inspired by the commitment they have for one another. They consider themselves family and challenge the status quo each and every day. That said, we will never be satisfied though until we achieve a zero incident environment.
Before I transition the call to Teresa and Barry, I’d like to provide some perspectives arising from the press release and investor presentation we Posted on Monday, January 5th related to the proposed BlueScope transaction. During the past five years we have focused on strategic organic investments in steel and aluminum products. The associated additional free cash flow generation is meaningful and as you know, very close at hand. We are well positioned with substantial liquidity, low leverage and significant expected free cash flow generation to support the continuation of our consistent, disciplined and balanced capital allocation strategy. Our criteria for growth has not changed.
We grow to differentiate our product offerings, supply chains and to create value for all our stakeholders. A long standing track record of best in class return on invested capital and other return metrics is testament to our disciplined approach to both greenfield and acquisition growth. We have a well deserved reputation for excellent execution, clear long term strategy, a business model that enables strong cash flow generation through market cycles and a culture second to none. Our actions are intentional and strategic, not opportunistic. We pay fair value for good businesses that enhance value for all constituents. In December 2025 we submitted an offer to purchase Bluescope together with our Australian partner SGH.
The offer proposed SGH acquire 100% of BlueScope on an all cash basis with a subsequent on sale of the US Assets to Steel Dynamics, providing all Bluescope shareholders with a tax effective cash realization opportunity. The proposal was the most recent in a series of constructive approaches to provide Bluescope shareholders the opportunity to unlock the trapped value of the North American businesses and to find the right home for their businesses in Australia, New Zealand and Asia. That home is clearly with sdh given their track record of value creation across the industrial space, which closely mirrors the focus on delivery, capital allocation and free cash flow generation of sdi.
The offer is compelling, reflecting the value of Bluescope’s business appropriately and is significantly higher than the value its shares have ever realized in over 15 years. The deal construct is simple and straightforward. We requested a customary but short 30 day due diligence period which provides the opportunity for an effective and speedy process. However, our offer was rejected by the Bluescope board without any engagement and the commentary within BlueScope’s subsequent public releases regarding the proposal has to be seen as very disappointing. The premise for the Board’s rejection was principally based on insufficient value, yet they provided shareholders with no reasonable executable alternative strategy that would provide the same certainty of similar shareholder return.
Our cash offer is certain, immediate and tax effective with no financing contingency. It eliminates the significant execution risk and hopes that financial improvement might come from improved market spreads and currency exchange rates that are far from predictable. We agree that the North American assets and their operating teams are of quality as we know them well. In fact, for many years our steel operators have frequently worked closely with the Bluescope teams, exchanging best operating practices and safety initiatives. The Bluescope North American assets teams and senior leadership are not the problem. Broader, BlueScope’s long term financial and share price underperformance are the result of conservative incomplete growth strategies.
As a case in point, Northstar, Bluescope and the recently acquired coating businesses are at severe structural disadvantages. The steel mill is essentially a stranded asset and does not have the physical structural capability to provide the necessary value add products required to supply the geographically disparate coil coating operations. There are missing essential equipment. At a minimum, cold rolling and galvanizing required investment today could be as much as 1.5 to 2 billion Australian dollars, not to mention the years of waiting on equipment and the construction risks. In February 2024, BlueScope publicly discussed an associated plan to invest at that time $1.2 billion US dollars, about 1.8 billion Australian dollars today for a greenfield project to achieve a similar outcome.
Yet they officially deferred the project a year later in February 2025 due to market uncertainty and a pivot to acquisitions. Recently, Bluescope wrote down the asset value of nearly half a billion Australian dollars associated with its recent 2022 acquisition of the North American coatings business, noting that the business was not achieving expectations. More recently, rather than investing for long term growth, the board announced the one time tax ineffective non recurring unfranked special dividend at 453 million Australian dollars providing no recurring long term benefit to shareholders. We would suggest the North American Bluescope strategy isn’t working Steel Dynamics operational interactions with the Bluescope organization spanned over 20 years.
Discussions with senior leadership have explored various value creating concepts along the way. We have both enjoyed considerable business interaction through the sale of scrap coated coil joists and construction products to the Bluescope business and we purchased substantial steel from Northstar Bluescope. Suffice it to say we have a unique and clearly qualified perspective on Bluescope’s North American strategy and business model along with the associated earnings capability of their assets. Our respective leadership teams have long understood that industrial logic of combining our businesses. Our proposal to purchase Bluescope along with SDH is not an opportunistic foray to acquire assets on the chief it represents a long standing desire to maximize shareholder value for all stakeholders.
