Good day, and welcome to the Steel Dynamics Q1 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's remarks, we will conduct a question-and-answer session, and instructions will follow at that time. Please be advised this call is being recorded today, April 21st, 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, Holly. Good morning, and welcome to Steel Dynamics Q1 2022 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 the 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 sec.gov, and if applicable, in any later SEC Form 10-Q. You'll also find any referenced non-GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports Record Q1 2022 Results. Now I'm pleased to turn the call over to Mark. Thank you, David. Welcome to our Q1 earnings call, and as always, we appreciate and value your time with us this morning. Record results are of no import if our teams do not remain safe. Before beginning this morning, I want to pause for a moment to acknowledge a recent workplace fatality that occurred at our Heartland Flat Roll Division. We're deeply saddened. Our thoughts and prayers reside with his family and friends. The reason I always begin our calls with the topic of safety is because it can never be overemphasized. Safety is our number one value and first priority. Nothing is more important than sustaining a safe environment for our employees. We must all be continuously aware of our surroundings and our team members. We must actively think about safety at all times, keeping it top of mind, an active conversation. Simply, safety comes before everything. With this backdrop, it's difficult to celebrate an otherwise phenomenal performance. We're here this morning to share what the team accomplished in the Q1 and to congratulate them. Their record performance this quarter was another extraordinary achievement driven by the commitment, innovation, and passion of our people, executing on our long-term strategies of diversified value-adding growth. Thank the whole team, the entire team for your dedication to excellence in every pursuit. We're committed to operating our business in an environmentally responsible manner and have been since our founding. We've always been and continue to be a leader in production of sustainable, low carbon emission steel products. We encourage the use of new technologies and processes to reduce our impact on the environment, including a strategic focus on carbon emissions mitigation with a goal for our steel mills to be carbon neutral by 2050. Our sustainability strategy is an ongoing journey. We are starting from a leadership position within the industry and plan to stay there by doing even more. Before I continue with more market commentary, Theresa will share insights into our performance. Thank you, Mark. Good morning, everyone. It's exciting to continue to see all the new milestones being continually reached throughout the company. A personal thanks to our teams, and congratulations. Your performance resulted in another record quarter for Steel Dynamics, with net income of $1.1 billion or $5.71 per diluted share for the Q1 of 2022. In the quarter, we incurred costs of $84 million or $0.31 per diluted share for the continued commissioning and start-up of our Sinton, Texas, flat-rolled steel mill. Excluding these costs, Q1 2022 adjusted net income was $1.2 billion or $6.02 per diluted share. Q1 2022 record revenues of $5.6 billion and record operating income of $1.5 billion were both 5% higher than sequential Q4 results, driven by higher realized selling values in our steel fabrication business and continued strong performance in our steel and metals recycling operations. We also achieved record quarterly cash flow from operations of $819 million and adjusted EBITDA of $1.6 billion, a truly exceptional performance. We see positive industry fundamentals for at least the remainder of 2022 and believe our Q2 2022 results could achieve yet another new record performance. Our steel operations generated very strong operating income of $1.2 billion in the Q1, achieving record shipments of 2.9 million tons, of which Sinton contributed 50,000 tons. Earnings from our steel operations were 15% lower than sequential record Q4 results related to metal spread compression in our flat-rolled steel operations, as realized pricing declined more than raw material costs. In contrast, our long product steel operations experienced metal spread expansion based on rising product prices. Despite hitting record volumes, we still have additional steel shipping capacity, much of which is within the long product steel group. When Sinton is fully operational, it will contribute an additional 750,000 tons per quarter of availability. Operating income from our metals recycling operations for the Q1 were strong at $48 million based on improved metal margins as both average ferrous and non-ferrous pricing improved in the quarter. The team continues to effectively lever 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 by reducing company-wide raw material working capital requirements. Mark will expand on the meaningful benefit of our steel and metals recycling teams working together to reduce our cost of raw materials as well. A huge congratulations to our steel fabrication team. They almost doubled their previous record results, achieving a new record high quarterly operating income of $467 million, eclipsing the entire full year of 2021 results by almost 30% in just one quarter. These earnings were driven by record pricing, supported by near record shipments of 210,000 tons. Steel joists and deck order activity remains incredibly strong. Our steel fabrication business continues to operate with a record backlog, considering both forward product pricing and volumes, which currently extend through the