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Steel Dynamics Inc (STLD) Q1 2019 Earnings Call Transcript

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Steel Dynamics Inc  (NASDAQ: STLD)
Q1 2019 Earnings Call
April 22, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Steel Dynamics First Quarter 2019 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 be following at that time. Please be advised, this call is being recorded today, April 22, 2019, 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 Tricia Meyers, Investor Relations Manager. Please go ahead.

Tricia Meyers -- Investor Relations Manager

Thank you, Brenda. Good morning, everyone, and welcome to Steel Dynamics' first quarter 2019 earnings conference call. As a reminder, today's call is being recorded, and will be available on the Company's website for replay later today.

Leading today's call are Mark Millett, President and Chief Executive Officer of Steel Dynamics; and Theresa Wagler, Executive Vice President and Chief Financial Officer. We also have leaders from some of our operating platforms, including our Metals Recycling operations, Russ Rinn, Executive Vice President; our Steel operations, Chris Graham, Senior Vice President, Long Products Steel Group; and our new flat roll steel mill and Southwest strategy, we have Glenn Pushis, Senior Vice President, Special Projects and Miguel Alvarez, Senior Vice President, Southwest U.S. and Mexico.

Some of today's statements, which speak only as of this date, maybe 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 risks and uncertainties related to our steel, metals recycling and fabrication businesses as well as to general business and economic conditions. Examples of these are described in our annually filed SEC Form 10-K under the heading Forward-Looking Statements and Risk Factors found on the internet at www.sec.gov, and if applicable, in any later SEC Form 10-Q. You will also find any referenced non-GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued this morning entitled Steel Dynamics Reports First Quarter 2019 Results.

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

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Thank you, Tricia. Good morning, everyone. Welcome to our first quarter 2019 earnings call. We appreciate and value your time with us this morning.

At this point, Theresa normally provides performance insights, but I'd like to instead pause for a moment to acknowledge the recent workplace fatality that occurred in our Structural and Rail division. We are saddened and our thoughts and prayers reside with his family and friends. Although we have some of the best safety statistics in our industry, it brings little comfort at times like this.

The reason I always begin our calls with safety is because it simply cannot be stressed enough. It's our number one value, our first priority. Nothing is more important than sustaining a safe environment. We must all be continuously aware of our surroundings and the team members around us. We must actively think about safety at all times, keeping it an ongoing conversation on top of mind.

Probably with that, Theresa will provide us some insights regarding our recent performance.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Thank you. Good morning, everyone. Our first quarter 2019 net income was $204 million or $0.91 per diluted share, within our guidance range $0.88 to $0.92 per share. First quarter 2019 revenues were $2.8 billion, higher than first quarter 2018 sales, a 3% lower than the fourth quarter sequential result as average flat rolled realized steel prices declined.

Our first quarter 2019 operating income was $292 million, 20% lower than sequential fourth quarter results, driven by flat rolled steel metal spread compression. As we discussed our business (ph) this morning, you'll find we are optimistic about 2019 from a macro perspective, and even more so because of our unique earnings catalyst. More specifically, our first quarter steel shipments increased 4% sequentially to 2.7 million tons of growth achieved at each division excluding our Structural and Engineered Bar division.

Steel metal spreads compressed as our average quarterly realized sales price decreased $38 per ton to $902 in the first quarter, and average scrap cost consumed only decreased $5 per ton. The sales price decline is driven by lower flat rolled steel prices. In general, aside for merchant steel, most of our long product steel prices actually increased in the first quarter. There is always first quarter steel operating income of $312 million, and although lower than fourth quarter results, historically, a strong performance.

On March 1st, we acquired a 75% controlling interest in United Steel Supply, a leading distributor of painted Galvalume flat roll steel used for roofing and siding applications. We paid cash of $93 million and assumed debt $41 million. The cash payment is still subject to working capital adjustments later in the year.

With our recent flat roll acquisitions, production enhancements and our investments to cost effectively access the excess melting capacity at our Roanoke constructional steel division, we have diversified an increase of product capability. We now have an estimated annual steel shipping capability of over 13 million tons, including over 8.5 million tons of flat rolled steel, and over 4.5 million tons of long product steel. And because of our emphasis on value-added steel, we also have 4.5 million tons of higher margin annual flat rolled steel coating capability. And with the third galvanizing line is running at Columbus, mid-2020, we'll have almost 5 million tons of coating capability.

For our metals recycling platform, first quarter operating income was $20 million, an 18% sequential improvement based on increased non-ferrous shipment specifically aluminum and higher realized pricing. We continue to effectively ladder the strength of our vertically connected operating model, which benefits both the steel mills and the scrap operations. Over 65% of our metals recycling platform ferrous shipment serve our own steel mills, increasing scrap quality, metal efficiency, and reducing companywide working capital requirements.

First quarter 2019 operating income for our fabrication business improved sequentially to $21 million, representing a 39% increase. Earnings improved as realized product pricing increased and average steel input costs decreased. We continue to see strong order enquiry and customer optimism. We're entering the traditional construction season with a strong project backlog and expectation for continued solid non-residential construction activity. Our March fabrication backlog is as strong as it was this time last year.

During the first quarter of 2019, we generated $182 million of cash flow from operations, offset by operating working capital growth of the same amount, as there were several annual payments which are required to be made in the first quarter of this year. For example, our companywide profit sharing payments to our teams was $140 million in March to our record 2018 earning.

First quarter capital investments were $54 million. We currently estimate 2019 fixed asset capital investments to be in the range of $300 million to $350 million, excluding the new mill, which I'll address later. It's comprised of $100 million to $150 million of sustaining capital, which includes safety and environmental projects. $100 million is related to Columbus' third galvanizing line addition, and $100 million for other expansionary and efficiency growth projects.

Regarding shareholder distributions, we increased our cash dividend in the first quarter 2019 to $0.24 per common share, a 28% increase, this follows increases of 21% last year and 11% in 2017, demonstrating our confidence in the strength and continued growth of our sustainable through-cycle cash generation.

