スチール・ダイナミクス（STLD）2026年第3四半期決算説明会：鋼材出荷量が過去最高、アルミニウムの立ち上げが改善

スティール・ダイナミクス（Steel Dynamics、NASDAQ: STLD）は、過去最高の鋼材出荷量、実現鋼材価格の上昇、および高い製鉄所稼働率に支えられ、2026年第3四半期に前期比で力強い業績を報告しました。アルミニウム部門はランプアップ（稼働立ち上げ）段階にとどまっているものの、経営陣は熱延工場での操業上の問題は解決されたと述べており、業績が急速に改善すると予想しています。

主なポイント

• 2026年第3四半期の売上高は65億ドル、純利益は7億5,600万ドル、希薄化後1株当たり利益（EPS）は5.26ドルでした。調整後EBITDAは12億ドルに達しました。
• 鋼材出荷量は380万トンと四半期ベースで過去最高を記録しました。鋼材部門の営業利益は、平均販売価格が1トン当たり102ドル上昇したことにより、前期比43%増の10億ドルとなりました。
• スティール・ダイナミクスの製鉄所稼働率は92%で、全米業界推定の80%を上回りました。
• アルミニウム部門は2,600万ドルの営業損失を記録しましたが、前期比で21%改善しました。経営陣は、2026年第4四半期および2027年を通じて、出荷量、コスト、収益性が改善すると見込んでいます。
• 営業キャッシュフローは合計8億4,600万ドルでした。四半期末の流動性は24億ドルで、2026年の自社株買いは5億9,100万ドルに達しました。
• マーク・ミレット最高経営責任者（CEO）の退任に伴い、テレサ・ワグラー最高財務責任者（CFO）が2026年末にCEOに就任する予定です。

主要財務データ

経営陣は、9月下旬の約3,000万ドルに上る為替変動とアルミニウム・ヘッジの未実現時価評価調整の影響により、業績が当初のガイダンスレンジをやや下回ったと説明しました。

事業および業績動向

鋼材事業

鋼材事業が収益の主たる牽引役となりました。記録的な出荷量と平均販売価格の1トン当たり102ドルの上昇により、セグメント営業利益は2026年第2四半期比で43%増加しました。

経営陣によると、薄板（フラットロール）市場の市況は引き続き好調で、堅調な顧客需要、サプライチェーンにおける適正な在庫水準、リードタイムの長期化がみられます。コイル価格に対する高付加価値スプレッドは1トン当たり230ドル超に回復しました。スティール・ダイナミクスの薄板ポートフォリオの約80%以上は、通常市場の変動から2ヶ月遅れて連動する契約価格に基づいています。

第3四半期の出荷量には、熱延コイル99万2,000トン、冷延製品14万6,000トン、表面処理鋼板163万トンが含まれます。最近追加されたコーティングラインは、今後6ヶ月間でさらに稼働率を引き上げる余地があると経営陣は述べています。

非住宅建設に支えられ、長尺製品（ロングプロダクト）市場も堅調を維持しました。経営陣によると、受注残高は2027年まで順調に伸びています。データセンターは形鋼需要の約15%、スチールジョイストおよびデッキ事業の約8%を占めており、需要基盤がより広範に広がっていることを示しています。

シントン工場での月産量は約21万〜22万トンで推移していました。経営陣はこれを月産25万トン以上に引き上げる可能性があるとみています。形鋼工場はさらに8万〜10万トンの生産能力を追加できる可能性があります。

アルミニウム事業

薄ゲージ製品の圧延速度向上に伴い、表面品質の問題や大幅な歩留まり低下が発生したため、アルミニウムの出荷量と財務業績は当初の会社予想を下回りました。スティール・ダイナミクスは熱延工場の冷却剤を変更し、経営陣はこの問題が完全に解決されたと発表しました。

10月の最初の3週間、熱延工場は75%の稼働率で運転しました。3基の冷延工場はすべて稼働しており、年間65万トンの生産能力を利用可能です。自動車用連続焼鈍・溶融処理ラインの第1ラインはフル稼働しており、第2ラインは2027年第1四半期に稼働開始予定です。

同社は複数の自動車メーカーから自動車用5182および5754完成品の認証を取得し、6000系材料のトライアルを実施しています。経営陣は、自動車向け完成品の出荷が2026年末までに開始されると見込んでいます。

公称能力および想定されるプロダクトミックスにおいて、経営陣はアルミニウムプラットフォームのサイクルを通じた調整後EBITDA目標（6億5,000万〜7億ドル）、および金属リサイクル事業の目標（4,000万〜5,000万ドル）を維持しました。

加工およびリサイクル事業

加工部門の営業利益は、出荷量増加と平均販売価格の上昇が鋼材投入コストの大幅な増加を相殺したため、第2四半期の8,500万ドルから9,100万ドルに増加しました。スチールジョイストとデッキの受注残高は前年同期比で50%増加しました。

