Steel Dynamics Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 19, 2023

There are 12 speakers on the call.

Operator

Good day, and welcome to the Steel Dynamics Third Quarter 2023 Earnings Conference Call. Participating in the At this time, I'd like to turn the conference over to David Lipchitz, Director, Investor Relations. Please go ahead.

Speaker 1

Thank you, Holly. Good morning, and welcome to Steel Dynamics' 3rd quarter 2023 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 and Teresa Wagler, Executive Vice President and Chief Financial Officer. The other members of our senior leadership team are joining us on the call individually.

Speaker 1

Some of today's statements, which speak only as of this date, may be forward looking and participants are 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 risks and uncertainties related to integrating or starting up new assets, in the industry, the use of estimates and assumptions in connection with anticipated project returns and our steel, metals recycling and fabrication businesses, as well as to general business and economic conditions. Examples of these are described in the related press release as well as in our annual filed SEC Form 10 ks under the headings forward looking statements and risk factors found on the Internet at www.sec.gov and if applicable in any later SEC Form 10 Q. Will also find any referenced non GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled are in the same period.

Speaker 1

And now I'm pleased to turn the call over to Mark.

Speaker 2

Thank you, David. Good morning, everyone. Thank you for being with us on our Q3 earnings call. As you saw in the release, Once again, our teams achieved a solid financial and operational quarter. Almost 80% of our facilities had 0 safety incidents and our company wide trailing 12 month incident rate is running at an all time low.

Speaker 2

So congratulations to everyone, but more importantly, thank you for all your work participants are participating in the process of making sure that we are ready to take that. Cash from operations was a healthy $1,100,000,000 with adjusted EBITDA generation of $876,000,000 This performance truly affirms the cash generation resiliency of have seen significant momentum in our aluminum flat roll investments, Both current and prospective customers are excited by our market entry and the new and differentiated supply chain solutions we can provide. Are actually very, very surprised by the speed and completeness of our execution so far. Clinton Mill has proven its nameplate production capacity rate and full product capability, but does remain challenged by equipment reliability issues. Participants are confident we can resolve the majority of these issues by the year end.

Speaker 2

Successes cannot be achieved without the best metals team in the industry. Incredibly proud of the whole SDI family. Their passion and spirit form the foundation of our company. Catastrophe happening in Ukraine, the atrocities in Israel, the suppression of the Palestinian people and even closer to home, the anger and diversiveness within America in our political structure really is inspiring to come to work each and every day and be surrounded by very, very positive people that think right, they get it, they treat people right and are focused on what we do each and every day. Participants are in the position of our SBI family, not only our colleagues that come to work, participants are also their partners in life and their kids.

Speaker 2

I remind our teams, great financial performance is of no importance without keeping everyone safe. Continue to be focused on providing the very best for their health, safety and welfare. Today, the SDI family, when you include everyone. We have over 45,000 people that are reliant on the decisions we make each and every day and we're focused we truly are focused on that. Together, we're actively engaged in safety at all times and at every level, are keeping safety top of mind and an active conversation.

Speaker 2

Before I continue, Teresa, would you like to give us some details?

Speaker 3

Good morning, everyone. Thank you, Mark. I add my sincere appreciation to our teams for a really solid performance

Speaker 4

in the

Speaker 3

Q3. Our Q3 2023 net income was $577,000,000 or $3.47 per diluted sharing with adjusted EBITDA of $876,000,000 3rd quarter 2023 revenues of $4,600,000,000 and operating income of are in the range of $734,000,000 were lower than sequential second quarter results, driven by lower realized steel and steel fabrication pricing. We see solid industry fundamentals for the rest of this year and beyond, and we're focused on our continued transformational growth initiatives. Our steel operations generated operating income of $474,000,000 in the 3rd quarter, lower than sequential second quarter results are expected to be in the range of $1,000,000 due to flat rolled steel pricing metal spray compression as realized pricing declined more than average scrap costs. We expect our 4 new flat rolled coating lines to begin operating in the Q1 of 2024 at both Sinton and Heartland, Increasing our value added mix by an additional 1,000,000 tons, making so that our total coating capacity will be 6,900,000 tons going forward.