Q1 of 2023. Based on this strength, we expect steel fabrication earnings to continue to increase even further as the year progresses. Our cash generation continues to be consistently strong based on our differentiated circular business model. At the end of March, we had liquidity of $2.4 billion, comprised of cash of $1.2 billion and our fully undrawn unsecured revolver. During the Q1 of 2022, we generated record cash flow from operations of $819 million. Working capital grew $757 million due to higher customer account values stemming from higher prices and volume, coupled with the payment of our 2021 company-wide profit sharing of $360 million. We also funded $159 million in organic capital investments. We believe full-year 2022 capital investments will approximate $750 million, the majority of which relate to our four new Flat Roll value-added coating lines to be located in Sinton and Heartland. We also finalized the purchase of 45% of the equity interest in New Process Steel on February first. We increased our Q1 cash dividend by 31% to $0.34 per common share based on the additional ongoing through-cycle free cash flow expected from our new Sinton Steel Mill. We repurchased $389 million of our common stock in the Q1, representing 3% of our outstanding shares. As we exhausted our previous program, we also announced the board's approval on an additional $1.25 billion share repurchase authorization, further demonstrating our confidence in Steel Dynamics' future cash flow generation. Since 2017, we've increased our cash dividend per share by 143%, and we've repurchased $2.7 billion of our common stock, representing 27% of our outstanding shares. Our capital allocation strategy prioritizes strategic growth with shareholder distributions comprised of a base positive dividend profile that's complemented with a variable share repurchase program while also dedicated to preserving our investment-grade credit designation. We're squarely positioned for the continuation of sustainable, optimized long-term value creation. Sustainability is a part of that long-term value creation strategy, and we're dedicated to our people, our communities, and our environment. We're committed to operating our business with the highest 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've also set interim milestones for 2025 and 2030. We've led the steel industry with our exclusive use of electric arc furnace steelmaking technology, our circular manufacturing model, and our innovative solutions. We plan to sustain our leadership position by executing our carbon reduction goals through, among other avenues, investing in emission reduction projects, increasing the use of renewable energy, and developing and supporting new innovative technology. As an example, we're incredibly excited to recently invest $25 million in the equity of Aymium. Aymium's a producer of renewable biocarbon products that replace fossil fuels and reduce emissions in large global industries, including the electric arc furnace steel industry. We have an actionable path toward carbon neutrality that is more manageable and we believe, considerably less expensive than most of our peers. Our sustainability and carbon reduction strategy is an ongoing journey, and we are moving toward the intention to make a positive difference. We plan to continue to address these matters and to play a leadership role moving forward. For those of you that like to track our detailed flat-rolled shipments, for the quarter, hot-rolled and pickled and oiled shipments were 736,000 tons. Cold rolled shipments were 162,000 tons, and coated shipments were 1,065,000 tons. Mark? Thank you, Theresa. Our steel fabrication operations executed another exceptional record quarter. The earnings power of this platform in this environment still has not been completely displayed as customer demand and pricing continue to be strong. Our steel joist and deck order backlog remain at record volume and forward pricing levels, extending well into the Q1 of 2023. The non-residential construction market remains solid, continuing the trend we have seen over the last year, especially in areas that support online retail, specifically represented by construction of distribution warehouse facilities, along with data centers, schools, and healthcare. Our steel fabrication operations provide a significant natural hedge to our steel production operations in a stable or moderating steel price environment. They also support our steel mills during periods of weaker steel demand as a ready internal customer, what we call pull-through volume, increasing the through-cycle utilization of our steel mills. There are steel fabrication facilities located throughout the U.S. and in Mexico, providing us with an advantage, broad-based customer-centric supply chain. As I move into metals recycling, I'll just take a moment to thank Russ Rinn, given his impending retirement in July, for the truly significant contributions he's made to that platform over his ten years, eleven-year tenure. He's helped transform that business. Today, we're operating at the same volumes with 1,500 less teammates. The consolidation there and rationalization has been excellent. I've got massive faith in Miguel Alvarez, who now is leading that platform. I've got great faith that he's gonna continue that transformation and do great things with that business. Russ, my sincere thanks, mate. Our metals recycling operations also performed well in the quarter with steady operating income of $48 million. As one of the largest ferrous and non-ferrous metal recyclers in North America with operations throughout the U.S. and Mexico, we have a competitive advantage in providing the highest quality, cost-effective scrap to our EAF-based steel mills and to our other customers. In