経営陣は、2027年初頭納品予定として受注残に加わったプロジェクトは価格が高めに設定されていると述べました。通常の第4四半期の季節要因が短期的な業績に影響を与える可能性があるものの、2027年には加工部門の価格設定、出荷量、利益率がより強固になると予想しています。

金属リサイクル部門の利益は、実現価格の下落により前期比で減少しました。リサイクルチームは、アルミニウム製品におけるリサイクル材含有率の向上と原材料コストの削減をサポートするため、スクラップ分別能力を拡張しています。

経営陣の見通し（ガイダンス）

• 経営陣は、契約価格における典型的な2ヶ月のラグを反映して、薄板価格の上昇と高付加価値スプレッドの拡大が2026年第4四半期の業績を支え、2027年まで続くと予想しています。
• 鋼材の利益率やスプレッドは、今後数ヶ月間力強い推移かやや上昇すると予想されています。経営陣は現在、スクラップコストに対する大きな上昇圧力は見込んでいません。
• 立ち上げコストの減少、稼働率および歩留まりの改善、リサイクル材含有率の上昇に伴い、アルミニウムの出荷量と収益性は2026年第4四半期に急回復し、2027年を通じて改善が続くと予想されます。
• 同社は引き続き、2026年末までに熱延工場の稼働率90%を目標としています。経営陣は、この目標が製品シートの出荷ではなく、ホットバンド生産に適用されることを明確にしました。
• アルミニウムの歩留まりは年末までに目標水準に達し、2027年にはより安定すると見込まれます。スクラップ含有率は2027年半ばまでに最適化された原材料ミックスに近づく見通しです。
• 経営陣は、アルミニウム部門が2027年第1四半期以降にEBITで黒字化すると予想しています。なお、製品認証は新規車種プラットフォームへの採用に依存するため、自動車向けプロダクトミックスの最適化には2028年頃までかかる可能性があります。
• 2027年の設備投資額（速報値）は6億ドルを超える可能性があります。スティール・ダイナミクスは2027年前半のキャピタル・マーケット・イベントで詳細を発表する計画です。

リスクと注視点

アルミニウムの立ち上げ（ランプアップ）が引き続き主な実行課題です。熱延工場の冷却剤問題は解決したものの、後工程での加工や認証を経る必要があるため、製品の出荷はホットバンドの稼働率から遅れることになります。

リサイクル材比率向上、歩留まりの安定化、自動車向け比率向上のタイミングが、アルミニウムの利益率改善のペースを左右します。自動車向けの最適化は2028年にずれ込む可能性があります。

10月と11月に3つの薄板製鉄所で定期修繕のための操業停止が計画されています。ほとんどは3〜3.5日間の予定ですが、バトラー工場は大型天井クレーンの交換のため、やや長期間の停止が必要となる可能性があります。

プロジェクトの価格改定よりも鋼材投入価格の上昇が速かったため、加工部門の利益率は圧迫されました。経営陣によると、現在はより高い価格設定が受注残に反映されつつあり、2027年に向けてこの懸念は薄れつつあります。

アナリスト質疑応答の主なポイント

• アルミニウムの利益率改善要因：経営陣は歩留まりの改善を最大の機会として挙げ、それに続いてスクラップ利用率の向上を挙げています。競合他社が1,000人以上であるのに対し、同社は約700〜750人の従業員で対応しており、労働効率はすでに良好です。
• アルミニウムの収益性：同セグメントの第3四半期のEBITDAは黒字でしたが、生産上の問題により2026年下期全体でのEBIT黒字化は難しい見通しです。経営陣は2027年第1四半期以降のEBIT黒字化を見込んでいます。
• 鋼材価格とスクラップ：リードタイムの長期化、適正在庫、輸入抑制、第4四半期の製鉄所休止が鋼材価格を支えています。経営陣によると、老廃スクラップや発生スクラップの堅調な流出入が原材料コストの圧迫を抑える見込みです。
• 加工事業の見通し：受注残の価格改定が遅れたため、鋼材コストの上昇が一時的に利益率を圧迫しました。2027年納品分の新規受注には高めの価格が適用されており、出荷量と利益率の改善という経営陣の予想を後押ししています。
• 資本配分：スティール・ダイナミクスは今後1〜3年の期間において自律的成長（オーガニック）プロジェクトを優先しています。同社は2027年前半に、プロジェクトの選定と2027年の設備投資についてより詳細に説明する予定です。
• 収益構成：経営陣は、現在の収益における鋼材の割合はおそらくピークに近いとみています。操業パフォーマンスの改善に伴い、アルミニウムおよび加工事業が2026年第4四半期から2027年にかけてより大きく貢献すると予想されています。

決算説明会文字起こし全文

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day and welcome to the Steel Dynamics Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that this call is being recorded today, October 20, 2026, and your participation implies consent to our recording this call. If you do not agree today's terms, please disconnect.