Speaker 3

For those that track our detailed flat rolled shipments, in the Q3, we had hot rolled and P and O shipments of 858,000 tons, totaled shipments of 132,000 tons and coated shipments of 1,202,000 tons. Operating income from our Mel's Recycling operations was $19,000,000 significantly lower than 2nd quarter results due to non ferrous and ferrous metal spray compression. Ferrous scrap demand was also reduced as numerous domestic steel mills had maintenance outages in the quarter. Are participating in the industry.

Speaker 4

We are the largest North American metals recycler, processing

Speaker 3

and consuming ferrous scrap and non ferrous aluminum, copper and other metals. The team continues to lever our Circular Manufacturing operating model, providing higher quality lower cost scrap to our steel mills, in the Q3. Lower than sequential second quarter results yet historically strong as average realized pricing declined 11% and volumes declined participants are in the range of 16,000 tons. Our steel joist and deck demand remains solid with good order activity. Our backlog extends through the Q1 of 2024.

Speaker 3

The backlog has contracted from record highs experienced in 2022 as shipments have outpaced spot order activity. Forward backlog pricing remains very strong and spot pricing resilient. Based on our backlog, customer sentiment and manufacturing momentum, We expect steel fabrication earnings to remain solid in the 4th quarter, but below 3rd quarter levels based on seasonally lower volumes. In the range of $1,000,000,000 in the range of $1,000,000,000 in the range of $1,000,000,000 in the

Speaker 4

range of $1,000,000,000 in the range of $1,000,000 in the range of $1,000,000 in the range of $1,000,000 in the range of $1,000,000 in the range of

Speaker 3

$1,000,000 in the range are expected to support domestic fixed asset investment and related steel and joist and debt consumption in the coming years. Our cash generation continues to be strong based on our differentiated circular business model and variable cost structure. During the Q3 of 2023, we generated strong cash flow from operations of $1,100,000,000 and generated $2,700,000,000 on a year to date basis. At September 30, we achieved record liquidity of $3,700,000,000 inclusive of cash, liquid investments and have secured $1,200,000,000 revolver. Year to date of 2023, we've invested $1,100,000,000 in capital investments.

Speaker 3

For the Q4, we estimate capital investments will be in the range of $500,000,000 to $550,000,000 of which around 350,000,000 are related to our aluminum flat roll investments. Much of the remaining capital is related to the completion of our 4 new value added coated lines. In February, we increased our cash dividend 25 percent to $0.425 per common share. Year to date 2023, we've also repurchased are participating in the company's earnings release and the company's earnings release will be recorded in the Q4 of 2018. At September 30, 2 $178,000,000 remained authorized for repurchase under our existing $1,500,000,000 authorized plan.

Speaker 3

Have a strong dividend per share by 174% and repurchased $5,200,000,000 of our common stock, 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. We remain dedicated to preserving our investment grade credit designation at the same time. Our free cash flow profile has fundamentally changed over the last 5 years, generating from an annual average of $540,000,000 to $2,600,000,000 today. Have placed ourselves in a position of strength to have a sustainable capital foundation that provides the opportunity for meaningful strategic growth We will readily fund our flat rolled aluminum investments with available cash and cash flow from operations. We also plan to continue strong and responsible shareholder distributions in the range of $1,000,000 as we've clearly demonstrated.

Speaker 3

We're squarely positioned for the continuation of sustainable optimized long term value creation. Sustainability is also a significant part of our long term value creation strategy and we're dedicated to our people, our communities and our environment. Are committed to operating our business with the highest integrity. In that regard, we remain excited about our joint venture with Aimmune, a leading producer of renewable biocarbon products. We believe our 1st joint venture facility could decrease our SteelScope 1 greenhouse gas emissions by as much as 35 participants are in the same position and we currently expect to have the facility operating in the second half of twenty twenty four.