We also repurchased $84 million of our common stock during the first quarter, approximately $350 million remains authorized for repurchase at the end of the quarter. Since 2015, we repurchased 23.6 million shares, representing almost 10% of our outstanding shares. We maintained strong liquidity at $2.2 billion at March 31st, representing almost $1 billion in cash and short-term investments, and $1.2 billion of available funding under our revolving credit facility.

Before I hand the call back to Mark, I will share some updates regarding additional insights pertaining to the anticipated cash investment timeline for our new Southwestern U.S. flat-rolled steel mill, which is a key part of our growth strategy. The total investment is currently expected to be approximately $1.8 billion, subject to continued refinement as we make final site selection, obtain required permitting and finalize the project timeline.

Based on what we know at this point and assuming timely receipt of required environmental and operating permit, we would expect to begin actual facility construction in 2020, followed by starting operations in the second half of 2021. Based on this timeline, we estimate the approximate capital investments to be as follows: approximately $300 million in 2019; $850 million in 2020; and $650 million in 2021. We'll continue to refine these estimates as we make a final site selection and secure state and local incentives. We've been making very good progress on those fronts.

The strength of our through cash cycle generation coupled with a strong capital foundation, provides meaningful opportunity for growth and continued shareholder distributions through our positive dividend profile and share repurchase program. We're squarely positioned for a continued optimized long-term growth creation.

And finally, for some of those of you that use flat-rolled steel shipments for your models that are broken down, for the first quarter of 2019, our hot-rolled and P&O shipments were 854,000 tons, our cold-rolled shipments were 137,000 tons, and finally, our coated shipments were 867,000 tons.

Thank you, Mark.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Thanks, Theresa. Well, as Theresa reported, New Millennium Building Systems, our fabrication platform delivered strong performance, with profitability increasing despite lower shipments resulting from inclement weather. Product pricing has improved, while still input cost have decreased resulting in metal spread expanding.

Our order backlog remains strong, heading into a summer construction season, and is slightly higher than this time last year. Project backlogs are expanding with contract and struggle with the construction labor shortage, which should prolong this non-residential construction cycle. The ongoing strength of this business and continuing customer optimism bodes well for non-residential construction demand.

Our metals recycling team also performed well, improving profitability in the quarter, as non-ferrous volumes and metal spread increase, especially related to aluminum. Conversely, first volumes contracted modestly. First scrap availability has been steady. A strong automotive sector is generating a more than ample supply of prime scrap. We expect seasonal flows of cut and shredded grades will continue to pick up and outpace demand.

We would expect actual volumes to remain constrained throughout the rest of the year. This is consistent with our longer term scrap view, the pricing will remain stable and supportive of healthy steel sheet margins -- metal margins. The steel platform delivered a solid first quarter performance in a somewhat challenging flat-rolled steel pricing environment. Flat-rolled steel prices began a downward trend in the second half of 2019, which continued through mid-first quarter, reaching an inflection point in February.

As prices softened, buyers remained on the sideline. Our teams were able to increase flat-rolled shipments to help offset some of the margin compression. The good news is that underlying demand remained intact. Flat-rolled pricing increased and order input rates returned thereby regaining healthy lead times.

While industry shipping rates eased in the first quarter 2019 due to the 35-day government shutdown and abnormally cold and wet weather in many parts of the country, lower mortgage rates and interest costs should increase construction and higher oil prices could boost energy sector demand in the coming quarters.

We further believe both U.S. and Mexican steel consumption will continue to improve in the coming years with Mexican growth outpacing that of the U.S. based on meaningful increases in their manufacturing base.

We continue to position Steel Dynamics for the future through optimization of existing operations, organic investments, and transactional growth. During 2018, we reinvested on our existing steel operations and acquired Heartland, a 1 million ton flat roll processing facility for additional value-added product diversification.

We also recently acquired a 75% controlling interest in United Steel Supply to further enhance our prepayment supply chain. We completed $38 million, 200,000 ton a year rebar expansion at our Roanoke Bar division in the third quarter, becoming the only independent supplier in that region.

In the first quarter 2019, we also completed a 240,000 ton per year, $82 million rebar expansion at our Structural and Rail division. This expansion includes cut-to-length and coiled rebar capability.

Our unique rebar supply chain model is expected to meaningfully enhance customer optionality and flexibility, providing significant logistics, yield and working capital benefits. In addition, we will be the largest independent rebar supplier in the Midwest region also. We shipped our first full rebar in February.

We acquired Heartland mid-year 2018, increasing our flat rolled product diversification through value added, wider and lighter gauge product capability. It's geographic proximity to our existing Midwest flat roll operations also allows for meaningful value creation.

Integration is going well, and the team is setting new production levels and productivity. But the facility was built with higher cost inventory acquired through an acquisition through March of 2018. We still plan to reach an annualized run rate of over 80% of capacity by midyear.

The innovative spirit of the whole team throughout the organization remains intact and there were numerous small organic projects that were completed in 2018 that will benefit the coming years as well.

During 2018, we also announced further growth for our Columbus Flat Roll division. In the last two years, Columbus has transformed its product offerings through the addition of the paint line and the introduction of more complex grades of flat rolled steel. The diversion of product to these diversified, value-added outlets has reduced the volume available to our existing galvanized steel customers.

So to address the lack of sufficient galvanizing capacity, we announced the addition of a third galvanizing line at Columbus. The $140 million investment is another step of further value-add diversification for the Columbus mill and less hot-rolled coil exposure. The 400,000 ton line is planned to begin operations mid-year 2020.

Additionally, during the next 18 months, we plan to invest about $90 million at Columbus to further increase the range of complex grade capabilities, including advanced high strength steels for both the automotive and energy sectors. In aggregate, these upgrades will reduce the availability of about 400,000 tons from SDI Columbus of non-coated flat-rolled steel into the Southern U.S. by the year 2021. This will coincide with the time frame that we plan to begin our operating -- begin operating our planned new flat roll steel mill in the Southwest.

