Good day, and welcome to the Steel Dynamics Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's remarks, we will conduct a question-and-answer session, and instructions will follow at that time. Please be advised that this call is being recorded today, January 25, 2022, 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 David Lipschitz, Director, Investor Relations. Please go ahead. Thank you, Kate. Good morning, and welcome to Steel Dynamics fourth quarter and full year 2021 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 Theresa Wagler, Executive Vice President and Chief Financial Officer. The other members of our senior leadership team are joining us on the call individually. Some of today's statements, which speak only as of this date, may be forward-looking and predictive, typically preceded by believe, expect, anticipate, or words of similar meaning. They are intended to be protected by the Private Securities Litigation Reform Act of 1995, should actual results turn out differently. Such statements involve 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 the related press release, as well as in our annually filed SEC Form 10-K under the headings Forward-Looking Statements and Risk Factors, found on the Internet at www.sec.gov, and, as applicable, in any later SEC Form 10-Q. You'll also find any referenced non-GAAP financial measures reconciled to the most directly compared GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports Record Fourth Quarter and Record Full Year 2021 Results. Now, I'm pleased to turn the call over to Mark. Thank you, David, and good morning, everybody, and happy 2022. Welcome to our fourth quarter and full year 2021 earnings call. We appreciate your time, and thank you for joining us today. The entire Steel Dynamics team delivered an exceptional performance in 2021, with record sales, earnings, and cash flow generation. The team totally shattered previous full-year records. It was a tremendous achievement, certainly supported by a strong market, but driven by the commitment and passion of our teams executing on our long-term strategies that continue to grow our through- cycle earning capability. Thank you, team, for your dedication to excellence in every pursuit. I'm proud to work alongside you. Due to this steadfast commitment our people have to one another and their families, to our communities, and to our customers, we are operating safely amidst the extended pandemic. The health and welfare of our teams remain paramount. Record financial results are of no import if our teams did not remain safe. Although our safety performance continues to be better than industry averages, our safety performance deteriorated year-over-year. This is an unacceptable trend that we're working diligently to resolve, as our intent will always be to have zero incidents. Since our founding over 25 years ago, we've been intentional in managing our resources sustainably for the benefit of all our stakeholders. We are a steel industry leader in sustainability, operating exclusively with electric arc furnace technology for differentiated circular manufacturing business model. As our journey continues, we're committed to the reduction of our climate footprint, including a practical and achievable goal for our steel mills to be carbon neutral by 2050. We are starting from a position of strength, yet plan to do more. We're competitively positioned and focused toward generating long-term sustainable growth. Before I continue with additional market commentary, I'd like Theresa to share insights as always. Thank you, Mark. Good morning, everyone. Good to speak with you. I want to add my sincere appreciation and congratulations to the entire team. We continue to achieve new milestones throughout the business, attaining record annual performance, with record revenues of $18.4 billion, derived from strong product pricing and volumes across all of our operating platforms. Record operating income of $4.3 billion and net income of $3.2 billion, or $15.56 per diluted share. Record cash flow from operations of $2.2 billion and adjusted EBITDA of over $4.6 billion. Truly an exceptional performance. Regarding our fourth quarter 2021 results, net income was $1.09 billion or $5.49 per diluted share, which includes additional performance-based company-wide special compensations of approximately $21 million or $0.08 per diluted share, which was awarded to all non-executive eligible team members in recognition of their extraordinary performance, a fourth quarter contribution to the company's charitable foundation of $10 million or $0.04 per diluted share, and costs of approximately $52 million or $0.18 per diluted share associated with the construction and startup of our Sinton, Texas flat-roll steel mill. Excluding these items, fourth quarter 2021 adjusted net income was over $1.15 billion or $5.78 per diluted share. Our fourth quarter 2021 record revenues of $5.3 billion were 4% higher than sequential third quarter results, driven by higher realized selling values in our steel fabrication business and our flat-rolled steel operations. Our fourth quarter 2021 record operating income of $1.4 billion was 8% higher than sequential results, driven by the continued demand strength in our steel fabrication operations. As we discuss our business this morning, we see positive industry fundamentals for 2022, and we're focused toward our continued transformational growth this year. Our steel operations generated record operating income of $1.4 billion in the fourth quarter, as increased realized selling values expanded margins across the steel platform, offsetting seasonally lower volumes. Our lagging flat-rolled contract business represented approximately 80%-85% of our total flat-rolled volume in the quarter. We had quarterly steel shipments of 2.7 million tons, with our steel mills operating at 88% of their capability. For the full year 2021, our steel operations achieved numerous financial and operational milestones. The platform's full-year operating income was a record $4.4 billion, with record shipments of 11.2 million tons. A truly phenomenal performance. As a reminder, we still have additional market opportunity, mostly within our long products group and now with the start of our Sinton, Texas