Speaker 3

We have an actionable path are on track for carbon neutrality that is more manageable and we believe considerably less expensive than may lay ahead for many of our industry peers. Our sustainability and carbon reduction strategy is an ongoing journey, and we're moving forward with its intention to make a positive difference. And again, before I turn the call back over to Mark, I just want to thank the teams for a great performance. Mark?

Speaker 2

Super. Thank you, Theresa. As you saw, the steel fabrication platform continues to perform well and it turned in another solid quarter. We continue to have high expectations for the future earnings profile of this business. We believe non residential construction markets will be strong in the participants are in the range of $1,000,000,000.

Speaker 2

Our cash flow is expected to remain strong into 2024 and related spending has been higher in 2023 compared to No political dysfunction has delayed the awarding of public monies likely into the Q1 of next year. Participating in the future. The infrastructure spending and fixed asset investment related to the IRA programs, along with the reshoring of manufacturing, should provide momentum for additional construction are spending through 2024, effectively extending the construction cycle. And customer commentary, as I talk have confirmed our positive outlook. The oil fabrication order backlog are ending through March 2024 with strong forward pricing.

Speaker 2

Current order entry pricing remains resilient. Participants are a significant contributor unto itself. Our fabrication platform provides meaningful pull through volume for our steel mills, particularly important in softer markets, plan for higher through cycle steel production utilization rates compared to our peers, adding to the resiliency of our through cycle cash generation. Furthermore, it provides an effective natural hedge to lower steel prices. Our metals recycling platform had a challenging quarter as demand from domestic steel mills softened and realized ferrous scrap prices declined.

Speaker 2

Prices pulled back in the Q3 with bushelings prices falling some $80 a ton. The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our electric arc furnace steel mills and our scrap generating customers. In particular, our Mexican locations competitively advantage our Columbus and Sinton raw material positions will also strategically support aluminum scrap procurement for our future flat rolled aluminum investments. Are enhancing margin and increasing the availability of low residual ferrous scrap. This will mitigate prime ferrous scrap supply issues in the future.

Speaker 2

It will also provide us with significant advantage to materially increase the recycled content for our aluminum flat rolled products and increase our earnings opportunities on the platform. Steel operations achieved strong shipments of 3,100,000 tons and solid financial results in the 3rd quarter. Production utilization rate when you exclude Cinten was 90% compared to a domestic industry rate of some 76%. Higher utilization rates have been clearly demonstrated throughout all market cycles, driven by the value added diversified product offerings, which amount to are in the range of 70% of our sales. And this, as Teresa mentioned, will increase further with the addition of 2 galvanizing and 2 paint lines that will be commissioned in the Q1 of 'twenty four.

Speaker 2

Differentiated supply chain solutions, driving customer preference and mitigating price volatility

Speaker 5

are in the range of $1,000,000 and best in class financial metrics.

Speaker 2

Looking forward, steel backlogs are strong and customer order entry is good. Customer inventories are also at historically low levels. Auto production estimates for 2023 remain around 15,000,000 units, which will be further reduced by the ongoing strike. In the demand that is still strong and with tight supply, participants are in the meantime, unfortunately, our auto direct flat road exposure is more concentrated toward European and Asian producers, so far has mitigated the strike impact on our flat road order volume. Although not a significant impact to overall earnings, participants are seeing greater impact than our Engineered Bar division as their 15%, 20% auto exposure participants are subject to the same period of time.

Speaker 2

We are confident that the infrastructure spending provides meaningful support in the first half of twenty twenty four. Participants in residential construction seems to be abating with the depletion of available home inventory. Participants are in the range of $1,000,000,000. We are pleased with the progress we made in the quarter. In total aggregate, long product demand remains solid.