At this time, I would like to turn the conference over to David Lipschitz, Director, Investor Relations. Please go ahead, sir.

David Lipschitz

Thank you, Sylvie. Good morning, and welcome to Steel Dynamics' Third Quarter 2026 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 integrating or starting up new assets, the aluminum industry, the use of estimates and assumptions in connection with anticipated project returns and our steel metals recycling fabrication and aluminum 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 if affable in any later SEC Form 10-Q. You will also find any referenced non-GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports Third Quarter 2026 results.

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

Mark Millett

Well, good morning, everyone. Thank you for joining us this morning for the third quarter 2026 Earnings Call. Before I begin our report, I would like to take a moment to congratulate Theresa on her appointment as CEO at the end of this year. As most of you know, she's been with the company for 28-plus years, starting when we had just our first mill in Butler, Indiana. And back then, here's just a handful of people, and now we've got 14,000 strong in our team. In that time, she has built an incredible understanding of our markets, our customers and our company. Most importantly, she understands our culture and is passionate about our people. She has been acutely involved with the strategic decisions and direction we have taken these past 15 years, decisions that have driven tremendous growth and about 3,000% shareholder value appreciation, a value with very few -- very few can claim. That success has also been supported by an incredible team of 14,000 people as I said, and the best senior leadership on the planet, all of whom have been very keen, very key contributors of our growth.

I just want to -- very unusually maybe, but I'd just like this to signal them out. Miguel Alvarez, Jim Anderson, Matt Bell, Chad Bickford, Chris Graham, Barry Schneider, Tommy Scruggs, Rick Poinsatte. These folks have been incredible. And with this team and with Theresa at the helm, we will undoubtedly drive SDI to even greater heights.

So that said, and congratulations, Theresa?

Theresa Wagler

Thank you very much, Mr. Mark.

Mark Millett

Our teams, I think in the third quarter achieved a very strong quarter-over-quarter financial and operational performance. That said, we did come interest shy of our earlier guidance range due to late September anticipated moves in foreign currency and aluminum hedging unrealized market-to-market adjustments of just under $30 million.

Some quarter highlights included record quarterly steel shipments of 3.8 million tons, adjusted EBITDA of $1.2 billion, an extremely strong cash flow from operations of $846 million. Both the milestones relating to the aluminum mill commissioning and ramp were also achieved. Seriously, my sincere thanks to an amazing team that consistently brings our vision and strategies to life. As I said always, safety will be our most important cultural pillar and value with great dedication to each other. Our team continues to focus on our take controller safety philosophy. We have hundreds of volunteers that travel across our company, not simply auditing our safety practices at our facilities, but cultivating our culture to ensure each facility has the right attitude and mindset to drive our performance ever upwards. It is an incredible time commitment and so inspiring as they operate as a family, supporting each other while challenging the status quo and striving for continuous improvement every day.

So before I continue, though, Theresa, will you update us on some specifics relative to Q3?

Theresa Wagler

Absolutely. Thank you, Mark, and thank you for your kind words. Good morning, everyone. I appreciate you being with us this morning. For the third quarter of 2026, our net income was $756 million or $5.26 per diluted share with adjusted EBITDA of $1.2 billion. Third quarter 2026 revenues were $6.5 billion, and operating income was just under $1 billion -- was just over $1 billion, higher than sequential second quarter results driven by higher realized steel pricing and record steel shipments.

As Mark mentioned, the steel team delivered an outstanding quarter with record shipments of 3.8 million tons. Our steel operations generated operating income of $1 billion in the third quarter, a 43% sequential increase as average selling prices per ton increased $102. During the third quarter of 2026, the domestic steel industry operated at an estimated utilization rate of 80%, while our steel mills operated at 92%. We consistently achieve higher utilization due to our value-added product diversification, differentiated customer supply chain solutions and the support of our internal manufacturing businesses, and this is consistent throughout all market cycles.

Regarding flat-rolled steel, market conditions remain favorable. Customer demand is strong inventory levels throughout the supply chain remain very lean, and order lead times are elevated. Value-add spreads to coil prices have recovered, increasing to over $230 per ton as the largest flat-rolled steel coder in North America, we are well positioned to capitalize on these margin opportunities. As a reminder, approximately 80% of our flat-rolled steel portfolio, sometimes more is linked to contractual pricing that generally lags market changes by 2 months. Given this significant improvement in flat-rolled steel pricing and the continued expansion of value-added spreads, we expect these favorable market dynamics to positively impact our fourth quarter results and into 2027.