mill. Because based on our existing annual steel shipping capability, we have over 13 million tons of shipping capability on the steel side, and when Sinton is fully ramped, it will be over 16 million tons. Operating income from our metals recycling operations for the fourth quarter remained strong at $44 million based on the improved metal margins offsetting lower ferrous shipments. Many domestic steel mills had planned maintenance outages throughout the fourth quarter, lowering ferrous scrap demand. For the full year 2021, operating income from the metals recycling operations was a record $195 million, driven by meaningfully higher volumes and average selling values for both ferrous and non-ferrous recycling. The team continues to effectively leverage the strength of our circular manufacturing operating model, benefiting both our steel and metals recycling operations by providing higher quality scrap, which improves furnace efficiency and reduces company-wide working capital requirements. Our steel fabrication operations also achieved record operating income in this quarter of $238 million, 2.5 times record third quarter results, driven by materially higher realized selling values, which more than offset escalated average steel input costs. For the full year 2021, our steel fabrication platform achieved another record year, with operating income of $365 million and record volumes of 789,000 tons, both eclipsing previous peaks. Congratulations to the team. Steel’s strong demand remains very strong, as evidenced by continued robust order activity resulting in another record order backlog extending throughout 2022. Based on our backlog and customer sentiment, we expect steel fabrication earnings to continue to increase into 2022. Our cash generation continues to be strong based on our differentiated circular business model and highly variable cost structure. At the end of the fourth quarter, we had liquidity of $2.4 billion, comprised of cash of $1.2 billion and a fully available unsecured revolver of $1.2 billion. During the fourth quarter of 2021, we generated record cash flow from operations of $724 million and $2.2 billion for the full year, also a record. Working capital grew $1.7 billion during the year due to higher selling values resulting in increased customer accounts and inventory values. During 2021, we invested $1 billion in capital investments, of which $831 million was invested in our new Texas flat-rolled steel mill. During 2022, we believe capital investments will be in the range of $750 million, the majority of which relates to four new flat-rolled coating lines to be placed in Sinton and Heartland. Regarding shareholder distributions, we maintained our quarterly cash dividend at $0.26 per common share after increasing it 4% in the first quarter of 2021. We also repurchased $330 million of our common stock in the fourth quarter, representing 3% of outstanding shares. At December 31, we had $383 million remaining authorized for repurchase under that program. In the past five years, we've increased our cash dividend per share by 86%, and we've repurchased $2.3 billion of our common stock, representing 23% of outstanding shares. While during the same time frame, we achieved an investment-grade credit rating and maintained our growth company profile by investing $3.1 billion in organic capital investments and funding of dollars in acquisitions. These actions reflect the strength of our capital foundation and consistently strong cash flow generation, and the continued optimism and confidence in our future. Our capital allocation strategy prioritizes strategic growth, with shareholder distributions comprised of a base positive dividend profile that is complemented with a variable share repurchase program while also dedicated to preserving our investment-grade credit designation. We are squarely positioned for the continuation of sustainable, optimized long-term value creation. Sustainability is a part of this strategy, and we're dedicated to our people, our communities, and our environment. We're committed to operating our business with the highest level of integrity. Further committing to this path, in 2021, we announced greenhouse gas reduction and renewable energy goals, including a goal for our steel mills to be carbon neutral by 2050. To increase transparency and accountability, we also have interim milestones for 2025 and 2030. We've led the steel industry with an exclusive use of electric arc furnace steelmaking technology, circular manufacturing model, and innovative solutions to increase efficiency, reduce raw material usage, reuse secondary materials, and promote material conservation and recycling. We plan to sustain our leadership position by executing our climate goals through, among other avenues, implementing emission reduction projects, improving energy management, increasing the use of renewable energy, and developing and supporting new innovative technologies. We have an actionable path that is more manageable, and we believe considerably less expensive than what may lay ahead for our traditional platform and industry peers. Our sustainability and climate strategy is an ongoing journey, and we're moving forward with the intention to make a positive difference. We plan to continue to address these matters and to play an industry leadership role moving forward. Thank you, Mark. Super. Thank you, Theresa. As you said, our steel fabrication operations performed exceptionally well throughout 2021, achieving record volume and earnings. The earnings power of this platform in a strong construction environment is yet to be completely displayed. At the end of the year, our steel joist and deck order backlog was at a record level for both volume and forward pricing, extending through much of 2022. The non-residential construction market remains sound, especially in areas that support online retail, data centers, schools, and healthcare, specifically represented by construction of distribution warehouse facilities. Our steel fabrication operations provide a powerful natural hedge to our steel production operations in a steady or softening steel price environment. Our metals recycling operations also performed well this year, achieving record annual earnings and strong volume growth. The acquisition