Speaker 2

And in flat roll, lead times are expanding. We're seeing excellent order entry. Participants are in the Turning to Cinten. After the unplanned July outage related to the Caster shear, participants produced over 290,000 tons in the quarter. The mill has clearly demonstrated its production rate capability have been achieving 36 heat sequence lengths and it's exceeded its hourly nameplate run rate.

Speaker 2

However, as I said, participants have said, we expect to progressively ramp up to about 70% total run rate by the end of 2023, are reaching a production of 2,400,000 tons for 2024. Despite our challenges, The team has demonstrated the key competitive advantages of the Texas Steel Mill. We have completed full product dimensional capability. It's have proven up to 1 inches thick down to 0.53, I do believe, up to 84 inches width. Production of higher strength grades, tough grades with lower alloy content and thus lowering costs for those value added products.

Speaker 2

We've achieved grade 80, 100 and already had been approved for some API grades. I think just generally, it affirms our technical and process choices and there's no doubt that in my mind, it's the next generation electric arc furnace participants are in the same store. We have gained strong market acceptance, and we can sell every pan of steel we make. Participants are in the process of executing our financial performance. Participants are in the range of $1,000,000 relative to our expansion into aluminum.

Speaker 2

As I said, the responses from existing and new customers across all markets is absolutely incredible. Participants are developing the site. We purchased some 2,600 acres, I do believe. But we're developing it for the co location of customers participants are seeing a number of customers are already indicating strong interest in that model provide sustainable competitive model for all of us. To recap the project, the 650,000 will be located in Columbus, Mississippi.

Speaker 2

State of the art facility participants will be canned, 200,000 tons auto and 150,000 industrial. We have on-site melt and cast slab capacity in Columbus of around 600,000 metric tons. The project will be supported by 2 satellite recycled aluminum slabcasting centers, will have 1 in Central Mexico and 1 in Arizona to capture scrap close to its source. Participants will have 2 cash lines, coating lines and downstream processing and packaging lines to fully support our customer base. Start up for the rolling mill.

Speaker 2

Mexico Slab Center should start up late 'twenty four, perhaps January of 'twenty five participants are in the Arizona Slab Center in the Q1 of 'twenty five. So the project cost, including all recycled slab centers is around $2,500,000,000 participants are in the range of $100,000,000 to $700,000,000 As we stated in the past, we expect a through cycle annual EBITDA have around about $650,000,000 to $700,000,000 from the aluminum portion, and the support of will draw another $40,000,000 to $50,000,000 for them. I think the market from an investment premise participants are in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to The industry generally has older assets, had a tough time earning its cost of capital.

Speaker 2

There's been little reinvestment over the last 45 years. It has heavy legacy costs, tends to be inefficient in high cost operations. We see a definite deficiency in supply From our perspective, it is an adjacent industry to us. Participants are in the range of $1,000,000 and $1,000,000,000 and $1,000,000,000 to $1,000,000,000,000 In closing, we're excited and impassioned, we always are and we continue to be by our future growth opportunities as they will continue the high returning growth momentum we have consistently demonstrated over the years. Altria and business model continue to positively differentiate our performance, leading to best in class financial metrics, are following a balanced cash allocation strategy that has rewarded our shareholder by top in class returns.

Speaker 2

Are no longer a pure steel company, but an integrated metals business providing enhanced supply chain solutions to the industry. Participants are participating in the process of executing our teams, our foundation. I thank each and every one of them for their passion and their dedication. We're committed to them. And as I remind those listening today, the safety for yourselves, participants are competitively positioned and continue to focus on providing superior value for our company, our customers, team members, our shareholders alike.

Speaker 2

Thank you. Thank you for joining us again today.