Our investment premise is straightforward. SDI is the logical owner of the North American assets as we can unlock the latent value. Currently, Northstar Bluescope is a stranded commodity centric single site steel mill. It will be pressured by additional hot rolled coil production capacity coming online in the US within the next 24 months. Product diversification is critical for it to sustain earnings power and an imperative for the desired value creation within their acquired coating business. These challenges are self evident from the recent massive asset breakdown that I mentioned earlier. The scale supply chains and business model of SDI would provide immediate resolution.
Additionally, Bluescope has publicly emphasized the monetization of industrial and rural land located in remote regions of Australia and New Zealand. We believe there are likely significant zoning and environmental challenges, not to mention development timelines spanning what could be decades. Bluescope’s plan for earnings uplift will take considerable time to realize with substantial execution and market risk. For U.S. steel Dynamics, our pipeline for growth investments is robust. Our track record of delivering profitable growth is without comparison. The acquisition of Bluescope North America makes sense for Steel Dynamics strategically, but we will be led by our focus on value creation and will be guided by rationale and not hope and we will remain disciplined as always.
With all that said and given the public nature of how this is evolved. We won’t be making any further comments or taking questions related to the Bluescope transaction after our commentary, and we thank you for appreciating and respecting that request. So with all that said, love to talk about the exciting things going on within Steel Dynamics. So Theresa?
Theresa E. Wagler — Executive Vice President and Chief Financial Officer
Thank you Mark. Happy New Year everyone. Thanks for being on the call. I am going to be brief with my comments today. In 2025 we achieved operating income of $1.5 billion and net income of $1.2 billion or $7.99 per diluted share. Cash flow from operations was 1.4 billion and liquidity remained strong at over $2.2 billion as we continued strong shareholder returns and near the completion of a significant organic growth phase with the associated cash flow close at hand. For the fourth quarter specifically, our net income was $266 million, or $1.82 per diluted share. As some of you noted, our effective tax rate benefited the quarter by approximately $15 million due to state adjustments and other benefits related to certain reserve items.
Fourth quarter 2025 revenue were $4.4 billion and operating income was $310 million, lower than sequential third quarter results driven by lower realized steel pricing and lower volume. For the full year 2025, operating income from our steel operations was $1.4 billion versus prior year income of 1.6. Record steel shipments, as Mark mentioned, of 13.7 million tons were more than offset by compressed flat rolled steel metal margins. In the fourth quarter, our steel operations generated operating income of $322 million, sequentially lower driven by seasonally lower shipments combined with planned maintenance outages at our three flat rolled steel mills.
Barry will provide more context regarding the outages in a moment. For those of you tracking the flat rolled shipments for your models, fourth quarter hot rolled shipments were 942,000 tons, cold rolled 122,000 tons and coated products were 1,395,000 tons. For the full year 2025 operating income from our metals recycling operations it was $97 million, almost 30% higher than 2024 results based on improved pricing and volume and gains the team continues to achieve in operating efficiency. For the fourth quarter, operating income actually declined about $13 million from a sequential basis based on lower pricing and seasonally lower shipments.
Our metals recycling platform provides a significant competitive advantage for our steel, aluminum and copper operations using innovative new separation technologies and growing supplier relationships to support their customers and our growing internal needs. For the full year 2025, earnings from our steel fabrication platform they were $407 million representing a solid year, yet lower than the prior year earnings as average realized pricing and volume declined. However, pricing and metal margins actually moderately expanded in the fourth quarter as our steel fabrication team achieved operating income of $91 million. Our steel joist and deck demand remains solid with good order activity.
December was one of the strongest activity months in 2025, setting up 2026 very well. We’re incredibly excited for our aluminum team’s operational and commercial progress. Mark will provide specifics later on on this call, but as planned, the team was EBITDA positive in December based on 10,000 metric tons of shipment and improving cost structures. A true achievement as there is still ongoing construction and equipment commissioning in various parts of the operations. For the Full year and fourth quarter 2025, we generated cash flow from operations of $1.4 billion and $273 million respectively. Of note, there was a structural increase in working capital related to our new aluminum investments which reduced full year cash flow by approximately $450 million and fourth quarter cash flow by approximately $155 million.
Our cash generation is consistently strong based on our differentiated circular business model and highly variable low cost structure. At the end of the year we had liquidity of over $2.2 billion. On November 21, 2025, we did issue $800 million in investment grade unsecured notes comprised of $650 million of 4% notes due 2028 and $150 million of 5.25% notes due in 2035. The net proceeds from the notes were used to redeem our $400 million notes due 2026 and for other general corporate purposes. During 2025, we invested $948 million in capital investment. We currently believe capital investments for 2026 will be in the range of $600 million.