We continue to be increasingly excited about the expansive opportunities and long-term value creation of our Southwest U.S. and Mexico growth strategy will provide Steel Dynamics. Each of our operating platforms have an existing presence in the region today. We were on the move and planning to meaningfully expand our influence in the region.

The planned construction of our new flat-rolled steel mill in the Southwest is a significant piece of the plan. The facility is designed to have an annual production capacity of 3 million tons and will include a 450,000 ton galvanizing line, and a 250,000 ton paint line with Galvalume capability. We estimate the investment to be approximately $1.8 billion.

The new mill will have capabilities beyond existing electric-arc furnace flat-roll steel produces, and competing even more effectively with the integrated steel model and foreign competition. Having a thicker cast section and a more conventional two stage hot-rolling presses, the mill capability will provide higher strength and tougher materials for the energy and automotive markets. The mill will be capable of 84-inch wide, 1-inch thick, 100 ksi hot rolled coil.

Downstream value-added capabilities will include galvanizing and pre-paint, and to be clear, we're not just adding production capacity. We will have a differentiated product portfolio, we will have a significant geographic freight and lead time advantage, and we have target markets.

The new metal will have in fact three targeted regional markets, representing over 27 million tons to 28 million tons of relevant flat-rolled steel consumption. We believe this demand will continue to increase in the coming years. Those regions include approximately 8 million tons from the four-state region of Texas, Oklahoma, Louisiana and Arkansas, which has limited domestic regional supply and relies heavily on imports.

Approximately 4 million tons from the underserved West Coast region, which also relies heavily on imports. And finally, about 16 million tons from the growing Northern and Mid-Central Mexican region. Based on their growing manufacturing base, we believe Mexican demand growth will continue to outpace supply, making this an even more attractive underserved market in the coming years.

A significant competitive advantage lies in the intended location of the facility central to these targeted market region. We are still actively pursuing sites in both Texas and Louisiana. The mill will provide a significant freight cost savings and delivery time advantage to many customers in the U.S. and Mexican regions. This will provide a competitive supply chain allowing the new mill to effectively compete with imports flowing into Houston and the West Coast, that inherently have long lead times and speculative price risk. Customers are excited and have already expressed interest in possibly locating facilities on or near our site.

From raw materials perspective, our metals recycling operation already controls a significant and growing scrap volume in Mexico, due to our scrap management relationships, much of which is prime scrap. We also plan to cost effectively source pig iron through the port system. Based on our current scrap relationships, both in Mexico and the Southern U.S., we are confident in the ability to procure high quality scrap in the region.

We've been developing a flat rolled steel strategy for this region and Mexico for several years. We've been developing both customer and scrap relationships, and we are confident in the long-term strategic value and investment profile this project provides. We believe our unique operating culture coupled with our considerable experience in successfully constructing and operating cost-effective and highly profitable steel mills, positions us well to execute this greenfield opportunity.

We're also optimistic about our existing market opportunities for 2019. We believe North American steel consumption will continue to see a steady increase. Furthermore, the actions taken by the U.S. federal government has developed a healthy domestic steel environment and should provide sustainable long-term support for the U.S. manufacturing base. These actions will continue to erode import volume, while increasing effective import price. We anticipate reciprocal 232 tariffs between the U.S., Canada government, Canada and Mexico will be replaced by alternative effective -based programs among the USMCA countries prior to ratification of the agreement later this year.

Specific to Steel Dynamics, our unique culture and the execution of our long-term strategy continues to strengthen our financial position through strong cash flow generation and long-term value creation, clearly demonstrating our sustainability and differentiating us from our competition. Customer focus, coupled with market diversification and low cost operating platforms, support our ability to maintain our best-in-class performance and differentiation. The Company and the team are poised to continue organic and transactional growth.

Our exceptional team provides the foundation for our success, and thank each and every one of you for your passion and commitment to excellence, and remind you, safety is always the first priority. We are committed to providing exemplary long-term value to our fellow colleagues, to our communities, to our customers and to our shareholders, and look forward to creating new opportunities for you all in the future.

So, again, thank you for your time, and we'd like to open the call up for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Martin Englert with Jefferies.

Martin Englert -- Jefferies -- Analyst

Hi. Good morning, everyone.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Good morning.

Martin Englert -- Jefferies -- Analyst

Your commentary on demand remains generally positive expecting continued growth in North America this year. Can you discuss how much of that growth is coming from the core end market versus maybe Steel Dynamics taking market share from either imports or competitors? And then, any other additional detail you can provide on potential growth ranges anticipated for steel consumption here?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, certainly, obviously, demand, I think has been a big question, relatively for all. I think one has to reflect back a little bit and understand why the fourth quarter was a little soft. It was a tough quarter from an economic standpoint. You had a 35-day government shutdown, you had inclement weather, customers' sentiment, people's sentiment generally was a little down. You had lingering recessionary concerns overhanging the fourth quarter, the trade war rhetoric and softening raw material price expectations.

I don't think it was surprising honestly, but we saw a little softness there. That softness is flagged in February, and our order input rate picked up dramatically pricing things back up, and today our lead times are very healthy for hot-rolled coils through the end of May, which is exactly where we'd like to see them. And we're actually a little long to be honest, and coated and pre-paint were anywhere from six to eight weeks.

So, we see -- at least, tomorrow it looks a very positive environment. I think oil remains strong, and I think energy has been very good to us and I think to the industry in general. And as we meet with our Energy Pipe & Tube customers, they seem to be very bullish going forward. The gas oil transportation infrastructure need to continue to be build out, particularly with the very large LNG projects that are happening along the Coast in the Southwest. So, we see energy being very, very, very strong for the next several years, manufacturing base is healthy and we see construction remaining healthy. As we said earlier, our window of interest into the non-risk construction through New Millennium Building Systems is very positive, and our order backlogs are higher this year -- this time this year than they were last time. So, I think, generally, a very positive environment for the rest of the year.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

So, Martin, specifically, as it relates to whether its market share or fundamental core sector growth, we expect to see in consumption, domestically, probably about 2% growth year-over-year based on our own production. But then, there is some of that specific to Steel Dynamics where we have continued to take market share specifically in automotive and some of the energy markets as well. So, it's a combination of both.