today's environment, our advantage of having our metals recycling platform is even greater. During the last 18 months, our recycling and steel teams have worked closely in developing a higher quality shredded scrap that can be used in place of prime scrap. The combined effort resulted in our Butler Flat Roll Division reducing its need for prime scrap from 65% of its mix to only 40% while achieving the same steel qualities. We are currently rolling this out to our Columbus and Sinton Steel divisions, allowing for a lower cost, readily available, low residual scrap supply. Additionally, given the historically high spread between prime and obsolete grades, which is around 70, 170 dollars a ton today, the reduced prime scrap requirement has provided a significant cost savings. Teams are also working together as global pig iron supply chains have been disrupted with the advent of the invasion of Ukraine. Our Flat Roll Steel operations have reduced their amount of pig iron usage while maintaining the highest level of steel quality through changes in our operating practices and the help of our metals recycling team in sourcing alternative inputs. We have sufficient resources for our steel production to continue operating uninterrupted. Additionally, of particular note, our Butler Flat Roll Division has the advantage of Iron Dynamics, an on-site liquid pig iron production facility that supplies almost all of Butler's pig iron requirements. Charging liquid pig iron into the electric arc furnace also significantly increases productivity and reduces melting costs. We developed the technology years ago, and it's the only existing facility of its kind today. We are currently in the process of pursuing opportunities to become even more pig iron self-sufficient for the future. Steel team had an outstanding quarter as well, achieving record shipments and operating income of $1.2 billion. During the quarter, the domestic steel industry operated at a production utilization rate of 80%, while our steel mills operated at a rate of 93%. We consistently operate at a higher utilization due to our value-added product diversification, our differentiated customer supply chain solutions, and the support of our internal manufacturing businesses. Hot-rolled coil pricing moderated during the early part of the Q1, but prices have recently firmed with extending order lead times across the product set, especially in coated products. With continued strong demand, we believe steel prices will remain strong based on higher raw material input costs, global flat-rolled steel supply disruptions related to the Ukraine-Russia conflict, and lower steel imports. Throughout our company 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, at least 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 optimistic. The automotive sector steel consumption is expected to grow with production through 2024, returning to over 17 million units, supported by an extreme lack of automotive dealer inventory and strong pent-up demand. The non-residential construction sector is strong, as evidenced by the strength of our customer backlogs within our long product steel group. Our structural rail and railroad bar divisions both achieved record quarterly earnings, and our engineered bar products division is operating at historically strong volumes. Additionally, as we discussed, steel fabrication operations are operating at never seen before levels. Residential construction is also good, resulting in high demand for HVAC, appliance, and other related products. Strong energy prices continue to push up the rig count, and we have seen solid demand for energy products. In aggregate, our steel order backlogs and order input strength, coupled with broad optimistic customer commentary and general market momentum, drive us to conclude that steel market dynamics will remain strong throughout 2022. Steel Dynamics is a dynamic growth company, increasing through cycle earnings and cash flow to support continuous long-term value creation. Our most recent and significant investment, represented by a new state-of-the-art electric arc furnace flat-rolled steel mill located in Sinton, Texas. This differentiated strategic investment facilitates significant through cycle operational and financial growth for our teams and customers and for our vendors and shareholders. This electric arc furnace steel mill represents next generation lower carbon emitting steel production capabilities, providing differentiated products and supply chain solutions. 3 million-ton state-of-the-art facility is designed to have product capabilities beyond that of any existing electric arc furnace flat-rolled 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 value-added steel product portfolio and benefits our customers with an even broader climate-conscious supply option. Sinton's strategic location is centralized in an underserved steel consumer region that represents over 27 million tons of relevant flat-rolled steel consumption in the U.S. and Mexico. We offer shorter delivery lead 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. We have seven customers locating on our site, representing up to 1.8 million tons of annual flat-rolled steel processing and consumption capability. Four are already operating and the other two have broken ground. Or three have broken ground, actually. This represents a unique closed loop process as we provide them on-site steel and simultaneously reclaim their scrap to be remelted into new steel products. We have an advantaged raw material procurement strategy for Sinton. Our acquisition of a Mexican metals recycling company in 2020 provides a critical source of prime scrap supply. These operations are strategically located near high-volume industrial scrap sources