Some of the aluminum CapEx did shift from the fourth quarter into the first quarter just from a tiny perspective. We also completed the purchase of the remaining 55% equity interest in new process steel effective December 1st. As Mark mentioned and I also want to welcome the teams in 2025, we purchased $900 million of our common stock or over 4% of our outstanding shares and $240 million during the fourth quarter. At December 31, we still had $801 million remaining authorized for share repurchases. These actions reflect the strength of our capital foundation and consistently strong cash flow generation capability and the continued optimism and confidence in our future.
Our Capital Allocation strategy prioritizes high return 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 maintaining our investment grade credit designation, our free cash flow profile has fundamentally changed over the last five years from an annual average of $540 million per year for the five year period 2011 to 2015 to $2.2 billion for the most recent five year period. And if you exclude the recent investments in Sinton and aluminum, it actually would be $3.2 billion per year. And there’s still more coming.
We’ve invested over $5 billion in three primary organic growth investments. These projects have estimated through cycle annual EBITDA capability of approximately $1.4 billion. We’ve placed ourselves in a position of strength to have a sustainable capital foundation that provides the opportunity for meaningful strategic growth and strong shareholder returns while maintaining investment grade metrics. We are squarely positioned for the continuation of sustainable optimized long term value creation. Thank you Barry.
Barry T. Schneider — President and Chief Operating Officer
Thank you Teresa. Our steel fabrication operations performed well throughout 2025, achieving strong ear at the end of the year. Our steel joist and deck order backlog was solid with December being the third strongest bookings month of the year. The backlog extends through the first half of 2026. We continue to have high expectations for this business this year due to the positive customer sentiment and quoting activity moderating interest rates, continued manufacturing on shoring and public funding for infrastructure and other fixed asset investment programs. The uplift from this macro environment could be considerable. Our steel fabrication platform provides meaningful volume support for our steel mills critical in softer demand environments allowing for higher through cycle steel mill utilization compared to our peers.
It also helps mitigate the financial risks of lower steel prices. Our metals recycling operations also performed well this year increasing operating income by almost 30%. Congratulations to the team. The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating customers. In particular, our Mexican locations competitively advantage our Columbus and Sinton raw material positions. They also strategically support aluminum scrap procurement for our flat rolled aluminum investments. Our metals recycling team is also partnering even more closely with both our steel and aluminum teams to expand scrap separation capabilities through process and technology solutions.
This will help mitigate potential prime ferrous scrap supply issues in the future. It will also provide us with a significant advantage to materially increase the recycled content for our aluminum flat rolled products and increase our earnings opportunities. Steel team had another solid year with record shipments of 13.7 million tons. During 2025, the domestic steel industry operated at an estimated production utilization rate 77% while our steel mills operated at 86%. We consistently operate at higher utilization due to our value added steel product diversification, our comprehensive differentiated customer supply chain solutions and the support of our internal manufacturing businesses.
This higher through cycle utilization of our steel mills is a key competitive advantage supporting our strong and growing cash generation capability. Best in Class Financial Metrics Operationally, we did have some downtime in the fourth quarter related to planned outages at our three flat rolled steel mills. There were some additional delays which inhibited production by 140 to 150,000 tons. Regarding the flat rolled steel markets, prices have recently improved supported by stable demand and lower imports. Lead times have extended and customers remain optimistic about the outlook. Long product steel markets were a highlight throughout 2025 and we expect another solid year as demand and pricing remain strong, particularly in structural steel and railroad rail.
Regarding the steel market environment, North American automotive Production estimates for 2026 are expected to be similar to 2025. Automotive dealer inventories continue to remain below historical norms and actually decline further in December. Our specific automotive customer base has not only remained stable but have provided opportunities for growth. We have become a supplier of choice for many U S based European and Asian automotive producers due in part to our lower carbon content capabilities. Non residential construction should benefit from ongoing onshoring activity. Recently announced domestic manufacturing projects and continued infrastructure spending in the energy sector. Oil and gas remain steady with solar continuing to be very strong.
Overall, we remain optimistic concerning demand for our diversified value added steel products in the coming year. With that, back to you Mark.
Mark D. Millett — Co-founder, Chairman, and Chief Executive Officer
Super well thank you Teresa. Thank you Barry. I think everyone can appreciate sustaining such positive results don’t just happen, they result from the strategies implemented and executed by the teams over time. We have invested strategically to provide scale, product and market diversification, unique customer supply chains and linked operating platforms to optimize market opportunities throughout market cycles. When combined with our performance driven culture, we consistently achieve at the highest levels. We optimize cash generation allowing for a consistent and balanced cash allocation strategy that has delivered strong shareholder returns. Our disciplined investment approach continues to support a strong and growing through cycle cash generation profile while maintaining the highest return on invested capital among our industrial peers.