Long product steel markets also remain incredibly strong, supported by healthy activity in nonresidential construction. Customer demand continues to be exceptionally robust with order backlog extending well into 2027. We remain optimistic about demand for our diversified product portfolio of steel products and believe our end market exposure positions us incredibly well. For modeling purposes for those on the call, our hot-rolled coil shipments in the third quarter were 992,000 tons, our cold-rolled shipments were 146,000 tons and finally, our coated flat-rolled shipments were 1 million -- excuse me, were 1,630,000 tons.

Third quarter 2026 operating income for metals recycling was $33 million lower than sequential -- sorry, it was $33 million lower than second quarter earnings due to lower realized pricing. Our metals recycling team is partnering even more closely with our steel and aluminum teams to expand scrap separation capabilities. This will provide a meaningful advantage in increasing recycled content in our aluminum flat-rolled products while expanding our earnings opportunity. Our steel fabrication team achieved third quarter operating income of $91 million, an increase from second quarter results of $85 million as increased volume and higher average pricing offset significantly higher steel raw material input costs. I want to give a shout out to the team. They did an incredible job.

Our steel joists and deck business is experiencing strong demand with our order backlog 50% higher today than a year ago. The Dodge Momentum Index, which generally leads Construction spending by 12 to 18 months remains elevated and is improving. We are also seeing improved pricing within our steel joists and deck business with strong expectations for 2027, supported by positive customer sentiment and quoting activity, continued manufacturing onshoring and public funding for infrastructure and other fixed asset investment programs. We're starting to see the uplift from this macro environment and we believe it could be considerable.

Third quarter 2026 operating losses from our aluminum operations were $26 million, a 21% improvement over sequential results. Shipments and financial performance were below our original expectations due to a matter within the hot strip mill, which Mark will describe in a moment. The issue has been resolved, and we expect improved performance going forward. We expect volume, cost structure and profitability from the aluminum rolling mill to improve in the fourth quarter and throughout 2027. In the third quarter, we generated strong cash flow from operations of $846 million. Our cash generation is supported by our differentiated server business model and highly variable low-cost structure. At the end of the quarter, we had liquidity of $2.4 billion.

During the third quarter of 2026, we invested $150 million in capital investments with fourth quarter estimates also in that same range. During 2026, we have repurchased $591 million of our common stock and continued a positive dividend profile. At September 30, $260 million remained available under our current repurchase program. These actions reflect the strength of our capital foundation and cash flow generation capability and the continued confidence in our future. Our capital allocation strategy prioritizes high-return growth opportunities while maintaining a disciplined and balanced approach to shareholder value creation.

Shareholder returns are anchored by a sustainable and growing base dividend, complemented by a flexible share repurchase program that allows us to return additional capital to shareholders when appropriate. At the same time, we remain committed to preserving our investment-grade credit profile ensuring the financial strength and flexibility needed to support strategic growth initiatives, navigate market cycles and create long-term value for our shareholders. Our free cash flow profile has fundamentally changed, increasing to an average annual $2.4 billion during the most recent 5 years. And if you exclude our recent transformational growth, it averages $3.2 million per year, an incredible achievement. And there's more to come.

Over the past number of years, we've invested more than $5 billion, arguably $6 billion in 3 primary transformative organic growth initiatives. These investments reflect our disciplined approach to capital allocation and our commitment to growing in markets where we believe we can create sustainable competitive advantages. As these assets continue to mature, we expect them to generate meaningful earnings and related free cash flow. We've established a strong and sustainable capital foundation that enables us to invest in meaningful strategic growth opportunities, consistently return capital to shareholders and maintain the investment-grade financial metrics that underpin our long-term success.

And I would be remiss if I also didn't congratulate Mark on his upcoming retirement, although my belief is will be busier then than he is now. And just to point out, under Mark's leadership, we went from a market cap of $3 billion to today, $35 billion and continuing to move forward. We had around 3,000 people. And when he originally started, we had 3 to now almost 15,000, and that was all under Mark's leadership. So thank you, Mark, for that.

Mark Millett

Well, thank you, Theresa, but it takes the team, takes a village. So thank you, though. Consistently achieving those incredible results year-over-year. It just doesn't happen. It is the product of an effective business model that mitigates volatility, a commitment to state-of-the-art technology, both leveraged by unique and passionate culture driven to excel. The resulting performance reflects the dedication of our teams and the effective strategies we have developed and executed over time. We have invested strategically to gain significant scale, high-margin product and market diversification, efficient and unique customer supply chains and synergistic operating platforms to optimize market opportunities throughout economic cycles. These strategies enable us to consistently achieve at the highest levels, allow us to control our own destiny and outperformed competitors across all market goals.

Our foundational focus on market and product diversification, particularly in higher-margin value-added products, support stronger through-cycle facility utilization and drive superior financial performance. We optimize cash generation, which enables a balanced and consistent capital allocation strategy that supports growth, maintains financial strength and delivers compelling long-term returns to our shareholders. Our disciplined approach to capital investment continues to generate strong through-cycle cash flow and supports one of the highest return on invested capital profiles not only of steel companies but in the industrial sector. Our most recent and most significant current investment is in aluminum flat-rolled products. The mill is transitioning from commissioning to full production ramp and the excitement continues to be palpable as you tour the facility.