Martin Englert -- Jefferies -- Analyst

Okay. Thanks for all that detail there. I appreciate it. And if I could one quick follow-up. Volumes on SBQ do appear down year-on-year, can you discuss what you're seeing with demand there and the end users, and why volumes were lower?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, I guess, we permit a little bit of sketchiness in the SBQ market. I think suppliers are getting some push back on current pricing. Most mills are full at this point. People are looking for volume discounts. We think some of it is inventory corrections. Most are still optimistic regarding the second half of '19. I'd say that's what's driving that. I spent a couple of days at the North American Steel Alliance, which is a gathering of -- along with the family owned, the smaller processing steel distributors. And I would say to a customer, they were all very focused on the market outlook. They are a little cautious with inventories, and so they're not speculating in any way, shape or form, but it is a positive environment.

Martin Englert -- Jefferies -- Analyst

Okay. Thank you for all the detail.

Operator

Our next question comes from the line of Curt Woodworth with Credit Suisse.

Curt Woodworth -- Credit Suisse -- Analyst

Thanks. Good morning, everyone.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Good morning.

Curt Woodworth -- Credit Suisse -- Analyst

The first question is just on the profitability of the Steel Ops segment this quarter. If you look at -- the ASP increased relative to scrap increase from metal spread was up about $53 a ton year-on-year, but EBITDA per ton only went up $9. So, I'm just curious, what were some of the other moving pieces around cost inflation, electrodes, things like that you could identify?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Curt, when you're looking year-over-year, the biggest change that you're seeing is the electrode cost. Our electrodes didn't start increasing the cost until the second half of 2018 because we had different inventories that were layered in. And so, it's almost a $20 million quarter-over-quarter increase, in just electrodes alone. But if you were to do that same comparison on the sequential fourth quarter, it's basically flat. So, you're seeing the higher input costs and that's basically the change year-over-year.

Curt Woodworth -- Credit Suisse -- Analyst

Okay, that's helpful. And then a follow-up just on the new 3 million ton mill. Mark, how do you think about sort of the cadence of layering production? I mean 3 million tons is almost a 50% increase to your current footprint on a productive capacity basis for sheet. So, you know, clearly pretty transformative is -- you know, is your sort of strategic imperative is that you'd want to try to quickly gain that market share and maybe be more disruptive or what -- what's kind of the strategic philosophy in terms of how quickly you could ramp the 3 million tons? And would you look to stagger it as well?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, we have no intention of staggering it. And I think, the market will be very, very receptive, and at least from all commentary today, they're incredibly receptive. I think one has to recognize that is in that Southwest region right now, there's a vacuum of domestic supply. This mill is going to have sort of minimum of $30 plus trade advantage over any domestic mill, plus it's right in the heart of the input coming through Houston. So, I'm afraid to manage there, and probably even more importantly, a lead time advantage.

When folks are bringing in imports, and they've got a two, three, four-month lead time and that price speculation, I think, we're going to gain a massive volume of market share that import downstream, and it's going on allowing the pipe producers, tube producers in that region, in Louisiana, Oklahoma and Texas, competitive scope, but they haven't been able to procure up to this point. And that's allowed a massive amount of pipe and tube imports as well.

So, I think, the -- you've got to consider again, there's just a void in the supply there today, and I think this mill is going to supply. It's going to supply that four state region. But, as I said earlier, it's 7 million, 8 million, 9 million tons onto itself. It's a very competitive freight rate to the West Coast. That is a 3 million to 4 million ton market, and they are suffering on the supply side dramatically today.

Plus we're within $30 million freight of the Northern Mexican markets, Monterrey in particular, and that's a growing region. It's 15 million and 16 million tons today, and that's predicted to be 20 plus million tons over the next three or four years. So, I have no doubt of the ability of that mill to penetrate the market and pick up market share very, very quickly.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

And in addition, Curt, I don't think you can emphasize enough the fact to what Mark said earlier, that we've got considerable number of customers that actually want to move on campus. And so, that's going to help the ramp-up of that facility as well.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

And then also if you look at or if you reflect on any market that we've entered in the past, most of those markets actually have been over served in any event. And our strategy is always to differentiate ourselves to create value for the supply chain, which obviously creates value to the end user, to the customer. And this mill is very, very different from any other electric arc furnace facility today. You can kind of understand it is a electric arc furnace mini mill hot end with an integrated hot strip mill.

So, the thicker cast slab, the two-stage rolling, which will allow us to do thermal mechanical rolling, adds strength capability, adds toughness. So, our mill offerings, 84wide up to 1-inch, 100 ksi material is very, very differentiated, and can only be really accessed by the integrated mill today, and they're at least probably a $50 or $60 straight into that region.

Curt Woodworth -- Credit Suisse -- Analyst

Okay, great. Thank you.

Operator

Our next question comes from the line of Matthew Korn with Goldman Sachs.

Matthew Korn -- Goldman Sachs -- Analyst

Hey, good morning, Mark. God morning, Theresa.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Good morning.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Korn, good morning.

Matthew Korn -- Goldman Sachs -- Analyst

Hey. So, I appreciate the new detail on CapEx for the new mill. Question is, given the number of new furnaces announced and in or near construction, is there any constraint on available engineering talent? I imagine that the population of anybody really experienced and leading in the EAF build out is fairly small and well bid. And then you also mentioned timelines in your approvals. What is the timeline on permitting? What should we be watching for? Is that a second quarter or second half? Where's the calendar there?