In aluminum, we just grew more and more excited each and every day as we watch the aluminum teams execute, moving from construction through commissioning to serving the customers with high quality products. I believe we enjoy a unique market environment. There is a significant domestic supply deficit of over 1.4 million tonnes for aluminum sheet and this deficit is forecasted to grow along with demand in 2024. That deficit was supplied through high cost imports which are now even higher cost. As the tariffs increase from 10% in 2024 to the current 50% level. We’ve seen that there’s clear alignment with many of our SDI’s core competencies.
Our construction capabilities have once again been proven both Columbus and St. Louis Potosi as state of the art facilities. We’re using our deep operational know how in combination with the technical expertise of aluminum industry experts that have joined us and our proven performance driven culture will drive higher efficiency and and low cost operations as compared to our peers. We 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 provides countercyclical market diversification and a more stable earnings profile 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’re the largest North American metals recycler which includes aluminum. And that team has done an incredible job successfully developing new separation technologies allowing us to have both more access to usable aluminum scrap and at a lower cost. Production to date, even in its early stages is already confirming our expected earnings differentiation through cycle. EBITDA expectation remains clearly at 650 to 700 million dollars for the mill itself plus another 40 to 50 million dollars for the Omni platform.
As we spoke in the past, the four key areas of advantage being labor efficiency, the higher recycled content, a higher yield through the process and optimized logistics. All of which are driven by our low cost culture. The strategic investment is a cost effective and high return growth opportunity providing SDI with additional countercyclical diversification further stabilizing and growing our cash generation capabilities. As the industry Already knows, the 650,000 metric tonne project is no longer a vision. It’s clearly here and clearly having a positive impact in the industry. The customer base is excited to have a new market entrant that is known to be innovative, customer focused and responsive to their needs.
For us, business relationships are long term founded on trust with a continuous goal of creating mutual value. And that’s not just simply financial value, but new supply chain solutions, new products, better quality and better service and we are seeing to react at surprising speed. Many customers have seen that with recent supply side challenges in the aluminum flat rolled products market, the Timing of our ramp up has been fortuitous allowing us to help the market while accelerating our material qualifications. Startups have their challenges and I would like to thank our customers for their patience as we fine tune our operations today.
Those customers have been very, very responsive and thank you for that. We have received certification from many customers for industrial and can sheet finished products and through automotive aluminum hotbands. This accelerated certification should allow us to shift our product mix to a higher margin mix in 2026 reaching optimization sometime in 2027 as compared to our earlier expectation of 2028. Three of the four melt cast houses are fully commissioned and have produced all 3, 5 and 6,000 series ingots for industrial, kanshi and automotive sectors for rolling mill commissioning, product development and commercial shipments and the team there is doing an absolutely phenomenal job actually as they are through the hot mill I guess the hot mill is completing commissioning having ran 3035052 industrial 3104 can sheet 57545182 automotive grade material.
The cold reversing mill is successfully producing 3003, 5052 and 3104. The first tandem mill is in commissioning and starting to produce the second tandem cold mill and the first of two cache lines are on schedule to be operating before the end of the first quarter 26. The team is incredibly excited with the earlier than anticipated product certifications for sure. It’s a testament to the phenomenal talent we have embedded in the team and there’s so much great energy and momentum throughout the mill. We’re extremely excited by the physical production and quality capability of the mill this early in the startup and are focused on achieving optimal consistency.
We ended the year shipping 10,000 tons in December which is about 20% of our capability eventual capability and are confident we will be exiting 2026 at a rate approaching 90% capacity. We’re 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. The capital spending for Centum, the four value add lines and Aluminum Dynamics is largely spent with a projected future through cycle EBITDA contribution of over $1.4 billion. I’m excited as investors recognize the power and the consistency of our strong cash generation combined with our disciplined high return capital allocation strategy.
It is our belief that the steel industry has undergone a paradigm shift in recent years supported by a pervasive sense of mercantilism that will provide a level playing field through continued and appropriate trade mechanisms. Fixed asset investment will continue to grow which directly correlates with increased metal products demand. Continued reassuring AI and cloud computing will support non residential construction and decarbonization will materially steepen the global cost curve, providing steel dynamics with a huge competitive advantage to gain market share and increase metal spreads. Our highly diversified value product capabilities provide us with a very unique advantage to leverage this evolving metals business environment and will amplify our relative earnings capability.
In closing, as I always say and always believe, our people are our foundation. I thank them some 14,000 of our teammates and when you include their partners in life, their spouses and their children. There are 63,000 people in the SDI family and I thank each and every one of them for their passion and their dedication and we’re committed to them. And remind those listening today that safety for yourselves and your families and each other is the highest priority. I’d be remiss not to thank our loyal customers, many of whom have supported us since our inception.