throughout Central and Northern Mexico. Sinton provides a differentiated product offering, a unique regional supply chain solution, a significant geographic freight and lead time advantages, and offers a lower carbon alternative to imports in a region in need of options. We currently expect 2022 shipments from Sinton to be over 1.5 million tons, achieving utilization of approximately 80% by the end of the Q3 and over 90% before year-end. In addition, our previously announced additional four value-added flat-rolled coating lines are still on schedule to begin operating mid-2023 in support of our Sinton steel mill and our Heartland flat-roll operations. The four lines are comprised of two new paint lines and two new galvanizing lines with Galvalume coating capability. Our unique value-added coating supply chain strategy has resulted in our existing lines consistently running at or near full capacity. Existing customers are anxiously awaiting the volume from these new lines. We're the largest domestic non-automotive coater of flat-rolled steels with an annual coating capacity of over 6 million tons. These four lines will increase that capacity by an additional 1.1 million tons. In closing, our sustainable symbiotic operating platforms and customer-centric supply solutions demonstrate our financial and operating stability, differentiating us from any competition. We're not the same company that we were nearly five years ago. We are not just a steel company. Our average annual free cash flow has more than doubled and is still growing. The consistency and industrial strength of our earnings is clear, and we are investing for transformational growth. Our people and their spirit of excellence provides the foundation for this success. Thank you each and every one 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, and we'll open the line up for questions. Thank you. If you would like to ask a question, please signal by pressing the star key followed by the digit one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you pressed star one earlier during today's call, please press star one again to ensure our equipment has captured your signal. Also, we ask that you please limit yourselves to one question to facilitate time for everyone. Any additional questions can be addressed upon reentering the queue. Please hold a moment while we poll for questions. Your first question for today is coming from Emily Chieng with Goldman Sachs. Emily, your line is live. Good morning, Mark and Theresa. Thanks for taking my question today. My first question is just around your raw material update there. Can you remind us what the raw material mix is or was previously before the shift to using more obsolete versus prime scrap, the amount of IDI or liquid pig iron that you're using, and perhaps how we should see that changing over time? Well, IDI is consistently running at about a 260,000-ton rate, as we speak. It's been very consistent for many years now. After the, you know, the original pioneering efforts or challenges that we had many years ago, it is an absolutely solid technology for us. Again, as I mentioned, virtually all our pig iron needs at Butler is captured from that facility. Emily, one way to look at it from the shift that Mark talked about, from prime scrap to an upgraded type of obsolete scrap. Butler went from 65% to 40%. If that were able to be accomplished with Columbus, Sinton, and Butler, if you just make high-level assumptions that generally we would use approximately 20% of pig iron, and then the rest would be more geared toward that prime scrap. If you think about it from a volume perspective, it could be as much as 1.5 million-2 million tons shifting from prime scrap to a higher grade. If you apply, you know, any spread to that today, I think Mark mentioned it's like around $170 per ton, which is higher than normal, even if it's $100, $150 per ton, that could be a significant change once, you know, if all three mills are fully operational. Great. Thanks. I'll jump back in the queue. Your next question for today is coming from Michael Glick with JP Morgan. Michael, your line is live. Yeah. Just on the cost side, beyond scrap, how should we think about energy costs more broadly, just given some of the recent moves we've seen in several of the regional power hubs and in natural gas prices as well? Well, just as a reminder, from a natural gas perspective, for electric arc furnaces, for Steel Dynamics specifically, it isn't a huge part of the cost structure. It ends up being somewhere around 2% or 3% of the cost of manufacturing the steel products. Obviously, it is impactful. We're likely to see increasing prices across the spectrum from a natural gas perspective, but nothing that we believe is necessarily significantly impactful. From a power perspective, across the spectrum, we're operating all different grids. It's very different. In some areas, we're in the open market, and others, we actually have contracts in place. There should be some escalating prices, but nothing that we think will be material at this point. Just to add, if you look at it from a global perspective, obviously, energy prices in other parts of the world have appreciated far greater than U.S., along with other commodity pricing issues. So the actual global cost curve has risen and should support pricing further. Obviously, given our low cost position advantages Steel Dynamics. Got it. Agreed. Your next question for today is coming from David Gagliano with BMO Capital Markets. David, your line is live. Hi, thanks for taking my question. I just wanted to ask a little more about the, you know, the fabrication business. Unbelievable how much this has exploded higher over the last year. I know it's, you know, directionally not new, but again, another