Glenn Pushis -- Senior Vice President, Long Products Steel Group

Yes. Hi, Matt. This is Glenn Pushis. We're working on that project pretty much full time now. We've got our environmental permits in place of Texas application. We're being told it's about a one-year process for that, and we're really not finding any -- to your question on engineering talent, we're really not finding any real challenges there. It seems to be that there's a lot of people with some available engineering time and are ready to jump on the project there pretty quickly.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

And to add to that, again Glenn, it's the best way I modeled. I was in the conference room watching the folks leaving, what we call, the war room that in our basement, and there are probably a dozen individuals just walking out at the end of the day. And I -- it's just amazing the amount of knowledge and talent and experience we have within our organizations, and sort of designing, procuring and building construction starting up large capital assets. And so I've got no doubt the team is going to perform sort of (technical difficulty) the equipment itself has been spec-ed out, and Glenn and team, I think, expects to have that order placed in the next two weeks.

Matthew Korn -- Goldman Sachs -- Analyst

Excellent. Let me ask then on the scrap market. You know, week after week, we see domestic steel production up year-over-year, utilization rates are higher. Now naturally that would mean the drawn scrap should be higher. Yet global steel production keeps growing, global iron ore prices are substantially higher, which, all else constant, should be a tailwind for scrap prices. So, and your -- why your scrap prices remain so moderate, and does it come down to -- we should essentially expect to finish steel prices to lead scrap moving forward, and not the other way around as it has been in the past? I'd love your opinion on that.

Russ Rinn -- Executive Vice President of Metals Recycling

Yes. Matt, this is Russ. I think the biggest difference in the U.S. market today is the export market. Again, you've got a tepid export market, which means scrap is staying on the coast, and it's more accessible. They're more -- it's a little bit higher in supply than what we've seen probably in the past decade or so. Obviously, that's been changed in a heartbeat and you can certainly look at the fact that iron ore is rated at $90 range -- per ton range, and used the standard 4 times, 4.5 times, which is the higher price. But when there is excess scrap hanging around, it's all chasing a smaller market because they like exports.

Matthew Korn -- Goldman Sachs -- Analyst

Got it. Thanks, folks.

Operator

Our next question comes from the line of Chris Terry with Deutsche Bank.

Chris Terry -- Deutsche Bank Securities -- Analyst

Hi, Mark and Theresa. I just had a question on the overall market dynamics. Just wanted to flesh out a little bit. In terms of your comments, there was an inflection point around the middle of February. We started to see pricing move up on the back of that, and then I guess linked to the question before on the scrap environment, we've seen that easing the last couple of months. How are you seeing activity at the moment, and the pricing environment? It seems like things have eased a little bit, but you're still very positive on the demand story. So, just want to think about the spreads in the next couple of quarters and overall pricing dynamics for the end products and also scrap? Thanks.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, I think, as Russ said, we look at kind of stable scrap pricing going forward the rest of the year, it may soften a little bit this coming month. But again, 10, 20 up. But 10, 20 are not massive moves. So, stability on the raw material side. On the pricing side, yes, it inflected, went up and it's eased a little. But if you look at the arbitrage to falling pricing today, it's pretty well evaporated. Imports are still under control. On an annual basis, will be under control and then probably will continue to erode through the year. So, I think that the market sort of pricing today is going to be relatively stable too. So, spreads will remain healthy.

Chris Terry -- Deutsche Bank Securities -- Analyst

Okay. Thanks, Mark. And then, just following up on your comments a bit earlier around the Section 232 quotas versus tariffs. Can you just talk a little bit more about that and the timing you'd expect on that from Steel Dynamics point of view?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, I think, we would say, it's absolutely totally speculative. But I would say, our intelligence would suggest that progress is being made in China and progress is certainly being made in the USMCA, that would likely change toward a sort of quota-based agreement. Those quotas being based on a certain level of historic import levels with a tariff for any (inaudible) over that. And I think that there will be a positive outcome for all three countries. When that trade move that we actually are seeing some pretty positive outcome, is a 301 I guess pre-fabricated imports. That action is under way, hasn't been concluded yet, but we're already seeing some of the larger projects that we bid out and destined to be kind of Chinese steel, pre-fabricated Chinese steel coming into the country. Those are now being rebid, and I think, that's a very, very positive sign for our long products metal market in general.

Chris Terry -- Deutsche Bank Securities -- Analyst

Okay. Thanks a lot.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Welcome.

Operator

Our next question comes from the line of Brett Levy with Wexford.

Brett Levy -- Wexford Capital -- Analyst

Hey, guys. It's the recipe question. You guys are adding 3 million tons, you're adding galvanizing, you're adding the width, you're getting potentially from cliffs and other people iron ore feed that will be very clear. Have you guys gone, and I'm guessing you have, I've just asked to see if you can make the recipe to make the deployment of a Chevy or a Dodge in terms of rolling pattern, alloys, galvanizing, kind of all the pieces of the puzzle because it just doesn't seem right, you would just build it and expect them to come. I would think that you probably have done some work on this and can you give any clarity on that?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, first and foremost, we are certain of build your dreams. As I've said many times before, we don't manage to hope. We do think that (technical difficulty) control our own destiny. I think the teams -- obviously, in Butler, they've been supplying roughly 30% of their output to the automotive world for years -- years and years. And the Columbus team has built a phenomenal following already, particularly with the higher strength of advanced steels and gaining incredible acceptance particularly with the European automotive producers, BMW, VW Princes car. And this -- or the new mill just adds to that.

As we said the two-stage rolling, the thicker cast slabs will allow us to get advanced steels for automotive, much stronger steels, and we'll get -- allow us to get the tougher, thicker steels for the energy markets, API grade. So, I think, the opportunity for the market is definitely in front of us. We just have to get this thing up and running by 2021.

Brett Levy -- Wexford Capital -- Analyst

Thank you, Mark. Thank you, Theresa.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Thanks, Brett.