These partnerships are based on trust, on doing what we say we will do and creating new solutions to enhance the value proposition. And our new aluminum partners will experience the same. And as I said earlier, I appreciate their patience as we work together to get Columbus up and running and finally to our suppliers and service providers who we value and trust. And thank you. We can’t do what we do without you. We look forward to creating new opportunities for all of us today in the years ahead. With that Ali, we would love to take questions.
Questions and Answers:
operator
Thank you. If you would like to ask a question, please signal by pressing the star key followed by the digit one 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 one earlier during today’s call, please press one again to ensure our equipment has captured your signal. Also, we ask that you please limit yourself to one question to facilitate time for everyone. Any additional questions can be addressed upon re entering the queue. Our first question today is coming from Kathya Jancic with BMO Capital Markets.
Your line is live.
Katja Jancic
Hi, thank you for taking my question. Maybe starting on the aluminum rolling mill mark, I think you said that the mill is expected to reach 90% utilization by the end of 26. Is that correct?
Mark D. Millett
That’s correct. That’s a little sooner than we’ve, I think talked in the past. But what we’re seeing from the team, from the equipment, it’s given us a strong confidence that that can be achieved.
Katja Jancic
And then given that the mill reached or was EBITDA positive in December and when looking at the current aluminum and the Midwest premium environment, how should we think about the profitability over the next few quarters?
Mark D. Millett
Well, I would. We anticipated that that positive EBITDA profile will continue through the year.
Theresa E. Wagler
Katja. We’re going to be ramping up. So there’s still, as Mark mentioned on his opening remarks, we’re still commissioning and constructing some of the downstream facilities, if you will. So that will have an impact for the first half of the year. But we do expect to, you know, remain and be improving EBITDA throughout the first half of the year. And then the second half of the year really is about product mix optimization.
Katja Jancic
Okay, thank you.
operator
Thank you. Our next question is coming from Lawson Winder with Bank of America securities. Your line is live.
Lawson Winder
Thank you very much, operator and good morning, Mark, Theresa and Barry, thank you for today’s update.
Mark D. Millett
You’re welcome.
Lawson Winder
What I’d like to do is just kind of ask a question along the lines of investment and not necessarily M and A, but into growth too. When you think about your balance sheet and the amount of debt that you could potentially take on, whether for some sort of acquisition or for a major investment into new capacity, where do you kind of see the upper limits of your comfort level?
Theresa E. Wagler
Thanks for the question, Lawson. So we do have a balance sheet that actually has a considerable amount of capacity. When we look at where we’d like to be on a through cycle basis, we’re very direct about being less than two times on a net realized basis. And we’re well under two times today, as we say it, from a liquidity and debt perspective. So there is room to move. And that is also in light of the fact that our structural EBITDA is actually improving. So that $1.4 billion that we talk about associated with aluminum and Fenton 4 value added lines hasn’t really begun to be realized in any meaningful way yet.
So all of that is adding extra capacity to the balance sheet as well. We are incredibly committed to the investment grade markets, but there’s a lot of room in our ratings to be able to add that capacity. So I won’t talk about necessarily a top range. I’ll just say on a through cycle basis, we definitely will remain under a two times net levered basis.
Lawson Winder
Okay. Thank you for those comments, Theresa.
operator
Thank you. Our next question is coming from Tristan Gresser with BNP Paribas. Your line is live.
Tristan Gresser
Yes, hi. Thank you for taking my question. Just a Quick follow up on the aluminum. If you expect to reach kind of targeted utilization rate by year end. And I understand your product mix might not be fully optimal by then. But given the current pricing environment, is it fair that by year end this year you should get to your at least to your targeted margin profile into Q4, at least those months in Q4.
Theresa E. Wagler
If you’re referring to the through Cycle 650 to $700 million EBITDA estimate, is that what you’re trying to.
Tristan Gresser
Yes.
Theresa E. Wagler
Yeah. So what we’ve said in the past is that actually the margins that we’re achieving, not achieving today, the margins on a market basis that are available today are actually higher than what we projected on a through cycle basis for the investment itself, just given where the Midwest transaction price is, et cetera. So there is that opportunity, I think, more quickly yet. We’re still working through startup, we’re still working through, you know, all those items. So we’re not prepared today to talk about what profitability might look like in the fourth quarter of this coming year.
But all the market factors are positioned to actually give us a significant advantage over what we had modeled on a through cycle basis.
Theresa E. Wagler
All right, that’s clear. And Fiorello me a quick follow up just on Centen. If you can give us an update. I think there were a press report of some incident in January and if you could talk a little bit about the volume, look into Q1 for the steel business, that would be also appreciated. Thank you.
Barry T. Schneider
Lawson, is Barry with regards to the incident here beginning of the year, we did have a transformer failure at the Siton facility. It was one of the high voltage transformers in the yard. This was an original transformer. And I think as we talked about publicly, we had some transformer issues at that facility we were starting up. We believe this transformer was subjected to some of that stress on the system early. So we had been monitoring it. We took the opportunity a couple years ago to actually go out and buy significant amounts of other transformers that we have engineered into the system.