doubling in basically the profit contribution this quarter, which is fabulous. You know, but there's a lot of moving parts embedded in that business. It might be the visibility towards, you know, longer term is still fairly low. I'm just trying to see if you could give us a little more information on that segment. You know, can you talk more about how this business is priced? Are there cost pass-throughs? Are there lags between those pass-throughs and contract prices? I know there's a lot of different pieces within that business, but if there's any more visibility, I really appreciate it. If really just to summarize, if you could just give us, you know, what you think your view is on a normalized go forward EBITDA contribution basis from this business beyond the Q1 of 2023. Several points, somewhat eclectic maybe. Firstly, demand is at historic highs. You know, if you follow the Steel Joist Institute numbers, it's at peak levels for sure. It is driven largely by the change in retail, you know, going online retail, distribution houses, along with the data centers. That arena is truly pushing massive demand. Secondly, I think it needs to be recognized that the industry, since prior peaks, has changed dramatically. It's a rationalized, consolidated industry today. That allows it. It's just a changed dynamic that allows us to have a, I think, greater pricing strength. There's a realization today that the value of the product is a lot higher than people would suggest in past history. That product is gonna sell at higher levels going forward, no matter where we are in the cycle. Good morning. Good morning, David. Just a couple of other points to add to what Mark described. If you're looking at a backlog for the fabrication business versus a steel business, it's very different. Once a project enters the backlog in our fabrication business, the entire project has been highly engineered, and it's part of a bigger, you know, construction project overall. If you look at the steel costs that are involved in these large projects that we're participating in, it's really not a large percentage of the total in the entire project. The customer base, if you will, is not as sensitive to steel pricing as one would think. I think you saw that in the Q1 where even though Flat Roll Steel prices had a couple of months of weakening, it didn't change at all what we were putting in the order backlog at our fabrication business. That's one thing. The second thing is because our backlog is out much longer than it typically is. We typically would see a backlog of maybe 4-6 months. Now it's out, and that would be a very good backlog. I mean, now we're out into, you know, well into 2023. We, you know, changed some of the contract terms as well to try to ensure there's more security and what I would say is more visibility and certainty around the backlog. We believe that we have a great deal of visibility. We know where we're pricing today, and Mark mentioned in his notes that that forward pricing is higher than what we've even realized at this point in time. That's why I had the confidence in my notes to say that we expect earnings from the fabrication business to continue to increase throughout 2022. You know, I'm not sure. You asked about pass-throughs of cost. There's no specific surcharges, et cetera, like you might see in some of the steel businesses in fabrication. All of that, once it's hit the backlog, it's already guaranteed from a price perspective. I'll just pause on that and see if Mark and I have addressed your question. Yeah, that's absolutely helpful. Thank you. It just, you know, again, I'm trying to gauge what the comfort level is around a normalized. It's you know, the EBITDA contribution now is 20x what it was historic average for, you know, well over five years, and that 20x increase happened, you know, in 4 quarters. I'm just trying to figure out as we go out beyond, you know, 2022 and 1Q 2023, some of this is structural and some of it's not. I'm trying to figure out what, you know, what you think a normalized sort of contribution should be for a business that's relatively low visibility from my perspective. David, I would tell you that I can't answer you specifically at this point. But what I would tell you is that it's certainly not what the last five years were, because Mark pointed to some structural changes within the industry itself from consolidation and other avenues as well as the construction market itself and what it's doing. There has been some structural change, which I think will make that normalized earnings moving forward are higher than we've seen historically, as well as what we've done internally. The fabrication team has really done an incredible job, and I know that you've been to some of our operations. We're looking to further automate and to do some really exciting things in the future as well. It's also not what we're experiencing today from a normalized level. There are some, you know, specific things that happened with extended steel prices with a very strong construction market. We think that market will continue. I mean, it's specific to there's a large concentration in warehouses at this point. We will do our best in the future to try to give you a little better idea of what normalized might look like. Okay, that's helpful. Thank you. Your next question for today is coming from Seth Rosenfeld with BNP. Seth, your line is live. Good afternoon. Thanks for taking our questions today. I have two follow-ups, please, with regards to the raw material strategy. First, thanks for the color on your efforts to cut your reliance on prime scrap and pig iron. Can you just talk a bit more about those markets and the outlook into spring? We had a huge squeeze in March. Are you now seeing any signs of