Operator

Our next questions comes from the line of Timna Tanners with Bank of America.

Timna Tanners -- Bank of America -- Analyst

Hey. Good morning, everyone.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Good morning.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Good morning.

Timna Tanners -- Bank of America -- Analyst

I don't want to beat the topic up too much here on the near-term market conditions, and I know we talked a little bit about your demand outlook. But one thing I wanted to ask you about is, why do you think domestic prices have narrowed so much the gap between imports like a lot of -- on the flat roll side, hot roll in particular, prices have been below at landed import levels for a while. Do you see like a lot of extra steel competing? Is this a short-term thing? What's your sense and why prices for domestic mills are below import landed levels?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, there remains a slight hesitancy. As I said, the customer base is very, very optimistic for business conditions and demand for the rest of the year. That being said, they're cautious on inventory, also they're buying, so as steady as she goes. And left again with the addition of a little bit more capacity maybe a stress to supply/demand a little bit. But from all we can see, Timna, is the market through our own order book and that remains strong. As I said, we're right through the end of May with hot-band and we're too long in my own opinion on the coated and pre-paint.

Timna Tanners -- Bank of America -- Analyst

Okay. Great. And then, yes, our channel Texas, just there is too much supply, so that's what I was trying to get at. You know, there seems to be this fight for market share, is what we're hearing, and I was just wondering if you're getting that sense from the field as well, but you know, I can leave it there.

And then just on the new mill, I don't understand the Mexico commentary. I just want to understand a little bit better. If I look at the Mexican net imports plus production I come up with about a 30 million ton market. And between the two new rolling mills Ternium and ArcelorMittal that are coming out on next few years that's what 5 plus million new tons. And then your mill is also talking about targeting these tons. And I know, you said demand is growing, but how are you looking at that equation. Can you talk us through a little bit more of that detail please?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, I think, again that the market is still short, for sure. Yes, Ternium is going to add a little bit of capacity we think. You never know until that is actually on board. Also it is adding hot roll and cold capacity. So there is addition there, but that is way down in the southwest. So they've got a massive freight, they get it up to Monterrey. I think you also need to understand, there are product capability deficiencies within Mexico that our mill is going to serve. Miguel, you got some talk?

Miguel Alvarez -- Senior Vice President, Southwest U.S and Mexico

Yes, I mean, I just listened that you mainly spend your last comment on those capabilities and what's going to happen compared to what (inaudible) in Mexico. We've been talking to a lot of consumers in Mexico, and we have to confirm that the capability that we're going to have from the (inaudible) are going to make a difference in the market. So, the capacity that is being added in Mexico is a capacity that is going to -- is mainly going to continue to compete with some of the domestic mills there. But what we are going to offer (inaudible) compete with them, what the problem with operating some of the tonnage that is being importing from other countries. So, we feel very confident about quickly gaining market share there with the capabilities that we're going to have.

Timna Tanners -- Bank of America -- Analyst

So, those capabilities would be not just the galvanize, I'm assuming because there's three galv lines coming on in Mexico as well. So, you're talking about capabilities aside from finishing. So, maybe like the wider gauges or maybe the thickness is that what you're talking about?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

It is a combination of width, gauge and strength.

Timna Tanners -- Bank of America -- Analyst

Okay. All right. Thank you.

Operator

Our next question comes from the line of Piyush Sood with Morgan Stanley.

Piyush Sood -- Morgan Stanley -- Analyst

Hey, guys. Good morning. A couple of questions. First one, on the fabrication business, you would have picked up higher price orders throughout last year. So, wondering whether you've seen all those higher price orders come through the results already or is there more to go through the year?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

From a fabrication perspective, for the backlog, we are -- actually we've increased prices pretty effectively in the first quarter this year, and we would expect to see that continue honestly through the year. And that in combination with the lower steel pricing is now in the inventory for the fabrication business should result in higher spreads than you would have seen in 2018.

Piyush Sood -- Morgan Stanley -- Analyst

Okay, that's helpful. And going back to spreads, just want to understand that the spread between hot roll and cold roll has widened closer to about $150. So, is the market much more tighter on cold than -- and cold and coated versus hot rolled, also how sustainable do you think that difference in tightness is?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well, certainly, on the coated side, galvanized side, the pre-paint side, things are very, very healthy. We actually have not necessarily the major player in coated sheet although that's a marketplace to be venturing through the Heartland acquisition. But I think, on the coated pre-paint spreads, those will be maintained.

Piyush Sood -- Morgan Stanley -- Analyst

All right. Thank you.

Operator

Our next question comes from line of Matthew Fields with Bank of America.

Matthew Fields -- Bank of America -- Analyst

Hey, everyone. Thanks for the detail on the CapEx schedule for the new mill. Is it your intention at this point to fund the construction spending through free cash flow generation and not with any additional debt and current?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Right now, Matt, our current intention to watch the capital market throughout the year. You would see our capital structure today, you'll see that we have some notes that are actually stepping down on pricing. So, I think, we're just going to continue to water the market. We definitely believe we could do that, but that might limit some optionality to do other things. So, I think, it's just something that we're going to wait and see what happens in the capital markets this year.

Matthew Fields -- Bank of America -- Analyst

Okay. And then as you enter this period of elevated CapEx spending over the next few years, against the backdrop that some of the other analysts have mentioned with all the new supply coming on from other producers. Is there kind of a leverage level that you would like to maintain as you're spending all this cash building this mill?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Well, currently, obviously, yes, no today obviously that leverage levels are quite attractive. I think our net leverage is less than one times at the end of the quarter. But through the cycle, we've consistently said, and we'd really like to maintain that through cycle net leverage somewhere between two and three times. And with that we believe that we'll be able to effectively do that even with the elevated levels of CapEx spending because I think one needs to keep in mind that we have all these earnings catalyst that are also coming online this year for example the rebar project is a Structural and Rail division. We just started shipping rebar in the first quarter this year, but by the third quarter this year we expect to be up to about a 90% to 95% capacity.