So we don’t have any concerns of ongoing problems. We believe we’ve rectified the original engineering and locational challenges we had down there. So all in all it was a great job by the SIT and fire department. It was rather demonstrative, the failure, but nobody was injured. The damage was limited to the transform itself and operations resumed shortly after. The plant was safe, which was within the 12 hours or so of the incident. So we don’t expect any ongoing concerns and the team has done a Good job of getting the backup resources. It’s very difficult to get transformers in this world, so they acted quickly a couple years ago to make sure we had the right stuff spared and installed.
So we feel good about where we’re going, and it was unfortunate, but onward upward with sinton.
operator
Thank you. Our next question is coming from Timna Tanners with Wells Fargo. Your line is live.
Timna Tanners
Yeah. Hey, good morning. Regarding the 1.4 billion structural contribution, I feel like we talked about aluminum, but just can you give us any updated thoughts on the status of the four value add lines that have been ramping up and just remind us where Sitan is? I know it’s still. That slide 9 shows us that it’s still running a little lighter than the rest of your operations. When can we expect that to maybe converge? Thanks.
Theresa E. Wagler
Yes, thank you. It’s good to talk to you again, Timna. So from the perspective of the 1.4, just to outline where that is on a through cycle basis, centen represents 475 to 525 million of that, as we mentioned, aluminum is 650 to 700. And then generally on the value added lines, we think about it more like maybe 50 million per line. So that would be like around 200 million. So the value added lines last year for the whole year were operating each one differently, but around 60% of their capability. The four lines. And then as far as Sinton, Stynton still had a lot of the additional costs to product quality embedded in 2025 that have since been resolved kind of in that fourth quarter, first part of this year time frame.
So Stinton really has the capability now, like all of our other facilities, to operate wherever the market will drive it.
Barry T. Schneider
Theresa, if I could add a little color to that, the four value added lines, two galvanizing lines and two paint lines are actually operating very well. As you are aware, we had the core cases that we had filed a couple years ago. Those core cases were against corrosion resistant steels that were being dumped into this country. Ten different countries were at play. We won substantial awards against those countries that will continue to limit the ability for those countries to just dump material into the United States. And the new process lines really were pressured because of that dumped material.
We had excess of a million tons that have already been removed from the market that had been coming from these 10 countries around the world. So as we ramped through that, we’ve fine tuned our quality and we’ve made sure that the customer base is excited about the product they’re receiving from those lines. They are operating full at this point in time. And because of our supply chain being able to take bands hot rolled coil and convert them into galvanized and painted coils, it’s really structurally helped respond quickly as markets change. Our supply chain was the innovation with painting and it remains our strength and the quality and innovation of the product.
So we’re real excited about what those lines will do now for us that we aren’t competing with the dumped tons from all across the world.
Timna Tanners
Got it. Thanks, Barry and Theresa.
operator
Thank you. Our next question is coming from Bill Pedersen with JP Morgan. Your line is live.
William Peterson
Yeah, hi, good morning. Thanks for taking the questions and thanks for all the details we’ve heard. I guess I’d like to follow up on an earlier question on Symptom, but broaden it out a little bit. It sounds like the sentinel impact here in the current quarter was fairly, fairly modest in terms of impact. But understand there may have been some other outages in your network in the late fourth quarter. Just trying to get a sense. Can you help us quantify the impact on outages and maybe more broadly, is there any planned maintenance in the first quarter that may impact your shipment profile?
Barry T. Schneider
I’ll build this. Barry. Our outages, we’re really good and make it a priority to take care of our equipment. And as you can imagine, our major flat rolled mills are of different ages with Butler at 30 and Columbus around 20 and sitting brand new. There’s different things we do at all these plants. It’s part of our long term strategic plans to take care of our assets. Some cases we add capabilities, other cases it’s just good old fashioned maintenance. It just coincided that all three of these, the three big flat rolled mills had outages in the fourth quarter. We don’t.
We typically do one or two outages a year depending on what our projects have. So quarter one, we don’t have anything on the table for us. We’re looking more towards the second quarter right now for our planning. So we got a lot of good work done. A lot of that is, as I said, it’s making sure that we continue to make state of the art products for our customers and that the machines are running as well as possible. So outside of that, nothing structurally different from what we do.
operator
Thank you. Our next question is coming from Phil Gibbs with Keybanc Capital Markets. Your line is live.
Philip Gibbs
Hey, good morning.
Mark D. Millett
Good morning, Phil.
Philip Gibbs
Hey, Mark. I understand you don’t want to talk further about the Bluescope deal. It obviously appears very compelling but curious if you’re prohibited from buying back stock for any reason given there’s now a potential deal that’s been publicly disclosed.