some softening of those markets as availability improves? To follow up, please, you commented quickly in your prepared remarks with regards to interest to become more self-sufficient for pig iron. What might that include? Is this gonna be organic or inorganic in nature? I'll start there, please. Well, firstly, on the pig iron opportunities, I'd prefer not to go into that. Just suffice it to say that we have plans. Relative to, and I apologize, I didn't necessarily hear all the first question there. Yeah. Mark, the question Seth had, and good morning, Seth, relates to pricing around raw materials and what we're seeing kind of in the near term and longer term for scrap and, you know, maybe for pig iron. Okay. Well, obviously, the unimaginable human tragedy in Ukraine, sorry, could be at the forefront of everyone's mind, but the consequences of that on our industry has obviously been massive. I think just on commodities in general, all commodities. If you look at pig iron. Now the typical global trade is around about 12 million tons merchant trade. Roughly 7 million, maybe 8 million tons of that were originating from Russia and Ukrainian mills. So there's been a big chunk of availability or supply taken out. I can't speak really for other mills, but I think they followed suit that we scrambled as an industry to cover our needs for the rest of the year into 2023 from other sources. We were very successful in procuring material from Brazil and from India, in particular. At the same time changing our sort of operations and process to lower the need or the requirement of that pig iron. You know, typically, where a mill is around about 22% pig iron input, you know, our mills today are running around about 14%. In combination, that's got us into 2023 from an uninterrupted supply. Consequence of all that though, obviously pushed pig iron pricing up. You know, it peaked at around $1,100 a ton. And that drew particularly prime scrap up with it. Prime scrap today is around 775-ish, I guess. Pig iron now is turned over. You know, transactions are in the kind of very low 900 range today, and we foresee that pressuring scrap pricing down, you know, at least sideways, but more likely pressuring it down going forward into the summer. On the flip side, you know, on the obsolete side, when you have pricing at these levels, and as Theresa suggested, you know, there's a record spread between obsolete shred grades to prime of around 170 dollars a ton. Historically, that was only about $40 a ton. At these trading levels, everyone is out there with their pickup trucks, picking up old cars and old refrigerators. The obsolete stream is considerable today. Flow is very high, and we feel that is gonna pressure scrap pricing over the next few months as well. Great. Thank you. If I can just one follow-up, please. Within your recycling business, I noticed that the ferrous shipments were down year-over-year quite considerably. Can you touch on what's driving that decrease, and how you'd expect it to transpire into Q2? From a ferrous perspective, the shipments were down in the Q1. It wasn't structural per se. It had to do with where raw material inventories were at the end of the year heading into the Q1. There were some mill outages during the Q1 as well. Heading forward is when, traditionally you're gonna see seasonality kick in, and based on where we see steel demand and how that translates then into raw material demand as well, we would expect to see increasing volumes, Q2 and Q3 for mills recycling. Great. Thank you very much. Your next question is coming from Timna Tanners with Wolfe Research. Timna, your line is live. Hey, good morning, guys. Good morning. Morning. First off, wanted to just get a little bit more color on the new guidance for Sinton starting up. I think now 1.5 million, and it was previously 2 million. Is it possible there's just, you know, further delays? Can you give us a little more color on that and, you know, what's happened there? Sure. Absolutely. I would say just emphasize the progress at Sinton is remarkable. The reduced volume, and I think we gave that in our January call, was still a little higher than that. That was before the start of the hot side of the caster. The caster was delayed just the start of itself. Since then, the mill is running extremely well as we commission all the different sort of bells and whistles and commission capabilities. We've already been out to 84.6-inch width coil. We've already been down to 0.060 on high-strength low-alloy grades. The hot band itself was described to me this morning as beautiful from our customers. I think it's going well, to be honest. I am confident that we will exceed that 1.5 million tons, in all honesty. We're just being conservative, perhaps for a change. Okay. I would say that we just had our national sales flat-rolled sales meeting at Sinton for the last two weeks. The last two days, sorry. The tenor there is the customer interest is absolutely off the charts. As I said, it's such a underserved marketplace today, and the product differentiation of that facility is gonna be insane. The fact that we have those seven facilities, four of which are already operating, will be a massive sort of pull-through sort of volume for that facility. To be honest, we couldn't be happier. Hey, yeah, what could- So 90% of the- Happier than last December. Yeah. Yeah The good side and I think it was. I can't remember which one of you suggested, but yeah, a slow ramp isn't all that bad from a supply demand dynamic right now anyway. If you consider, our ramp up is gonna be solid through the rest of this year. We went to 24/5 operation just this Monday. Up until that point, we were just commissioning sort of 12 hours a day on days. But Gallatin Steel obviously is not ramping up