Operator

Can be addressed upon reentering the queue. Your first question for today is coming from Martin Englert at

Speaker 6

Within the steel segment, steel conversion costs, which do include some substrate costs, increased, I think to around about $5.76 per ton in the quarter from $5.22 Is there any additional color that you can share regarding the portion of substrates may be some positives and negatives when you think about the sequential change in contributions between true conversion costs and substrates As well as if there was any material impact from the Cintin outage on that conversion cost.

Speaker 5

Participants are ready to take questions.

Speaker 3

Good morning, Martin. It's Theresa. Great question and observation. It really didn't have anything to do with the will be able to see a change

Speaker 5

in substrate mix, but

Speaker 3

that can have an impact. But there's 2 things that I would point to. One is the participants didn't operate all of July, the way that you're calculating your conversion costs, that lack of volume does have a pretty have a significant impact. It's not that there was additional cost. The costs were pretty de minimis.

Speaker 3

It's just that lost volume affecting the denominator. Participants are really affecting your conversion cost on a per ton basis, a little bit on an outsized way. The second thing is that, we are preparing to start the value added lines in Heartland and then sit and will follow thereafter in the coming months and there's some additional costs are related to that as well. But nothing to point to that would be systemic of higher conversion costs going forward.

Speaker 6

Okay. So there is certainly a one off that seemed material for the quarter and then some lingering Kind of transitory as you're working on ramping the other value added assets that will how long do you think that will persist for through the 4th are in the Q1 of next year. Any idea?

Speaker 3

No. So Martin, with the advent of But the value added line, there is some incremental cost. It's nothing that is necessarily significant that you'll have to try to figure out for the Q4. We have 2 of the lines coming online, maybe even before the end of the year with the remaining 2, for the first probably 1st couple of months during the Q1.

Speaker 5

Participants are in the

Speaker 6

line with us. Thank you for that. If I could one last one here, excluding 2020, looking at Seasonality in 4Q total steel shipments, they tend to decline around 5% sequentially. Is there anything you're seeing this year That would suggest something different. And I imagine comparing the sequential with the Cinton participants Back up probably might have an impact here on a sequential basis.

Speaker 3

Participants Yes. So you're spot on, Martin. We would expect to see normal seasonality within the steel operations. But as you have now in ramping up and operating for the full 4th quarter, you will see some benefit from that additional volume.

Speaker 6

And you're aiming for 70% utilization on exit for the year with Cintin, correct?

Speaker 3

That's correct.

Speaker 6

Okay. Thank you very much. Congratulations on navigating the downward market on the and the continued growth investments.

Speaker 3

Thanks, Martin.

Operator

Your next question is coming from Carlos De Alba

Speaker 7

Yes. Thank you very much. Good morning. Just continuing on Sinton, I wonder if you can give us a little bit of color On the EBITDA generated by the operation and how to see that going forward.

Speaker 3

Martin, I'm sorry, you cut off.

Speaker 1

Charles, do you repeat that?

Speaker 7

Yes, yes, sure. And just on Syntone, given the average that you experienced, but things now are Ramping up nicely and you expect full production throughout the Q4. How do you see the Evolution of the EBITDA generated by the company, by the plant, Sinton. Participants are available.

Speaker 3

So, Carls, we can't give we won't give specific guidance on the earnings Associated with Cintiq, we are giving updated items on volume so that you can understand from a modeling perspective. So we would expect to see a significant improvement from the Q3 given the fact We weren't operating in all of July, but that means that I really can't give you any guidance specific to what the EBITDA will be at Simmons.

Speaker 7

And then just maybe one more on the fabrication business. You did mention a strong forward pricing in your backlog. Is there any additional color that you can provide given the extraordinary strong pricing that we have seen in recent quarters relative to history?

Speaker 3

No, it's okay. It has to do with fabrication and the pricing and the backlog. So from a historical basis and even from recent 2023 pricing and the backlog is very strong, much higher than previous are in the market. We've seen that we maintained the spot market, where the order activity isn't as strong as was in 2022. It's still really good from a historical basis, but that is contracting the backlog somewhat.