Theresa E. Wagler
There’s nothing that is regulatory or structural in place. Phil? No.
Philip Gibbs
Okay. And then just to follow up just on kind of the energy cost wildness we’ve seen. I know you don’t use a lot of natural gas relative to electricity, but you know, perhaps there is a little bit of a knock on effect on electricity as well. I know it’s been ramping in some parts of the country, at least for consumers. So just curious in terms of how you’re thinking about your energy cost basket heading into the early stages of the year here.
Barry T. Schneider
Phil, this is Barry. I think with energy we have very unique contracts everywhere. Even here in Indiana we have three different electrical contracts. We try to be a good response in the market. So we buy smart. We take market signals for when we buy and sometimes we do take small downtime to help the system grids. With regard to electricity, we really haven’t seen anything meaningful. There are times of the day, there are times of a week that it might get expensive. Many of our operations don’t see that short term. Some do and they plan for that.
With regard to natural gas, we typically don’t. You know, we take positions future buys and we make sure that what we’re doing is responsible. When we see cold weather coming, we make sure we buy our transportation so that we can’t be interrupted. And typically as we get into the winter where it’s prudent, we’ll make sure more of that product is prepaid or pre bought. So we don’t see huge swings with energy. We do see local impacts, but in general we have good relationships with our providers. And as you sure you know, the mini mill process, we use considerably less natural gas per ton because in the flat rolled mills, when we cast, it goes directly into a rolling mill shortly after it’s cast.
So that’s the efficiency we get which helps us with energy quite a bit.
Philip Gibbs
Thank you so much.
Mark D. Millett
And Phil, just to add on there, just to sort of calibrate where our energy cost or percentage of energy cost is, it’s running around about 10% of our production cost. That’s gas and electricity. So even some fluctuation isn’t a material impact to us.
operator
Thank you. Our next question is coming from John Tomazos with John Tomassos Worry Independent research. Your line is live.
John Tumazos
Thank you very much. I’m unfamiliar with what are hot rolled aluminum automotive products. I’m sort of asking an innocent question. I don’t want to make it sound like I’m skeptical. I’m just unaware. What are finished applications on a car for hot rolled aluminum? And is it possible that you’re also selling hot rolled aluminum to another aluminum roller whose cold rolling capacity is bigger than their hot rolled capacity or for whom you have quality specs? They can’t make.
Mark D. Millett
The. Your question, as always, is on point, John. And I wouldn’t say it’s naive in any way, shape or form. There’s not a real market for direct hot band aluminum going into an automobile. It does get converted. That conversion is being done by others today because we don’t have the full downstream capability and we don’t have the cash line. So others in the industry are converting that. And I think it’s been part of just a great sort of entrance into the whole aluminum market itself. Obviously that market has been challenged on the supply side and we have gone out and wherever we can.
We’re helping the industry generally. And part of that is supplying hot band to folks.
John Tumazos
When will you. Excuse me, Mark. When will you have all the capabilities to coat and cold roll the automotive aluminum to sell the final product 100% on your own?
Mark D. Millett
The restriction is essentially the cash line. And the first cash line is due to be operational at the end of the first quarter.
John Tumazos
And cash stands for what, what does the acronym mean? Excuse me?
Mark D. Millett
Continuous…
Barry T. Schneider
Continuous Anneal surface hardening. It’s a final heat treatment so that it can be the right strength when it goes to the mill.
John Tumazos
I thought we took cash to the bank that you will.
Mark D. Millett
John. In my, in my naivety, I thought it was C A C H E for the longest time, so.
John Tumazos
Congratulations.
Mark D. Millett
Sounds great. Thank you.
operator
Thank you. As a reminder, ladies and gentlemen, if you have any further questions, please press star1 on your telephone keypad. Our next question is coming from Lawson Winder with Bank of America securities. Your line is live.
Lawson Winder
Oh, thank you, operator. And thank you for taking the follow up. Guys, I wanted to get your sense. Yeah, yeah. When you look at the aluminum market today and the success you’ve had so far with the startup and you look out maybe a couple of years, do you see the potential for Steel Dynamics to add additional aluminum rolling capacity?
Mark D. Millett
There’s absolutely no doubt that aluminum will be a growth platform for us going forward. And that’s not to substitute or replace growth opportunities in steel or any other businesses. And just, well, just in general, you got to compliment or I complement our team. They do a phenomenal job ensuring that we’ve got a pipeline of really effective value add opportunities and so yeah, we will continue to expand in steel and obviously aluminum is a new platform for us. And given the kind of the profile of that industry, there’s a lot of and the supply demand dislocation, there’s certainly phenomenal opportunities there for us.