That's quite a bit of additional volume and that's why I may mention in fact that our shipping capability today is over 13 million tons. So I think one needs to keep in mind that there's earnings catalyst that will be kicking in along with our additional spending over the next two to three years.

Matthew Fields -- Bank of America -- Analyst

Okay. Thanks. And then last question from me. How do you balance the $2 billion you intend to spend on the mill, some acquisitions you're making along the way, share repurchases and dividends with the kind of goal to get investment grade?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Well, right now I think we have the ability to have and what we would like to call a balanced approach to the capital allocation which you've seen us doing. If we are going to see a larger acquisition or transaction you'd probably likely see us pull back a little bit on the share repurchases in advance of that or in combination with that because that's a lever that we can use quite effectively. Otherwise, I think you should expect to continue to see a positive dividend profile from us which you've seen over the last long period of time actually, along with the additional capital that we've been spending with expectations of that continued cash flow generation. So I think you're going to continue to see us do what we've been doing.

Matthew Fields -- Bank of America -- Analyst

Okay, thanks very much, I appreciate it.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our question are from the line Chris Olin With Longbow.

Chris Olin -- Longbow Research -- Analyst

Hey, good morning.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Good morning.

Chris Olin -- Longbow Research -- Analyst

I get the whole underlying thesis that import quotas have a better long-term impact on the US steel industry. I guess my question is when you start thinking about the new NAFTA agreement, or I guess I should say the USMCA, once we see a shift from tariffs to quotas, is there going to be potentially a destabilising effect, does the market need to reset and could that explain some of the slowdown in orders heading into a final decision?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

I don't believe so. I think the final USMCA agreement will be based on past levels of trade and as such there'll be some kind of stability there, more than anything else.

Chris Olin -- Longbow Research -- Analyst

Okay. So the market doesn't have to reset to lower import prices, especially when you look at some of these long products being underpriced before the tariffs. I don't need to adjust for that at all?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

I don't think so.

Chris Olin -- Longbow Research -- Analyst

Okay. Thank you.

Operator

And our next question is from Phil Gibbs with KeyBanc.

Phil Gibbs -- KeyBanc -- Analyst

Hey, good morning.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Good morning.

Phil Gibbs -- KeyBanc -- Analyst

Hey, Mark, in terms of the United Steel Supply deal, is that something we should expect you all to do moving forward in terms of making more of these downstream acquisitions similar to what Mittal does in Europe or is this more of a one-time special situation?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

But Phil, I don't look at US Steel Supply is being a European model of steel mills entering the steel distribution processing space. I think this is very unique to our supply chain for pre-paint. You might see us continue to expand in that very unique specific area, but it's not my intent to become a steel processor or a distributor in any way, shape or form.

Phil Gibbs -- KeyBanc -- Analyst

And is this business going to get talked into steel or fabrication?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Actually it's already being reported through steel, so I knew -- there were shipments we have been reported in the coated shipments that I gave you earlier on the call.

Phil Gibbs -- KeyBanc -- Analyst

Okay and then I just have one follow up. Typically in a release you give changes in profit per part of the steel business whether that's flat, rolled or long products. I think that's the way you've discussed it in the past. Any color you could give us on directional change? I think we know but in terms of the magnitude of the change in each of those divisions would be helpful. Thank you.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Yeah, Phil, typically, it's part of the message we try to give sometimes the difference between flat and long products. I would just say that flat, rolled profitability was down, probably somewhere between 20% and 25% versus long products profitability being down maybe around 10%.

Phil Gibbs -- KeyBanc -- Analyst

Thanks so much.

Operator

Our next question is from the line of John Tumazos with Very Independent Research.

John Tumazos -- Very Independent Research -- Analyst

Thank you very much. Mark I'm going to ask a deliberately dumb question that I think all of us are probably confused about. There's potentially almost 10 million tons of new electric furnace SMS thin slab hot strip mill capacity if both you and Big River build new plants in the Texas Gulf Coast vicinity and Big River doubles in Arkansas and Nucor doubles Gallatin, maybe delta expanding as a slightly different in SMS design. So on the surface it might appear to some people in the investment community that they're all identical designs and I'm worried in SMS coil cells that are $25 or $50 because they're all the same and ArcelorMittal has different designs, different marketing practices, it might not, for example, be impacted as much. Now we know that you sell a lot of painted steel. Nucor is putting in a six high cold mill in the Hickman with four work roles, probably everybody's doing their best to buy clean metallics. How will your design be different so that everybody isn't selling the same SMS coil?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

I think, John, that's a very fair question. No, I don't think it's dumb. Maybe to answer, I think I can't speak for any future mills installed by any other future entrants. But as of the products to date, ours will be a very, very differentiated product in all honesty. Again, the cast section with combination is going to be unique. No one's going to be able to make a 84 wide, 1-inch, 100 ksi product. They are not going to able to make a 50 -- 30 and 50 PIW 50 ton coil.

(Multiple Speakers)

So, the yield improvement of a large coil, John, through a pipe and tube is probably in the order of 5% or 6%. So, again, my comment earlier is, anytime we enter the market, no matter what it is, whether it was rail, whether it's pre-paint, whether it was a rebought, we look for a differentiating angle from a technology and supply chain sort of value-add and I think this provides it.

In addition to that, you've got to consider the geographic location. Gallatin is in Kentucky. These are the facilities still remain a long distance away from the market. They can't get to the West Coast for 55 bucks. They can't get to the market or the regional market they were going to be able to supply anywhere close to the freight costs that we'll be able to avail ourselves. So, again, I think this project is very, very STLD specific, it's unique.

People have said, well, we base this decision on trade, absolutely not. This is a market based expansion for us and I think the investment profile is going to be handsome going forward.

