Steel Dynamics_ J.P. Morgan Industrials Conference Takeaways. Wed Mar 12 2025

Summary of Steel Dynamics Conference Call Company and Industry - Company: Steel Dynamics (STLD) - Industry: Clean Tech / Metals & Mining Key Points and Arguments Demand Outlook & Tariff Implications - The discussion highlighted the impact of Trump's evolving trade policy, particularly the implementation of a 25% tariff under Section 232, which took effect on the day of the call. CFO Theresa Wagler expressed optimism regarding the removal of loopholes and exclusions in tariffs [4][4] - Industry participants are advised to monitor the widening import arbitrage, aligning with comments from peer Nucor [4][4] - Steel Dynamics shipped approximately 500,000 tons to Mexico last year, with the Sinton facility's location expected to benefit West Coast markets that historically relied on imports [4][4] - There were inquiries from Mexico-based auto OEMs about orders to meet USMCA 'melted & poured' standards [4][4] - Tariff-driven 'pre-buying' was downplayed, contrasting with commentary from peers like Nucor and metals distributor RS, though the extent of this trend remains unclear [4][4] - Demand for energy-related products, particularly tubing, and structural products is strong, with datacenter activity remaining robust and warehouse activity showing improvement [4][4] - Pricing is expected to reach a trough in Q1, with improvements anticipated for both pricing and shipments throughout the year, although Q2 margins may face pressure due to lagged input costs [4][4] Strategic Initiatives - The CFO noted recent tightness in UBC scrap markets could be "transitional," partly due to pre-buying for ADI [4][4] - Steel Dynamics has a significant scrap footprint and advancements in proprietary sorting technology to mitigate challenges [4][4] - ADI aims for over 90% recycled content in its packaging products and has exposure to Mexico through its Omnisource footprint, including a new satellite slab caster in Northcentral Mexico [4][4] - The Sinton facility is operating at over 90% melt utilization with a focus on ramping cold mill/value-add lines to achieve profitability in Q2 [4][4] - A biocarbon solution will be selectively implemented across the portfolio starting in Q2, replacing carbon-intensive anthracite [4][4] Capital Allocation - Steel Dynamics launched a ~$1 billion notes offering, including$600 million in 2035 notes (5.25%) and $400 million in 2055 notes (5.75$600 million incremental can provide a cash buffer amid evolving recession concerns and may fund early calls on remaining 2027 notes (4.65%) [4][4] - The company is experiencing easing capex needs, which, along with greater earnings power from ramping value-add lines, should support shareholder returns moving forward [4][5] Other Important Content - The report includes a neutral rating for Steel Dynamics with a price of $123.53 as of March 12, 2025 [4][4] - The report emphasizes the importance of considering potential conflicts of interest due to J.P. Morgan's business relationships with Steel Dynamics [3][3]