of a Mexican metals recycling company in August 2020 has proven to be both a strategic supply and an excellent investment, combining a great financial result with the additional benefit of growing access to prime scrap in north-central Mexico in support of our southern electric arc furnace flat-rolled steel mills. Our metals recycling footprint provides a strategic competitive advantage for our EAF steel mills and our scrap-generating steel customers. We have ample access to ferrous scrap supply, including prime scrap, and believe this will remain the case in the future. The steel team had an incredible year, achieving record volume and also record earnings of $4.4 billion, which eclipsed previous peaks. During 2021, the domestic steel industry operated at a production utilization rate of 81%, while our steel mills operated at a rate of 91%. We consistently operate at a higher utilization due to our value-add steel product diversification, our differentiated customer supply chain solutions, and the support of our internal manufacturing businesses. As we suggested during our last earnings call, new capacity and moderate import growth has pressured hot rolled coil pricing. Supply side issues have largely been resolved, and lead times are back to manageable levels after booming post-COVID, as manufacturing steel demand recovered much more quickly than expected by the industry. Hot rolled coil pricing has moderated, but contrary to recent alarmist commentary, the magnitude of the price correction is in no way connected to any material change in overall demand. Inventory levels have certainly normalized to pre-COVID levels, but are more than appropriate for the present demand environment. December MSCI shipments dropped to approximately 2.4 million tons, but this is consistent with typical seasonality, not an abnormality. Monthly import levels have undergone controlled growth in recent months as the arbitrage expanded, but as anticipated, there's been no surge. The recent hot rolled coil price declines should effectively eradicate import volume growth in the months ahead. These are natural market adjustments and are not structural changes. Hot rolled coil transactions are currently consistent with published index numbers in the range of $1,300-$1,400 per ton. There are a limited number of large volume spot hot band offerings that can be procured at lower numbers, but these are not prevalent or reflective of the market in general. One must recognize that the spot hot band market has diminished in size over recent years as contract business has increased across the industry. Therefore, it's not necessarily a true indicator of the whole market. Current hot band spot offers are based on import values today, which are quickly drying up as the arbitrage shrinks. Traders are reportedly finding it difficult to execute any business for second quarter delivery. Throughout our history, we have intentionally grown our value-added steel product portfolio and created valuable customer supply chain solutions to mitigate the impact of price volatility. Today, over 70% of our steel sales are considered value-added. This differentiated business model will continue to provide best-in-class financial metrics and through-cycle cash generation. Looking forward, we remain steadfast in our optimism for 2022. After a short period of seasonally lower steel demand in November and December, our flat-rolled order input rate in January was one of the best months ever, and backlogs are very healthy. Automotive sector steel consumption should grow year-over-year as the chip shortage eases, fueled by an extreme lack of dealer inventory, which is 60% lower than normal, and strong pent-up demand. The automotive sector operated at production rates lower than normalized levels in 2020 and 2021, around about 13 million units, and is expected to grow to 15 million units this year and 17 million units in 2023. Non-residential construction sector is strong, as evidenced by the strength of shipments and backlogs at our Structural and Rail Division and steel fabrication businesses. Residential construction has also been reversed, resulting in high demand for HVAC material, appliance and other related products. Stronger energy prices are now pushing up the rig count and associated ERW pipe production. In aggregate, our steel backlogs and our order input strength, coupled with broad optimistic customer commentary and general market momentum, drive us to conclude that steel market dynamics will remain strong through 2022. We anticipate steel demand increasing year-over-year and with a likely retraction of import volumes, possibly moderate rebound in pricing. Steel Dynamics is a dynamic growth company, increasing through cycle earnings and cash flow to support continuous value creation. Our new Sinton, Texas, flat-roll steel mill represents our most significant investment to date, providing the avenue for transformational growth and opportunity for ourselves and our customers. This differentiated investment facilitates significant through cycle operational and financial growth for all of our stakeholders, from our teams and customers to our vendors and shareholders. This EAF steel mill represents next generation lower carbon emitting steel production capabilities, providing differentiated products and supply chain solutions. The 3 million tons state-of-the-art facility is designed to have product capabilities beyond that of any existing electric arc furnace, flat-roll steel producer, competing even more effectively with higher carbon emitting integrated steel facilities and high carbon foreign competition. It provides us with a more diverse steel product portfolio and benefits our customers with an even broader climate conscious supply option. The Sinton construction team has experienced numerous challenges related to supply chain disruptions and COVID impacts. These challenges resulted in hot side production shifting from the end of 2021 to a planned start before the end of February 2022. The Sinton group navigated through the challenge as well, and we're on the verge of seeing the significant benefits this facility will generate. Sinton's strategic location is centralized in an underserved steel consumer region that represents over 27 million tons of