The team has outperformed all industry expectations, constructing and commissioning an incredible facility in industry-leading time. Competitors and customers alike that have toured the mill are amazed at the quality and the capability of the plant and the speed of product qualification. But even more important to me, they are broadly complementary of the quality and the speed decor of the team. Again, they and our culture will differentiate us from the rest of the industry. The team is navigating a volatile aluminum market, driven by the impacts of geopolitical conflict and domestic supply chain challenges. But despite these near-term challenges, they've remained focused on execution custom service and operational excellence. Beyond these temporary constraints, we are operating in a unique and highly favorable long-term market environment. The United States faces a significant structural supply deficit of more than 1.4 million tons of aluminum sheet. And that shortfall is a forecast to widen as demand continues to grow across key end markets.

We believe our aluminum platform is exceptionally well positioned to capitalize on that growing domestic demand, creating substantial long-term value for our shareholders. The investment is in clear alignment with our core competencies. Our construction capabilities have once again been proven with Columbus and the Mexican slab cast mill, a state-of-the-art facilities built cost effectively and in record time. We expect the same result for our second recycled slab center currently being built in Mississippi. We are using our deep operational know-how in combination with technical expertise of aluminum industry experts. Our proven incentive-driven performance culture will drive higher efficiency and lower cost operations compared to our competitors.

Our metals recycling platform will facilitate higher recycled content. We're the largest North American metals recycler, including aluminum. Supply chains are in place in both Columbus and Mexico to achieve the highest recycled content in the industry. New separation technologies are now successful in amplifying supply chain value while providing broader access to usable aluminum scrap. Production to date is confirming our expected cost differentiation. When operating at our nameplate capacity and expected product mix, through-cycle EBITDA expectation for a normalized market conditions remains at $650 million to $700 million plus a further $40 million to $50 million for our metals recycling platform.

Operating experience to date, albeit still in ramp-up still supports our 5 key competitive cost advantages, labor efficiency, higher recycled content, which we achieved in the first half of '27, high yields and optimized logistics, all driven by our performance-based operating culture, utilizing state-of-the-art equipment. The strategic investment is a cost-effective and high return growth opportunity, providing steel dynamics with additional countercyclical diversification while further stabilizing and growing our cash generation capabilities. The customer base remains eager for a new market entrant, one that is known to be innovative, customer-focused and responsive. But that said, every startup and ramp-up brings its share of challenges. I'd like to sincerely thank our customers for their patience and partnership as we continue to fine-tune our operations and optimize performance. Their trust and support have been invaluable, and we remain focused on delivering the highest quality products reliability and service they deserve.

The hot side is fully operational with the ability to run at rated capacity and superior yields. All 3 coal mills are now operational and running well, which will allow us to access the 650,000 metric ton annual capability. We're in the process of improving yields and anticipate achieving our efficiency goals over the coming months. The first of 2 automotive continuous anneal and solution heat treat lines is fully operational. We achieved finished product qualification status and multiple automotive manufacturers for 5182 and 5754 products, and we are currently in trials for 6,000 series material. We have plans to ship finished automotive products before the end of this year, and I think it all would agree that is a phenomenal achievement. The second cash line is currently in commissioning and will be operational in the first quarter of '27.

We have experienced earlier-than-anticipated product certifications, and it is a testament to the incredible talent we have been able to embed in the team and the technical capabilities of mill -- of the mill. There's great energy, great momentum. As we move through construction, commissioning and ramping of the various production lines, we continue to be excited by our progress, with expectations for significant cost optimization benefits to occur in the near term and product mix benefits throughout '27. We did expect to have higher shipments and profitability in the third quarter. But as we ramped up to the higher rolling speeds for light gauge product, we developed a surface quality issue that resulted in significant yield losses. After a period of troubleshooting, we identified the need to change the coolant in the hot strip mill. The troubleshooting, cooling change and subsequent reestablishment of rolling conditions led to several weeks of lower production and lower yield, impacting volume and increasing costs in the quarter.

As Theresa suggested, the matter has been fully resolved and operations have been excellent so far in October. Quality and yields throughout the facility have improved dramatically. The hot strip mill has been operating at 75% thus far in October. Those put us a month behind, we still believe we can achieve 90% by the end of the year. We believe volume and profitability from our aluminum operations will increase sharply in the fourth quarter and continue improving through 2027 as stand-up costs subside, utilization yields improve and scrap content increases. We remain highly enthusiastic about our current and future growth initiatives, which we believe will continue to drive the high return growth momentum we have consistently demonstrated. The through-cycle earnings potential of over $1.4 billion from our recent key growth projects is becoming a reality. Capital funding is substantially complete and operational optimization is our focus for both our recent flat-rolled steel and aluminum investments.