yet, and Delta is not. Net, it's a good thing. Gotcha. So David and I decided we're gonna start a fab shop. I'm joking obviously, but I did want to ask you how hard it would be to see any competitors there in that space, right? Given that, you know, prices are now higher than $4,000 a ton, and historically I calculated $1,350. I mean, even with the higher costs, those are pretty nice margins. I know you said it's consolidated, but how hard would it be to see a new entrant there and how much of that could be a risk? Thanks again. The cost of entry from an asset perspective is not massive. You know, 'cause as we've seen or as we described in our last call, you know, we substantially increased the productivity and volume capability from our facilities there with almost no capital expense because simply it's people and lines more than actual capital asset. The engineering of that product is intense. To engineer cost effectively is it's proprietary kind of intellectual sort of evolution of many years. For someone to jump in fresh, hey, nothing's impossible, but there's absolutely no way they could emulate our productivity and our efficiency, and they wouldn't be able to penetrate, in my mind, the marketplace. Just to add to what Mark's saying, if you think about it, you have to have the architects and the firms, the customers willing to design to some extent for your product, et cetera. It's not something that someone can just get involved and have all the constituents know you right off the bat. Mark said it incredibly well. Understood. Thanks, guys. I'll stay put. One last thing I would add also. Mm-hmm is to create the culture for those facilities is absolutely phenomenal. Our team does incredibly well. If you were to visit a joist plant, it's almost a choreography of action and activity, and it's very difficult to replicate. Thanks again. Your next question is coming from Carlos de Alba with Morgan Stanley. Carlos, your line is live. Yeah. Hello, everyone. Good morning. Just a couple of questions. The first one, could you talk about any potential additional cost in this enhanced shredded scrap products that you are now creating and charging your mills with? I mean, other than the spread, which obviously is a big incentive for you to move down to shredded. You know, are there any costs that you incur that maybe we should take into consideration just besides the spread and the cost of shredded scrap? Then my second question, if I can, is you know, could you remind us or provide us an updated CapEx guidance for this year? In particular, is there any changes on the CapEx for Sinton, given, you know, the slower ramp up and the delay on the caster? Well, I'll take the scrap one. Essentially, Carlos, I'd say somewhere around $10 a ton. All right. Thanks, Mark. Carlos, good morning. That was a very short response. From the perspective of guidance for CapEx for this year, we're still fucking around $750 million, and your question was specific to Sinton. Specific to Sinton, we don't expect anything of significance for additional CapEx related to the delays. There was additional expense which you saw flow through the Q1 already due to the delay and just manpower and maintenance and things associated with that delay, but not from a capital perspective. For Sinton, we're still at that $2 billion mark, which honestly is incredible given what the teams have gone through, for them to be able to maintain their budget while being able to, you know, make it through COVID and whatnot and everything else. We're not expecting anything for the rest of the year in addition from a Sinton perspective for capital. All right. Excellent. Thank you, Theresa. Thank you. Your next question is coming from Curt Woodworth with Credit Suisse. Curt, your line is live. Yeah, thanks. Good morning. Good morning. Mark, with respect to the 1.8 million tons on site that's sitting there, nice that four are operating, three under construction. When would you expect that to be fully operational? When you look at that sort of localized manufacturing capability, do you have a sense of, you know, if how much of that would be potential onshoring capability, i.e., sort of new demand, or are those facilities replacing, say, existing sites within North America? Is my first question. Well, I guess the on-campus sort of development is firstly evolved much quicker than we anticipated. It's been absolutely incredible to see the faith of our customer base in coming to and investing in our sort of dream down there. Secondly, as I say, when I say intentional, we wanted to make sure that we differentiated our supply chains and each of those on-site customers per se are in a different field. We have everything covered from, you know, automotive to light gauge coated to, you know, heavy gauge plate cuts in length and leveling. We have a pipe producer there, and we have a couple of pipe producers there actually. It's a good spread, good array of activity to support our supply chain to customers. It's a huge benefit to them. We're able to firstly deliver that material to them free of charge. It's just, yeah, 200, well, it's more than 200 yards. It's a big site. You know, a mile down the track, you know, we can deliver it very effectively at low cost. If you see and stand beside one of our coils there, it is absolutely remarkable the difference in size between a 22-ton coil and a 52-ton coil. That's giving those customers massive operational benefits, yield benefits. That's the plot. It also obviously just the elimination of that first freight is $25-$35 a ton savings in the supply chain. We see it as a very effective solution. It's gonna allow us to penetrate markets much quicker. Curt, in addition to what Mark said, and we're getting a lot of excitement from this from