Speaker 3

So now it And I think something else that we just I want to keep in perspective, Mark mentioned it on his opening notes, but I want to reiterate it because I think it's really important. We've been talking about the IRA monies, the Department of Energy monies, Monies are coming from the administration for public dollars. It's our estimate and others would agree that are likely not even 5% to 10% of that money that's been allocated or awarded yet. It's going much slower than anyone had expected and much slower than the participants have indicated that it would. So those projects aren't benefiting the elongation of construction, steel consumption, fixed participants are fully expecting and what we're hearing from the administration and from others is that those dollars will start flowing in the first half of twenty twenty four.

Speaker 3

So right now, there's a bit of a gap in funding, and I think you're seeing that are in the volumes, but we fully expect that to pick up and improve in 2024 2025.

Speaker 7

Thank you very much.

Operator

Your next question for today is coming from Tristan Gresser at Exane BNP Paribas.

Speaker 8

Yes. Hi. Thank you for taking my questions. Maybe the first one following up on the fabrication. You provided some guidance back in Q2, and I now understand that the stable volume guidance half and half is no longer valid.

Speaker 8

So I was wondering if and it's not the first time the guidance has been cut there. So what is driving quarter after quarter that they can have cut in that weakness? And you provided some color on the sequential movements, I guess, on the steel side for Q4 volumes. Can you tell us a little bit more about fab? And the same question a little bit on ASP.

Speaker 8

You guided for down 10% to 15% in H2 versus H1 on the ASP front, the Q3 ASP is already down 17% versus that level. So can you help us try to calibrate the weakness in ASP we should expect in Q4, but also in Q1 because you have some visibility into that quarter as well. Participants are ready to take questions.

Speaker 3

From a modeling perspective, Tristan, from a volume, I mentioned My opening notes that we do expect to see some regular seasonality in the steel fabrication volume as well. So sequentially, we would expect it to be modestly lower than what you would have seen in the Q3. So again, we're not attesting that are interested to I think I addressed the consumption question when I responded to Carlos. As it relates to average pricing, Again, the backlog is very strong. If you're having seasonally lower volumes, I think it's a reasonable expectation to think pricing will be are down somewhat, but we don't see it being in the same magnitude as the sequential second to third quarter.

Speaker 3

It will be somewhat less than that.

Speaker 2

The market actually has been a little confounding because since mid July, we have seen the market being very, very strong, very solid, in fact. Order input rate has been great. You have a situation where people is more emotional. There's no main structural change in demand that It was more emotion relative to the strike. Mid September when people recognize that it's sort of already been baked into the price.

Speaker 2

When I saw that inventories are very, very, very low in the supply chain, I see participants are in the market. It's our anticipation and the anticipation of others that there's going to be quite are in a market increase in pricing once there's a resolution to that strike. Looking forward, we see a very positive constructive market environment.

Speaker 8

Thank you. That's very helpful. If I just have a quick follow-up and this time more on the capital allocation side. I mean, Given the current context, and I think you touched on and you reaffirmed what are your capital allocation priority are, Can you just reiterate what's your view on inorganic growth? And can you confirm that at the moment you're not interested in are looking at large acquisition on the flat roll side and that's not an area of focus and that right now 100% of your attention is on aluminum.

Speaker 3

Are very transparent on capital allocation. Our primary focus is for high return growth and that can be both organically and it can be transactional. We are very much focused on the aluminum strategy and that will be a priority. We are sitting with record liquidity at the end of the quarter of are $3,700,000,000 So we really have, I think the luxury and we don't take it for granted because of the performance have the luxury to be able to both invest organically, transactionally, if there was something that were are participating in our long term strategy as well as continue with the strong shareholder returns. And that at this point in time is our full intent

Operator

participants are available. Your next question is coming from Timna Tanners at Wolfe Research.