Lawson Winder
Okay, fantastic. And if I could also just ask on your thoughts or prescriptions for the dividend this year, you would normally look to update your thinking on the dividend in March. At this point, do you see any other investment considerations that might constrain the extent to which the dividend could be increased this year? Particularly when thinking about this very significant positive free cash flow inflection that’s anticipated at steel dynamics in 2026.
Theresa E. Wagler
So Lawson, the capital allocation strategy that we use for shareholder distributions are to keep the dividend growing as we have structural growth in cash flow. We have increased the dividend very significantly already for the advent of sitting, starting up, et cetera. So as we have further structural changes, we will increase the dividend appropriately. So aluminum could be part of that this year or maybe it’s next year, but we’ll let you know. In the absence of that, we definitely lean in with the variable share repurchase program.
Lawson Winder
Thank you all very much.
operator
Thank you. Our next question is coming from Phil Gibbs with Keybanc Capital Markets. Your line is live.
Philip Gibbs
Thank you. You mentioned aluminum expected to be running at 90% by year end 26. I think your previous view was 75%. What’s given you the added confidence to I guess say that this morning and also meaning kind of what’s changed?
Mark D. Millett
Well, I think given our, our experience in Sinton, we’ve been sort of retaining more of a conservative position, I would say. So that on top of what I see as a phenomenal team down in Columbus doing phenomenal things with an absolutely amazing piece of kit. Barry I think has said it in past calls, but just the nature of the aluminum process and production sort of steps or units, it’s a lot more forgiving from a startup standpoint. We explained it in the past, a thin slab or steel mill, such as a centen or a butler or whatever, because the whole mill melts through refining, through casting, through rolling is just one continuous thing.
One hiccup in one spot can take you down and it sort of compounds itself through the system. Whereas in aluminum, you know, we have just at Columbus we have the four melt cast units, you got, the hot mill, you’ve got, we will have, you know, three co rolling units. It’s just a lot, a lot more forgiving. So giving all that we just see.
Theresa E. Wagler
It’S the redundancy in it.
Mark D. Millett
Yeah, that’s right. And so we just have a high, high confidence level.
Philip Gibbs
Just a follow up to that. Can you give us an idea of where you’re running at right now? I know there’s a lot of trials and things going on and you may not want to double count stuff that’s not purely commercial. But trying to just understand where you are from a capacity utilization standpoint. Thank you.
Mark D. Millett
I would prefer not to be that specific. I would say that the. Our shipping rates are not necessarily a reflection of the production rates because of the quality. You know, it just evolves. We’re ramping up. That needs to be refined and optimized. And it’s getting optimized almost on a weekly basis. But the actual physical capability of the equipment is very sound.
Philip Gibbs
Thank you. Good luck.
Mark D. Millett
Thank you.
operator
Thank you. Our next question is coming from Carlos de Alba with Morgan Stanley. Your line is live.
Carlos de Alba
Yes, thank you very much. Hopefully you can hear me, but maybe. Theresa, can you comment a little bit on working capital? How do you expect that to move throughout the year given that you will continue to ramp up the early business and then CAPEX beyond 2026? Any comments there?
Theresa E. Wagler
Yeah, thanks, Carlos. I think I got both questions from a working capital perspective. A majority of the build that was required for aluminum, given the current pricing dynamics of aluminum, just the pure metal itself, most of that has been captured already in 2025. There’ll be some slight fluctuations between now and the end of the year. Nothing that I think would be material enough to be noted first quarter. However, just remember that we actually pay our profit sharing to all of our employees in that first quarter timeframe. So generally that has some pressure on the working capital and the cash flow.
Otherwise, everything looks like it’s pretty steady for the year as it relates to. To capital expenditures beyond 2026. As a reminder, our maintenance, or what we refer to as our sustaining capital really is fairly low. It’s generally around $250 million, maybe upwards of $300 million now. And beyond that, we haven’t really named any specific material projects at this point in time.
Carlos de Alba
Thank you. All the best.
operator
Thank you. This concludes our question and answer session. I’d like to turn the call back over to Mr. Millett for any closing remarks.
Mark D. Millett
Super, honey, I appreciate that. And for those remaining on the call, again, thank you for your support and for your time today for sure. Our teams aspire to create that shareholder value creation that we seem to be able to do year in year. Out. And 2025 was a reflection of that. Most importantly to our employees that might be on the line, you’ve all done an absolutely phenomenal job. You continue to do an absolutely phenomenal job. And what you do each and every day, that execution drives our success, and it drives that in the marketplace as well.
So thank you, and each and every one of you, be safe for yourselves, for each other, and for your family. So thank you very much. Have a great day, everyone. Bye. Bye.
operator
Once again, ladies and gentlemen, that concludes today’s call. We thank you for your participation and have a great and safe day.