John Tumazos -- Very Independent Research -- Analyst

Mark, I think it may be important to note that -- it may be important to note that -- my understanding is that Glenn's team have not selected mill supplier yet and that we're not buying a model number off the shelf. We have specified mills, a mill that probably no one has built before and all the suppliers are looking for a solution to fit your expectations there.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Perfect. And that's a very good point.

Glenn Pushis -- Senior Vice President, Long Products Steel Group

You just embrace estimates in the mill to provide a choice for everyone. That's not necessarily the case.

John Tumazos -- Very Independent Research -- Analyst

So you might go with a different design and different equipment supplier in your new mill?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Glenn and team are evaluating two -- well, depending on the equipment for the Hot Strip Mill Caster on the hot side, two basic vendors.

John Tumazos -- Very Independent Research -- Analyst

Thank you.

Operator

Our next question comes from the line of Sean Wondrack with Deutsche Bank.

Sean Wondrack -- Deutsche Bank -- Analyst

Hi, just have a follow up from one of your earlier comments. So you had sort of stated you know you expect through-cycle net leverage sort of in the two times to three times range and I think your net leverage is somewhere closer to 0.7 turns right now. Even if you were to sort of lump on, I don't know, the $2 billion project, you're still going to be, you know below two turn. So when you talk about two to three turn, is that somewhere you expect to be or do you think that's more of a ceiling sort of to where your leverage would go? And is it better to sort of think about distributable cash flow, from your eyes (ph), in terms of the levers you could pull back on, or accelerate?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Yes, the two to three times will be in the ceiling area. It wouldn't be somewhere where we would be sustained on a through-cycle basis. So that's the correct statement.

Sean Wondrack -- Deutsche Bank -- Analyst

Okay. So it's more of a ceiling, you know you're obviously embarking on these projects, leverage may move up a bit, but you wouldn't expect it to go anywhere higher than two to three times, is that sort of what you're saying?

Theresa Wagler -- Executive Vice President and Chief Financial Officer

That's correct. But remember that when I was answering that question that wasn't just about organic projects that also included any potential transaction from time to time that may arise.

Sean Wondrack -- Deutsche Bank -- Analyst

Right, totally. I'm just looking at this again, you know sort of where enterprise multiples are trading, you know somewhere in the four to five turns range for a lot of companies. It seems like three turns would be a lot of leverage on the business, you know kind of given that backdrop. That makes a lot more sense. All right thank you.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

You're welcome.

Operator

And our next question is up from the line from John Tumazos with Very Independent Research.

John Tumazos -- Very Independent Research -- Analyst

Mark, today there are certain, I guess, generally accepted practices in financial analysis like EBITDA ratios, a defect in EBITDA ratios are that if the selling price changes or the metal margin changes, it doesn't change, if it does change or it could be EBITDA can be illusory at the top of the economy for example. When I was a little boy 40 years ago beginning to do financial analysis, debt divided by debt plus equity was calculated, a conservative way to look at equity is to exclude goodwill or tangible net worth.

Steel Dynamics isn't as strong a credit using the ancient debt-to-debt plus equity tangible equity ratios and I just want to remind you and I might sound like a smart-ass; the guy that popularized EBITDA ratio, Mike Milken went to jail even though it's generally accepted today. Do you worry that your balance sheet is too levered, just in case there's a bump in the road and the world economy changes?

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Well I'm not worried at all. I think the -- our business model again is differentiated in good times, bad times. Quarter after quarter it's demonstrated the ability to generate cash at a superior rate than our peers. And I agree and I don't know want to (inaudible). So I've been in the industry for the 35 or whatever, too many years, and I remember people would be focused on not -- on net earnings not necessarily so much EBITDA we still look at that. You know things profits, investments have to make money, not just cash per se. And all I can tell you John is reflect on past performance, I think has demonstrated the through-cyclical superiority and we intend to maintain that.

Theresa Wagler -- Executive Vice President and Chief Financial Officer

And John, I would just add if you look at the total debt level of just over $2 billion and then you take into consideration the capital structure which is perfectly lettered out, where there is not any one more material maturity in any one year and the current maturity actually don't even have a meaningful maturity in the next three to four years. That's purposeful and that we maintain what we believe to be a very conservative balance sheet, but appropriate for a growth company.

John Tumazos -- Very Independent Research -- Analyst

Thank you.

Operator

Okay, thank you. This concludes our question-and-answer session. I'd like to turn the floor back over to management for closing comments.

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

So, thank you. And for those who're on the call, I'd like to thank you for your time today and those who support us, thank you for your support. To our employees, again, our priority is safety, safety, safety. Please be safe in everything that you do and thank you for all you do for our Company. And also thank you loyal customers for your support as well. Without you, we wouldn't be who we are. So, thank you and have a great day. Bye-bye.

Operator

Thank you, once again, ladies and gentlemen. That does conclude today's call. Thank you for your participation and have a great and safe day.

Duration: 68 minutes

Call participants:

Tricia Meyers -- Investor Relations Manager

Mark D. Millett -- Co-Founder, Chief Executive Officer, President and Executive Director

Theresa Wagler -- Executive Vice President and Chief Financial Officer

Martin Englert -- Jefferies -- Analyst

Curt Woodworth -- Credit Suisse -- Analyst

Matthew Korn -- Goldman Sachs -- Analyst

Glenn Pushis -- Senior Vice President, Long Products Steel Group

Russ Rinn -- Executive Vice President of Metals Recycling

Chris Terry -- Deutsche Bank Securities -- Analyst

Brett Levy -- Wexford Capital -- Analyst

Timna Tanners -- Bank of America -- Analyst

Miguel Alvarez -- Senior Vice President, Southwest U.S and Mexico

Piyush Sood -- Morgan Stanley -- Analyst

Matthew Fields -- Bank of America -- Analyst

Chris Olin -- Longbow Research -- Analyst

Phil Gibbs -- KeyBanc -- Analyst

John Tumazos -- Very Independent Research -- Analyst

Sean Wondrack -- Deutsche Bank -- Analyst

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