relevant flat roll steel consumption in the U.S. and Mexico. These customers are excited to have a freight advantage regional flat roll steel supplier. We have six customers committed to locate on our site, representing up to 1.8 million tons of annual flat roll steel processing and consumption capability. Five of these customers have already broke ground. We can offer shorter delivery times, providing a superior customer supply chain solution for the region. We will also effectively compete with steel imports arriving in Houston and the West Coast, benefiting our customers in these areas with lower logistics costs, removing risks associated with ocean transit, quality and delivery. We have also made considerable progress concerning our raw material procurement strategy for the mill. As I mentioned, the acquisition of a Mexican metal recycling company is a critical source of prime scrap supply. They're strategically located near high volume industrial scrap sources throughout central and northern Mexico and have already done a great job growing volume with a lot more to come. Sinton is not simply adding flat roll steel production capacity. We have a differentiated product offering, a unique regional supply chain solution, a significant geographic freight and lead time advantage, and offer a sustainable alternative to imports in a region in need of options. We're also going to build four additional value-added flat roll coating lines comprised of two new paint lines and two new galvanizing lines with Galvalume coating capability. Our unique value-added coated supply chain strategy has resulted in our existing lines consistently running at or near full capacity. Our existing customers are anxiously awaiting the volume from these new lines. One galvanizing line and one paint line will be located on site at Sinton, while the other two lines will be placed at our Heartland Flat Roll division located in Terre Haute, Indiana. Each site will increase flat roll capacity by 540,000 tons to further support our regional flat roll steel operations, providing them with more value added product diversification to serve our customers. We expect these lines will begin operating mid-2023. In closing, our unique culture and the execution of our long term growth and capital allocation strategy continues to strengthen our financial position through strong cash flow generation and long term value creation. Our sustainable, symbiotic operating platforms and customer centric supply solutions demonstrate our financial and operating stability, differentiating us from any competition. We're excited to continue our growth with new value creating opportunities. Our people and their spirit of excellence provides the foundation for our success. I thank each of you for your passion and dedication and remind you that safety is always our most critical priority. Everyone, thank you for joining us today. Kate, will you please open the line for questions? Our first question today is coming from Michael Glick at J.P. Morgan Securities. Your line is live. You may begin. Good morning. In your fabrication segment, can you give us a bit more color about how we should think about the trajectories of both pricing and margins moving through the year? Any ranges there would be helpful. Thank you. Good morning, Michael. I think on the last quarter call, we mentioned that we have firm expectations that the fabrication business is going to earn more earnings in the first half of 2022 than in the second half of 2021. We believe even more firmly in that. As I mentioned in my remarks, there is an expectation that we see another improvement in the first quarter and in the second quarter as well based on the backlog. There's more visibility in fabrication because the backlog is so lengthy, but also because of the pricing that we're seeing that we're able to achieve as demand remains incredibly strong. As far as specifics, it's hard to give specifics. I will just tell you that first quarter will definitely be, I think, meaningfully higher than what we saw in the fourth quarter, and again, another step function increase in the second quarter as well. Got it. That's helpful. Thank you. Thank you. Our next question today is coming from Emily Chieng at Goldman Sachs. Your line is live. Good morning, Mark and Theresa, and thank you for the update today. My question is just around growth. Now that, you know, Sinton is coming towards the end there, and you've got a couple of coating lines and gal lines in the hopper, how do you think about other greenfield growth potential in your portfolio, particularly as it relates to the rebar segment? Do you have a view as to whether or not you need to see further capacity growth in the long product side from Steel Dynamics? Thank you. Well, thank you, Emily, for your question. I think we will continue to demonstrate our sort of organic growth opportunities. In all honesty, rebar is not a focus of ours. It certainly has given us diversification in our Structural and Rail Division and in our rebar division, and we'll flex that as markets go up and down. That rebar is not a target, so to speak, of any major growth. We will continue to grow in the value-added business. Honestly, I think we've demonstrated that the strategic path has been very intentional and very profitable for us. More importantly, allows us that diversity of the product mix to sustain higher utilization levels through the cycle. I think there's still opportunity for to further value add processing on the flat roll side of things. Additionally, though, it's an intriguing marketplace out there. We're seeing a pipeline that is full of transactional opportunities today as well. Great. That's very helpful. Thank you. Thank you. Our next question today is coming from Timna Tanners at Wolfe Research. Your line is live. Hey, good morning and Happy New Year. Happy New Year. Thanks, Happy New Year. I wanted to ask a little bit more about what you're seeing in the first quarter in terms of volumes. Clearly the softer spot market that prevailed, as you mentioned in the fourth quarter with some of the lighter volumes has spilled over a bit into the first quarter. Wondering, you know, any early thoughts about what that could mean for shipments quarter-over-quarter. Any thoughts