Speaker 9

Hey, good morning, Tim. Wanted to just ask a little bit more about Cinton. If I go back in my notes A couple of years ago, you were talking about being at full capacity 3,000,000 tons and now you're talking about 70%, 80%. I'm just trying to understand, is there some reason that it's no longer expected to run full out? Or are you just assuming like maybe some gradual ramp up?

Speaker 9

I just want to understand that better.

Speaker 2

That's fine. We probably have not done an elegant job of explaining that. The 70% is just the run rate at the end of this year, Timna. Again, we'll continue to ramp up. We expect to be 2,400,000 tons total production next year, which I think is around over 80% of the 3,000,000

Speaker 4

participants are

Speaker 3

in the

Speaker 5

range of $1,000,000

Speaker 2

and then we will continue to ramp up from there. There's absolutely no doubt that Plant capability can exceed the 3,000,000 ton nameplate that we've advertised in the past.

Speaker 3

And I guess just to bring a little bit more clarity to that, we would expect to be operating around that full capacity by the middle of 20 are in the 20 4. Mark's just giving a total year view.

Speaker 9

Oh, helpful. Okay. Thank you. One other timing question was really on the downstream And in the presentation, it says they're starting in the second half, but I thought I heard you saying they were contributing more in the first half, so just trying to get the cadence of when that ramps up.

Speaker 3

Yes. It probably should have been updated in the investor deck. I'm guessing that's what you're pointing toward. Are at the end of 2023, but probably moving into that 1st month, 1.5 months in 2024 And then very closely thereafter, Sinton's additional paint line and galvanizing line will be starting as well, still within the Q1 of 2024.

Speaker 9

And then the last question, if I could squeeze it in, is just on the CapEx guidance. I think we had last quarter, you had talked about a number for are in 2020 of about $1,500,000,000 and just with the higher CapEx guide for Q4, we just wanted to check on if that number is still right for 2024. Thanks again. Participants

Speaker 3

You're welcome, Timna. Actually, we're in the middle of planning for 2024 on the capital investment side right now. It looks like it's going to be closer to $1,800,000,000 to possibly $2,000,000,000 I'll be able to put a finer point on that participants are in the Q1, but it's primarily comprised of a little bit more on the aluminum side just from a timing perspective, not a total investment. So aluminum may be as much as $1,300,000,000 to $1,400,000,000 next year. We also have the construction and startup of the biocarbon facility, which could be as much as $150,000,000 to $175,000,000 And then we have some tail to the 4 value added lines as well of maybe $100,000,000 So I will be putting a finer point on that, but right now I'd say it's probably in the range of $1,800,000,000 to $2,000,000,000 participants are ready

Speaker 5

for questions.

Speaker 9

Appreciate it.

Operator

Your next question for today is coming from Bill Peterson with JPMorgan.

Speaker 10

Yes. Hi. Good morning and thanks for taking the question. We've been seeing some reports that the U. S.

Speaker 10

And Europe are ahead of this summer tomorrow, maybe looking at removing some of the tariffs are adjusting quotas and things like that. I guess assuming that some of this does happen and quotas go away, How would you see this impacting the U. S. Steel market?

Speaker 2

Participants Well, I guess we don't have the same intelligence that others have It really seems still up in the air. The European position and the U. S. Position are totally at odds participants are not much progress has been made, but maybe we're wrong. That said, Obviously, quotas are in place with Brazil and European tariffs, maybe that is a little different, but Europe is not really a participants are not interested in our market in all honesty.

Speaker 2

If you look at the straightforward arbitrage today between, well, Asian pricing and European pricing, participants are not that attractive. We don't necessarily see a big influence there. We do feel strongly that any tariff and quota type activity participants will transition into some form of carbon tax, carbon border tax. Actually, in the long run, we'll likely be a lot more effective participants are in place today. Again, we need to remember participants will be conducting a very good question and answer session.