I'm encouraged by the growing recognition among our teams, customers and investors on the strength and consistency of our cash generation, coupled with our disciplined high-return approach to capital allocation. We believe that steel industry has undergone a fundamental paradigm shift in recent years, supported by an increasingly mercantile is the global trade environment that should help maintain a more level playing field through continued and appropriate trade enforcement mechanisms. We expect continued growth in fixed asset investment, which remains a key driver of demand for metal products. Manufacturing reshoring continues to gain momentum and together with growing investments in industrial infrastructure and computing is expected to continue to support nonresidential construction activity. As decarbonization initiatives continue, the resulting increase in global cost structures will materially steepen the cost curve, enhancing Steel Dynamics' competitive position in driving opportunities for market share gains and expanded metal spreads.

Our highly diversified value-added product capabilities provide a distinct competitive advantage, allowing us to leverage the evolving metals market environment and amplify our relative earnings par. In closing, as I have often said, our people are our foundation, and I thank each of them for their passion, dedication and commitment to our success. -- and we are committed to them. I remind each team made listening today, nothing is more important than safety for you, your families and for one another. I also thank our loyal customers. Our partnerships are built on trust delivering on our commitments and collaborating to create innovative solutions and value.

Finally, I thank our suppliers and our service providers, your partnership, trust and support for essential to our continued success. I would suggest SDI has never been in a better position. Current business is in phenomenal shape, and we are on the cusp of yet another step function increase in through-cycle cash generation. We have a phenomenal team in place to continue our leading growth trajectory, and I look forward to looking from the far of their success.

So with that, we will take questions, please.

Operator

[Operator Instructions] And your first question will be from Nick Cash at Goldman Sachs.

質疑応答

Nicklaus Cash

And congrats again, Theresa and Mark. So you just mentioned, Mark, and I still expect to hit about 90% utilization in terms of hot band production exiting the year. But I just wanted to know if you -- how should investors think about that 90% utilization? Is that hot band production gold mill or finished sheet shipments if it is hot band production? Should investors think about how that translates to shipments?

Mark Millett

Well, I think obviously, you've got to start at the beginning and the hot mill feeds all material downstream. So capability and suggesting it is the hot strip mill. Shipments will not be at 90%, albeit we have the 3 coal mills fully operational today. It's going to take a little while for a month or 2 to get the entry through the supply chain.

Nicklaus Cash

No, that's helpful. And just one more to follow up on the margin side. Give you a pretty extensive list of margin tailwinds on the aluminum side. But is it possible to provide any color or break down the margin opportunity that comes from the higher scrap utilization versus better yields, fixed cost absorption and richer product mix? And also, what is the demand for the cadence to getting to your optimal scrap utilization?

Theresa Wagler

Yes. Nick, so the magnitude, we haven't -- it's really hard to give a range of what that might look like. The magnitude of impact really is that the yields will have the most impact. And as Mark mentioned, we're actually -- we saw a significant improvement in yields across the facility, including the cold mills in October so far. I know we're just 3 weeks in. But since we made the coolant can change, we've really been able to dial into those preferred yields in what we think is a long-term goal for us and where we want to be. So we see getting to those yields before the end of this year and then refining them and having them be consistent throughout 2027. So that's the biggest impact.

The second then would be the scrap content. And so we have been using more primary aluminum or P1020 as we've gone through the certification or qualification processes with the different product types. We will in the first half of 2027, the increasing amount of scrap content. So hopefully, by midyear next year, we're in more of an optimized product mix on the raw material side. And then finally, the component of labor, we really are already there, right? So the third impact would be having a lower labor cost. And we're operating with, what, 750 people today, around 700 people compared to what the competitors would be with well over 1,000 people. So we've got that already dialed into the things that you should focus on would be on our yields. And the scrap content, which we think will have definitely in line by mid next year, if not before.

Operator

Next question comes from Alex Hacking at Citi.

Alexander Hacking

Yes. Mark, let me add my congratulations I know you're still going to be around at the company, but I guess this might be our last earnings call, taking a company from 3 people to 14,000 people, it's quite some achievement. I guess just following up on the aluminum side, Theresa, you gave some color there on the raw materials mix and the yields. When do you think you get to an optimal kind of end product mix? Is that would that be achievable by the end of next year? Or that's something that we should be looking for more in 2028?