on what's driving that and what might cause that to stabilize? Thanks. Well, I think we certainly saw the seasonality. As I said earlier, you know, there's one headline that MSCI shipments were down 17% compared to August and December. Well, if you look at it each year in history, it always does that, and it's just that seasonal adjustment is going to sort of disappear in the fourth quarter, I mean, first quarter here. The shipping volumes we would anticipate will increase accordingly. Do you expect normal increase from the fourth quarter to the first quarter in your shipping volumes across the board? Pretty much, yeah. Okay. Interesting. Thanks. Again, we're not seeing people I think are relating a little bit of pricing softness here with demand. As I stated earlier, demand, through our lens, is incredibly strong and will remain so throughout the year. I would add just to that, Timna, that we actually experienced at the end of the fourth quarter some logistics issues as well, which I'm sure people are experiencing outside the steel industry as well as trucking and rail and things have been disrupted. There were shipments that we expected to actually deliver in December that were not able to be delivered, so it's more of a timing issue. That's going to benefit the first quarter as well. Okay. I'll get back in the queue. Thanks. Thank you. Our next question today is coming from Seth Rosenfeld at BNP Paribas. Your line is live. Good afternoon. If I can follow up please with the outlook for free cash flow, and in particular, the role of working capital. Obviously, the last year, in particular Q4, saw a lot of investment in working capital. There were some delays with Sinton ramp up. Wondering if that was one reason for particularly elevated investment in Q4. With that in mind, can you give us a bit of color on expectations both for upcoming Q1 and for the year ahead? Is it reasonable to assume that with Sinton ramp up, a likely decline in ASPs for sheet, we could expect a meaningful working capital release? Thank you. Good morning, Seth. Thanks for the question. Yes, working capital, we did see significant growth during 2021, most of which is associated with the value growth in our steel products and in the increased volume and product pricing growth in our fabrication business. Sinton, at the end of the year, had about $150 million of working capital, and we would expect to see that grow by probably another $150 million during 2022 during the first half of the year. There's still some structural growth attached to that. Otherwise, as we see product pricing ease and we see the strength in volumes, we would expect to see valuations come down, which should have a pretty significant working capital release during the entirety of the year. You might not see as much of it in the first half, but definitely in the second half of the year. Okay. Thank you very much. Thank you. Our next question today is coming from Andreas Bokkenheuser at UBS. Your line is live. Thank you. Just a question on inflation. I mean, obviously it's a bit of an inflationary environment. How are you kind of thinking about inflation this year? Is there anything you kind of got on the table that can kind of mitigate inflation in looking at energy, even scrap? I mean, you've already integrated some scrap yards. Is there room for more scrap yard integration and acquisition there? That's the question on inflation. Thank you very much. Well, I think we can't speak to the overall impact of inflation on the domestic economy. Relative to SDI, I think we're not impacted dramatically. Obviously, scrap will react to the marketplace, but from a cost of conversion, we're relatively under control. We have been impacted a little by alloy cost. And we've been impacted by you know, the zinc cost over the last 12, 18 months moving up, but most of which is passed through you know, the alloy cost, which certainly is higher at our Engineered Bar Division than any other mill. Again, that tends to be passed through to the customers. We're not seeing a massive inflationary impact to our cost structure. I would add, Andreas, I know you know this, as it relates to wages, where a lot of people are seeing a really significant increase. Because we have so much of our compensation across the entire team that's performance-based, and it naturally fluctuates. We're not seeing the same pressure from a wage perspective because there's so much of the performance bonus compensation that's structurally in place. I think Mark said it perfectly, that we're not seeing a lot of pressure there with items that are passed through to the customer. And then one Yeah, go ahead. Sorry. One additional comment. I think we may have made this same comment in the last call. As you reflect on our results, it's amazing how the teams throughout our organization just continue to break productivity records. As such, over the years, we found our conversion costs are actually incredibly stable or consistent given that the additional volume you know reduces our fixed cost, the overhead cost, which sort of absorbs any additional sort of inflationary pricing on alloys and those sorts of things. It's amazing. We just did a study, to be honest, for our board last November. It's absolutely amazing how our conversion costs remain very, very, very stable through the cycle. Yeah, your performance-based structures is a good point. Thank you very much. I appreciate the insights. Thank you. Our next question today is coming from Curt Woodworth at Credit Suisse. Your line is live. Yeah, thanks. Good morning, Mark and Theresa. First question is just with regards to the Sinton ramp up. I was wondering if you could help us understand sort of the cadence of volume growth the next couple quarters, and what level of start-up costs we should expect. You noted, I think, 1.8 million of on-site captive supply. When would you expect that to be fully functional? Well, obviously, we are anticipating the final piece of the jigsaw to be put in place here in the next few days, if not the next week or so. So that the actual specific ramp over the next three months is difficult to predict. But we feel, you know, we should demonstrate a performance no less than others starting up the mills here in the last 5 years, 10 years. So we