Speaker 2

The kind of anti dumping Cases that were brought in 2015 went through sunset last summer and got continued. I think it's another 5 years. In addition was in concert with the kind of ailing duty.

Speaker 5

Participants are in the line

Speaker 10

with the question. Okay. Thanks for that color. Second question, so on bar volumes, so you mentioned that there's some impact with the strike, but the strike really only started, I guess, late in Q3. So how should we think about the trajectory of volumes assuming a bigger hit in the Q4 through that segment?

Speaker 2

For us, we don't really see a major change in volume from an automotive perspective in the 4th quarter As I mentioned in my notes, we have a large percentage of our order book is European and Asian, they are not impacted by the strike as of now. We are we do have some business with Stellanis and with Ford. But again, on a percentage basis, it's not going to be

Operator

Your next question is coming from John Tumazos with John Tumazos Independent

Speaker 2

Thank you. With all

Speaker 11

the great dynamics benefiting the Looks like it's trending about 8,000,000 tons below The average of 2017, 2018, 2019, I don't know what's normal, but I'm looking to the pre pandemic period. Your Own Choice business is off 16,000 tons sequentially participants are in the range of 56,000 tons year on year and there's no inventories in Joyce because participants are there any other segments that could account for the deviations?

Speaker 2

Participants are going to be in the range of the participants Yes. I think, again, all we can do, John, is participants are looking through our book, order book or lens. But obviously, the distribution warehouse arena has come off, Amazon obviously came out very publicly and sort of almost holding the development participants are still in the middle of the year. That's not the case with other distributors. It's still an ongoing market for us, although it is there.

Speaker 2

I think we picked it up, education, healthcare has been positive and the just Manufacturing facilities, the battery plants, the chip plants are picking up Not at the rate to offset totally offset that distribution base, but nonetheless, it's picking up strongly and we would anticipate continued growth next year. Just the infrastructure, the IRA spending, Certainly, we'll bolster our order book there and give it some support.

Speaker 11

In terms of the 2 year decline in spot sheet prices of $1200 from big records, How much damage do you think that's caused across consumer and distributor inventory? As you know,

Speaker 2

Well, I think the biggest impact is participants are in the supply chain. Participants In fact, it's not a reduced level of speculation. People just don't speculate anymore. So you see people that's kind of hand in mouth. They tend to be ordering and participants are buying on a as needed basis.

Speaker 2

That allows consistent shipping since July, mid July, We've seen very, very, very consistent order input rates and deliveries even as are very constructive outlook for 2023, which in all honesty came to fruition. The emotion last year was woe is us,

Speaker 4

participants are in the range of $1,000,000,000. We're headed for a recession, we've

Speaker 2

got high interest rates, inflation, etcetera, etcetera, etcetera. There was no participants Structural change in underlying demand in the Q4 of last year. We're seeing the same thing today. Our demand is are very, very solid across virtually every market sector that we have. Yes, we see that saw that softness, strike related, emotional, are starting to see lead time stretch out, just starting to see or get a little worried.

Speaker 2

We're booked out and essentially our order book is closed for November. And given the interest we see for December, we haven't opened that book yet. We're not so sure we will be able to satisfy the total appetite there. So it's a positive market

Operator

That concludes our question and answer session. I'd like to turn the call back over to Mr. Millett for any closing remarks.

Speaker 2

Participants Well, thank you, Holly. And for anyone that remains on the line, I would tell you, I am blessed, SDI is blessed, Each and every one of us is blessed here because we have phenomenal loyal customers. Thank you for your support today participants in the future. We have great service providers. We've got a phenomenal, phenomenal team of people that come to work, as I said earlier, inspired and positive each and every day.

Speaker 2

So thank you. Thank you for those that are shareholders And those on, I would hope that you consider us because we will

Powered by Quartr
Earnings Conference Call
Steel Dynamics Q3 2023
00:00 / 00:00