Theresa Wagler

Yes. No, thanks, Alex. And thanks to your comments about Mark, on your first report, too. We choose him about it being the titan of the industry. That said, as it relates to the product mix, the fact that the team has achieved the ability to ship finished automotive product here in the next coming months, that's extraordinary. We've only been operating for just less than a year. We do expect to be increasing the amount of automotive as a part of the mix throughout 2027, and whether we're completely dialed it at 30% by the end of the next year, probably won't be only because we need to be able to get on to the automotive platforms. So can sheet industrial definitely are already there on the can sheet side. Automotive will have a significant more amount in 2027, but I'd say you probably get to optimize sometime in that 2028 period just because we need to have the ability to get on the new platforms from an automotive producer perspective.

Operator

Next question will be from Katja Jancic at BMO Capital Markets.

Katja Jancic

Congrats to both the Theresa and Mark. Maybe on the fabrication side, prices seem to be inflecting. How should we think about pricing in that business from here?

Theresa Wagler

So Katja, you're right. And that was a super extraordinary is that the fabrication team. Obviously, the volume is all important. And as a reminder, we had really the industry didn't have great volume. It was lower than pre-COVID for 2025 -- or 2024 and 2025. We started to see demand really pick up at the end of 2025 into '26. We've seen that momentum continue as projects that were put on delay in '24 and '25 are now coming to fruition, and that's also impacting the long product steel side of our business in a very positive way. So the pricing that's going into the backlog today, so those projects that are being priced and really looking for delivery in early 2027, do have higher pricing associated with them. So you should see that be very positive for the fabrication segment.

That said, fourth quarter seasonality, you still might see some of that. So I wouldn't expect to see something other than the team I'm keeping really strong with volumes and with consistent pricing in the fourth quarter, but 2027 seems to be a really strong opportunity for an uplift on margins, volumes and pricing.

Katja Jancic

Maybe just quickly, would it be possible to quantify how much higher prices are in the backlog?

Theresa Wagler

It would be possible, Katja, but then the commercial team would fire me. So I can't. Thanks for asking. Sorry about that.

Operator

Next question will be from Carlos De Alba at Morgan Stanley.

Carlos de Alba

And let me join the congratulatory comments for both Mark and Theresa. And my question is on the steel mills. Any color or maybe Mark or Theresa on how you see the margins in that business trending in the fourth quarter, maybe early 2027, scrap prices that have been lagging steel prices are now catching up. So wondering if you see potential for margin expansion in the fourth quarter and early next year?

Mark Millett

Carlos, I think the marketplace as you likely know, it's very, very tight right this second. You've got the confluence of mill lead times have extended well into 2027 right now. Inventories remain at sort of the low end of historical ranges. You've got Q4 outages probably is going to take 1 million, 1.2 million tons out of the marketplace. And you've had up to this point, restrained imports. And so you've got this tightness for sure. And I do believe that we'll see some continued, again, intentional and not rapid pricing increases or momentum. That momentum, I think, is going to continue.

And then on the scrap side, you're right. It's been relatively stable. We saw a bump in October. But if you look at the dynamics of the marketplace at this -- even at this price, is incredibly attractive to the folks bring a scrap to our yards. So the obsolete flow right now is very, very, very strong. The export market is -- still remains relatively soft. The scrap segregation technologies that we've talked about in the past truly sort of effectively expanding the scrap reservoir and reducing the prime scrap needs. You've got strong manufacturing. So prompt scrap flows are also strong. So I don't see any major upward pressure in raw material costs. So it would be our view that the margins or spreads will remain very, very strong to slightly upward in the coming months.

Operator

Question comes from Lawson Winder at Bank of America .

Lawson Winder

I appreciate today's update. And then I would just say it's really reassuring to say a very well-planned, well-thought-out and very sensible leadership transition well done. I'd like to follow up on the comments on the steel fab business. So message heard loud and clear. There's going to be an uplift on pricing, volume and margin in 2027. Nevertheless, I mean, it is notable that just if you look at Q3 TTM versus Q2 TTM metrics, volumes are up substantially, but the operating incomes were down. And I just wanted to ask if there's some partly offsetting cost headwinds that we should be thinking about heading into 2027 on the fab business as well as those positives that you noted in the prior comments.

Theresa Wagler

Yes. Lawson, I thank you for your kind comments earlier. As it relates to the TTM, the difference is the fact that steel prices just strengthened very, very quickly, and our steel joists and deck uses a lot of flat-rolled steel. And so that pricing parental has impacted the margins because the teams needed a minute to be able to increase the pricing associated with that raw material uplift and that's being placed into the backlog into the future. So it's not real time, although they're experiencing the higher steel costs. So that's really why you're seeing the difference in the TTM amounts that you're looking at.

Going forward, as they've had the momentum now of having much higher demand dynamics, they're able to have pricing power, if you will, or pricing support is a better word, I guess. We don't see that as affecting nearly as much the 2027 even in light of what we believe will be an elevated steel price environment.

Lawson Winder

Okay. That's very helpful. And then, there is -- or planned maintenance outages at all 3 of the flat-rolled mills this quarter. Any factors that you would potentially call out that might cause these outages to be shorter or longer than any of those of the past? And then, when specifically do you expect each of them to happen?