would anticipate at least 2 million tons shipments this year, reaching capacity, central capacity, you know, in the late third quarter, fourth, probably fourth quarter. In terms of the onsite supply, when would you expect that to be at that consumption rate? Well, I think it will come on in concert with our mill, in all honesty. We have one facility that's actually operating currently. There is one very large facility that will be operational in the next couple of months. I'm not saying it was totally intentional, but by luck, if nothing else, you know, those facilities are gonna ramp up nicely in concert with the steel mill. Now, on the Okay. On the value add side, I think we've suggested in the past, you know, the paint line, coating line is doing extremely well. The Galvalume capability comes online here, I think in a couple of weeks. The finishing facilities perform extremely well. The hot strip mill is essentially commissioned. We bought slabs from third parties, and we also transferred intermediate slabs from our own facilities, took them down, sort of preheated them in the tunnel furnace and have driven them through the mill quite successfully. A lot of the parts are in great shape. We're just waiting on the caster. Okay. My follow-up is just maybe get a little bit more color on sort of market dynamics last few months. I mean, it seems like between COVID, seasonality, destocking, rising supply, there's a lot of moving pieces here. It seemed like you're indicating that your January order book definitely strengthened relative to November and December. I think you had a comment that you said that inventories were normal, but you know, some service centers saying they've got way too much, others don't. I'm just curious, you know, is your sense that the inventory level in the industry is generally getting right-sized pretty quickly at this point? In terms of sort of the volume trends you saw in the fourth quarter, was it more concentrated on, say, the service center side of your business or on the OEM side? Thank you. I think when I say inventories have normalized, I'm just going by history. I mean, it's quite simple. If you look at the last five or six years for sure, but you go back in time longer than that, levels are appropriate. Have they grown? Absolutely. They grew from an absolute historic low. As I indicated, I believe that they are appropriate for the sort of demand cycle that we're going through. The little bit of the lull, I do believe. You've gotta live through a few of these cycles in the past and our team is fortunate to have that experience. You hit COVID, the whole industry ground to a halt. Things started up much more rapidly. You know, there was chaos there, absolutely, in the industry, including ourselves, to some degree, to catch up. When you catch up, what happens? Well, our industry is not perfect, and in general, it overshoots it a little bit. In November, December, you saw things catching up, and all of a sudden people are getting their supply, you know, simultaneously from two to three mills. You get that little overshoot, which I think was seen in November, December. Those in the automotive space probably saw it more than most. You had that softness, but particularly in hot band itself. That will resolve itself. As I said earlier, we don't see any change in the underlying consumption of steel currently, and nor do we see that happening over, you know, over the months and quarters ahead. You just have a little kind of a spike of supply there that came through given the seasonality. Again, we're incredibly optimistic for 2022. Thank you. Our next question today is coming from Carlos de Alba at Morgan Stanley. Your line is live. Yeah. Thank you very much. I guess, following up on the last point. How should we reconcile then, Mark, the fact that the lead times in the industry, the information that is publicly available, have continued to come down, but you, as you said, are extremely constructive on how your order book is looking like and demand expectation. Is it just the supply that you mentioned that picked up in recent months and is going to now be absorbed by the demand? Or is it that Steel Dynamics is gaining market share versus competitors, and therefore what you're seeing may be different to what the industry statistics that we have access to? Well, I think we're certainly seeing market share in certain markets. We've certainly gained dramatic traction in the automotive sphere, for instance. Fortunately, that traction was with automotive producers that weren't as impacted by the chip shortages as maybe the U.S. domestic producers. Yeah, we are gaining sort of incremental market share there. Again, we have phenomenally sort of supportive, loyal customers that in where there are times like this will support us and bring their orders to us. Our overall business model, though, again, with the diverse product portfolio that we have, that we have differentiated supply chain solutions in our coated and pre-paint business is just different. Again, it provides phenomenal value for the customer. That those businesses remain strong, and we think that the coated value add market in general is gonna remain very solid going forward. All you have is a little bit of a seasonality sort of catch up moment in hot band, which pressures hot pricing. If you can envision, and I envision, that the import volumes that picked up in the last three or four months because of a massive arbitrage growth. If you envision that that can moderate, which I think as the arbitrage is shrinking, and as we listen to traders out there having difficulty sustaining business for, you know, late second quarter this year. If the imports do fall off a little, you're gonna get demand pressure again. It wouldn't be unexpected on our part if you saw a little rebound in pricing. All right. Excellent. Thank you very much, Mark. Thank you. Our next question today is coming from David Gagliano at BMO Capital Markets. Your line is live. You may begin. Great. Thanks for taking my questions. I'll just ask a couple of quick ones here. Just on the commentary around 85% of flat-rolled lagged pricing in the fourth quarter. Can you just give a sense so we can, you know, tighten up the models a little bit for first quarter? You know, what