customers of those customers that are on site, is that it removes a considerable amount of the greenhouse gases associated with delivery and movement of material. We'll be able to take their scrap as well. It's almost a perfect closed loop environment that heretofore really hasn't been available. It'll be interesting to see how that develops from a marketing perspective as well. Okay. And then with respect to Iron Dynamics, I mean, it seems like that facility has really become a viable asset to the company. I know in the past it had some issues. Are you evaluating potentially building another facility like that at some point? I know in your prepared remarks you said you were evaluating potential further investment into pig iron. Just curious kind of how you could see the evolution of that going forward. Thank you. I'd prefer not to reveal our strategy on pig iron supply right now. Understood. I appreciate the question. Once again, if there are any questions or comments, please press star one on your phone at this time. We do have a follow-up question coming from Seth Rosenfeld. Seth, your line is live. Hi. Thanks for taking the follow-up. Just one more with regards to working capital, please. Obviously, very significant investments in Q1 weighing on free cash flow. Can you give a bit more color on the split, perhaps how much of that was tied to strength in steel prices, volumes versus growth in raw materials inventories? Perhaps if there was a need to build particularly elevated inventories of raw mats given supply chain disruption. Then looking forward into Q2 or into the back half, what should we think about the sequencing of working capital investment, potential release as sentiment begins to then ramp up? Thank you. Certainly, Seth. From the perspective of working capital, one big draw, which I'll just reiterate, even though I had it in my opening comments, is that we do pay our company-wide profit sharing in March of every year, the following year. There was a $360 million payment to the profit sharing, which we're incredibly excited to be able to provide that for the retirement of our teams. It's based, as you know, on 8% of pre-tax earnings. That was a big part of the lever. The other piece of it really related to fabrication and customer account values and volumes. It was really less to do with inventory. Inventory was fairly flat. Specifically as it relates to Sinton. Sinton is in a building working capital mode, so it increases working capital in the Q1, somewhere around $150 million-$200 million. You'll see that continue. It might be another $100 million-$150 million in the second and Q3 combined, and then we should really be reaching that capacity point, outside of any big movements in inventory valuation itself or in customer valuations themselves for Sinton. From a consolidated perspective, moving throughout the year, again, we're heading into seasonally strong environments, second and Q3. You're not going to see as big of a build as we saw in the Q1 because you won't have the same movement in payables and accruals. I would say it's going to be muted, then likely you'll see some working capital give back in third and Q4. Great. Thank you very much. Thank you, Seth Rosenfeld. Your next question for today is coming from Alexander Hacking with Citi. Alex, your line is live. Yeah, morning, Mark and Theresa. I got dropped off the call for a little bit, so I apologize if this was asked. I also appreciate if you're gonna give me the same answer that you just gave Curt, but you know, you've talked about, you know, scrap and pig. How does DRI, HBI potentially fit into your raw material strategy? Thanks. We currently are procuring HBI and have been for many years. For us, it tends to be what we call a value and use kind of a economic well calculation. If it makes financial sense to put it in the mix, then we will buy it. HBI tends to be an inferior product for the electric arc furnace. It slows productivity there. It is low yield and increases energy consumption. So it is never a preferred material, but at the right price, it makes sense. We do have a small but kind of steady diet to keep in line within that supply chain. Our furnaces are actually at Sinton, and we're converting Columbus to sort of inline charging, which allows higher volumes of DRI, HBI to be added to the furnace if need be. Thanks, Mark. That concludes our question and answer session. I would like to turn the call back over to Mr. Millett for any closing remarks. Well, again, we certainly appreciate your time and hopefully, and I see some are just recognizing that the strength of our business model, the vertical integration, you know, the downstream supply chain solutions that we have, the diversified value add mix that we have, and now Sinton coming on, coming online and another four lines soon thereafter. We truly, in my humble opinion, we, the team, has truly transformed this company over the last five, six years. We're a different company today. We're not just a steel company. I see that some of you are recognizing that. I think with time, and as my mom always used to say, "Proof is in the pudding." Well, we're making the pudding, we're proving it, and I can't be prouder of the team. They're a phenomenal team. I ask them to be safe each and every day and look after each other. Thank you for the customers, for your faith and support, and for our vendors, particularly the vendors that have gone far and beyond the call of duty, so to speak, in putting Sinton together. They've done a phenomenal job. Thank you. Thank you to our shareholders who support us. With that said, thank you. Have a safe and wonderful day. Once again, ladies and gentlemen, that concludes today's call. Thank you for your participation, and have a great and safe day.