was that average lag duration-wise, and is that—are those reasonable proxies for, you know, for the first quarter as well? The contract business, Dave, in the fourth quarter was at 80%-85%, and it's likely to stay in that range at least through the first half of the year, as we're servicing our contract customers. As Sinton comes online, you know, more strongly in the second half of the year, that's naturally going to decline to a certain degree just because of the shift in mix. We're expecting that to be maintained. As it relates to lag, it's really about, you know, on average, a two-month lag on the flat-roll pricing, and it's generally tied to the CRU index. Okay. That's a reasonable proxy for the first quarter as well, two-month lag? Yes, correct. Okay. Perfect. Thanks. Just last question for me. The CapEx, it went up a little bit, $700 prior guide to $750. What was the reason behind that? Well, it was simply that we went through the extensive study that we do every year, and that generally takes place in the November timeframe. We approved some additional projects, and those projects as, kind of attested to by our return on invested capital metrics are really efficiency and growth-oriented, but they're just smaller in nature, so there's nothing individually to call out for the reason for the increase. It's just some really nice projects came to light. Okay, perfect. That's helpful. Thanks. You're welcome. Thank you. Thanks, David. Our next question today is coming from Phil Gibbs at KeyBanc Capital Markets. Your line is live. Yeah, thanks very much. Good morning. Good morning, Phil. Hey, Theresa, can you provide the sheet shipments by product grade? I can, and I apologize. I'm smiling because I did miss that. The hot bands and P&O shipments for the fourth quarter were 693,000 tons. Cold rolled was 136,000 tons. Finally, the coated products were 994,000 tons. Perfect. Then I remember last quarter you had, and Mark, I think you had talked about yellow goods having a decent outlook, and we obviously know your feelings on automotive. What's the future look like in your opinion for SBQ this year and engineered bar? I think for engineered bar is relatively steady. I think we'll gain some volume as automotive picks up. There's a gain at 15%-20% for auto with engineered bar, I do believe. They're gonna gain on the automotive side. They are gonna lose a little bit of volume, not much. As hot band has come off, folks are switching from seamless pipe over to ERW pipe. They'll lose a little bit of volume there. For us, though, generally, that's gonna benefit. We're already seeing the benefit down in Columbus, to be honest, as we're picking up energy orders there. One large mill, pipe mill is starting back up. Can you talk about those dynamics a little bit more on the energy side in terms of the switch? Did it have to do with the trade case that was filed? From our understanding, it's more just a cost issue. You know, taking a slug, you know, engineered bar slug and piercing it and producing seamless pipe is more expensive today now that hot band has come off. People are switching to the ERW. Thank you so much. Thank you. Our next question today is coming from Andrew Cosgrove at Bloomberg Intelligence. Your line is live. Hi. Thanks for taking my question. On ACET conversion costs have been kept in check, and the team has done a pretty good job. I was just a little bit curious as to, you know, if you take the raw material spread and then the excess on top of that, it looks like it ticked up 10%-15% quarter-on-quarter. I was just curious if that had anything to do with having to buy more hot band because Sinton was not up and running, and the finishing lines were, or anything else that you could add on that particular front. Great question. Yes, as I indicated earlier, the conversion cost under control is actually, you know, through our lines specifically. But as our conversion businesses and, you know, today, one has to remember, you know, what we're purchasing is 1.7-1.8 million tons of substrate from others to support our, you know, the mill in Pittsboro. We buy from third parties for our New Millennium fabrication business. You have our steel supply. You have our Houghton facility. Yes, the added substrate or the substrate costs moving through does impact the perceived conversion costs. Right. Okay. Just lastly, could you just give us a little bit of an idea, how much it costs to move things, geographically, say from, you know, the Gulf up to the Midwest or from where you guys are situated at, in the middle of the country to the western part? I guess along the same lines, are you still planning on sending 30% of Sinton's shipments to Mexico? Well, several questions there, I guess, or several answers to give. From the Midwest, you mentioned Midwest to the West Coast. Very little material moves from Midwest or East to, through the Rockies to the West Coast. It's a quite an exorbitant freight rate. That's why, you know, one of the many advantages of Sinton is actually the freight rate, believe it or not, all the way to the West Coast to compete with the import market there. I think the freight rate there is $55 a ton or thereabouts. It's the cheapest freight rate of any mill to the West Coast. To sort of calibrate freights, you know, northern freight, you know, folks in northern Indiana are shipping down to Mexico, and that's in the order of, I do believe $95-$110 a ton. Whereas, from Sinton into Mexico, into Monterrey, it's gonna be likely 37-ish dollars a ton. The Sinton facility itself has a phenomenal sort of geographic advantage there to move that material into Mexico. You're right, yeah, 30% or so, 1 million tons or thereabouts, should flow into Mexico from the Sinton facility. Okay, great. Thank you. Thank you. Our next question today is coming from John Tumazos at John Tumazos Very Independent Research. Your line is live. Congratulations on all the customers on your campus at Sinton. With Prime Metals and the coating lines and then those customers, it's, I guess, close to four million tons of potential demand. Do you expect to have the six more vacant lots for new customers filled? Does it make sense to build a second mill next to the first one if the demand is this good? Is it possible from an engineering standpoint to add another caster to increase the capacity at Sinton above 3 million tons, given how much the customers seem to love it? Well, John, your independent research is on target as always. Thank you, and thank you for the kind words on the team's performance because they did a phenomenal job last year. I would suggest that you know, Sinton is a jewel. The reception we've had there thus far and for those six customers to come and be building even before the plant is running, I think is testament to the vacuum of or the impact of a vacuum of steel, you know, primary steel production down there. Sinton is a much needed asset for our industry, and it's definitely differentiated. The addition of a second caster likely is unlikely, but we have designed that facility to add somewhat between 1 million-1.5 million tons of additional capacity. Expansion of that facility, you know, the capability is definitely there. I think we will also- What is the limiting factor to the capacity of the plant? Is it the caster or the surrounding infrastructure? The caster. The hot strip mill, like our other mills, has the ability, given the width-gauge combination that we can produce there, you know, 4.5 million tons of capacity. Thank you. My son went on a Sinton tour in November. He joined the AIST, Association for Iron and Steel Technology, and he was telling me how great it was and sent me along his notes. I'm not all that insightful, Mark. I learn from the younger generation. Yeah, I know, John. I don't know how that happened, but we were glad that he was there, I guess. Leadership conference in September of AIST and 6-9 other trade associations in Pittsboro, and has his own friends in the engineering departments of all these steel companies now. Yeah. Well, that's good. No, thanks for your continued support of us, John. Appreciate it, mate. Thank you. Our next question today is a follow-up from Timna Tanners. Your line is live. Oh, hey, guys. Thanks for squeezing me in. I just think there's a lot of question about the fabricating business. If you look historically, you know, the profitability in that division for EBITDA per ton has been pretty consistently $50-$200 for just to give you a broad range, of course. You know, prices went up $1,000 a ton, the EBITDA per ton exploded, and you say it's gonna be sustained there. I just like to understand a little bit, you know, is this a new normal in terms of earnings? Is this out earning? What's driving that? Are customers not kind of pushing back at all on the big increases in light of falling underlying steel prices? Just any further color would be really helpful. Look, it depends on what time period you're calibrating to, Tim, there. I guess, you know, that industry since it last peaked has changed and consolidated to large degree. At the same time, you know, currently the actual market demand is at a historical high. Tim, the visibility that we have isn't predicated upon falling steel prices. It's predicated upon the forward pricing that we know we have in the order book for steel joists and deck. The team's done a really good job of managing the steel raw material input. That's why we have more certainty. I would not say this is a new normal, no. This is an extraordinary time for them. To Mark's point, we're gaining market share as well as the team's been doing some really interesting things on the operational side. We've added shifts. The unique thing about our fabrication business is we can really achieve whatever volume demand will allow us to have just by adding people rather than adding assets, which is a very powerful tool. When we add volume, it really drops the bottom line. That's why, again, we feel really confident about, you know, 2022 for the fabrication, but it shouldn't be our expectation that this is something that is the new normal. Thank you. Our final question for today is a follow-up from Seth Rosenfeld. Your line is live. Thank you again for taking our questions. One final one of mine for shareholder returns. In the past, you've talked about the completion of Sinton as a potential catalyst to increase the base dividend. Can you talk us through the timeline in terms of the de-risking of Sinton that you would want to secure before making that step? When we think about the scale of any potential increase, how should we consider that versus historical strategy? Thank you. I think we mentioned it on the last quarter conference call as well, Seth. There is definitely the impetus from the board and from the senior leadership team to increase the dividend when we have through-cycle cash earnings that are increasing. That definitely is Sinton. We generally have our increases in the first quarter. I can't tell you what that will look like. I would expect to see it sometime in the first half of the year. But again, that's a board decision to make. They're very supportive of a substantial increase. We have a target of a net income payout ratio of at least 35%. So that's something that we'll take into consideration as we look at the through-cycle earnings for Sinton and what that dividend increase will look like. In the meantime, we're using the share buyback program as a complement 'cause that's something that we believe is very powerful for shareholder returns as well. Thank you. That was our final question for today. That concludes our question and answer session. I'd like to turn the call back over to Mr. Millett for any closing remarks. Thanks, Kate. Just quite simply, for those on the line that support us, thank you for that support for sure. Any customers, again, my heartfelt thanks to you. You make us who we are in all honesty. To our team, guys and girls, you absolutely shattered any previous performance by a long margin. Yeah, the market helped, but what you do each and every day makes us different, and I'm proud to be part of you. Lastly, though, phenomenal performance from a volume and from a profitability standpoint, but we need to buckle down, double down on our safety and get that trend going back in that downward trajectory as we have in the past. Again, thank you each and every one of you. Make it a great day. Bye-bye. Thank you, ladies and gentlemen. That concludes today's call. Thank you for your participation, and have a great and safe day.