Mark Millett

All the outages are somewhat normal, like 3, 3.5 day outages with the exception of Butler. Butler may be -- I don't know, a little longer, we're changing out one of the large overhead cranes, but nothing overly substantial as we see it right now.

Theresa Wagler

And those outages are October, November, Lawson.

Operator

Next question will be from Albert Realini at Jefferies.

Albert Realini

Also congratulations both Mark and Theresa. So just a higher level here, across the major steel players, we've kind of seen are to diversify earnings, whether it's consumer offerings specialty steel products or maybe even in some -- you guys, you've positioned the company increasingly kind of become a value-added metals producer rather than solely steel recently. The earning mix has shifted pretty meaningfully back towards steel. The mills have accounted for better than 90% of earnings, I believe, this quarter, which I think is probably the highest level since pre-COVID a bit higher than maybe some of your peers. So just should we think of that as something because maybe like a high watermark for steel share of earnings? And based on how you anticipate aluminum eventually rebounding, kind of how do you expect that shift to evolve over the next year?

Theresa Wagler

Yes. I mean it's -- Albert, that's a great observation, actually. Yes, it probably is, I would say, a user vernacular, a high watermark simply because fabrication is rebounding from a volume perspective pricing perspective. And we do think it was muted in '24 and '25. We don't think that's even through cycle for them or representative of through cycle. And aluminum is just getting started. And so -- and aluminum will be consistent. So it will be somewhat of the stabilization in both the earnings and the cash flow as there's less volatility generally in that industry as it relates to the earnings profile. And certainly, we've built diversification within our rolling mill to have even further, I think, stability as it relates to cash flow and earnings. So as we progress through you'll see a shift in the fourth quarter and then certainly throughout all of 2027 as aluminum ramps, both from a volume perspective but also from an earnings capability perspective. Steel is still very important, but you'll see aluminum and fabrication become increasingly more of a contribution to the total mix. Mark, do you agree with that?

Mark Millett

Yes.

Operator

Questions will be from Tristan Gresser at BNP Paribas.

Tristan Gresser

Congratulations, Mark and Theresa. If I may push you a little bit on aluminum division, I think previously, you had this target to be EBIT positive in H2. Would that still be possible now -- and maybe for next year, I mean, when we look at consensus, is already above your normalized kind of EBITDA targets, so how do you feel about that? And do you think there are the conditions to get there given the visibility you have on your ramp?

Mark Millett

Well, we were EBITDA positive actually in Q3. And...

Tristan Gresser

EBIT, sorry.

Mark Millett

I'm sorry. EBIT.

Theresa Wagler

Yes. I'm sorry, I thought you said EBITDA too and -- it was my fault.

Tristan Gresser

Sorry.

Theresa Wagler

No, no, that's okay. For the second half of the year, in totality, given the experience that we had in the third quarter, I don't think it's likely. Definitely, they are in the first quarter and onward for 2027. And regarding the second part of your question, we won't comment on where analyst estimates are for any segment or for the company as a whole. So as far as commenting on whether we're comfortable with where estimates are for aluminum next year. We won't comment on that. What we will say is that we have complete confidence in the team commercially it's there, the orders are there, the opportunity is there.

From a raw material perspective, we have full confidence in the recycling team to help us supply and increase the amount of recycled content. So on operationally, given the changes that just took place in the August, September, September time frame, we feel confident in the ramp as well. So we feel very constructive, very optimistic about next year for aluminum.

Mark Millett

The question -- I would just add I think sometimes one has to reflect and calibrate a little. And the -- obviously, some of the headlines this morning on the reports suggesting a challenge and maybe a stumble. All I can say is that I want us to recognize this has been a phenomenal achievement by the team. Those that are toward the facility, it is absolutely spectacular, and we'll likely hold or Theresa will likely hold a visit early, at some point next year, and you'll see it. But it's absolutely first-class facility. We've got a first-class team. And in combination, it's led to these accelerated qualifications in both automotive and cans. Again, that one needs, I think, to reflect and focus on that. when you climb a peak or Everest, you're going to stumble a little bit along the way. But when you have a champion team like we have, there's absolutely no doubt in my mind that you will be started in the future as to what that facility is going to be able to achieve.

Tristan Gresser

All right. That's good to hear. And the second question is, well, given you have a very strong free cash flow outlook for next year, can you give us some update on capital allocation for 2027. I mean what will be the focus? It looks like building another steel mill in the U.S. may not be a great ID M&A is not worth so do you need to see the aluminum plant to be well ramped up in a good track before you announce anything and we just need to expect higher buybacks until then? Or how should I think about it?

Theresa Wagler

Sure, Tristan. So we're in the middle of going through our kind of formal process around capital allocation as it relates to CapEx and other items. We have a clear pipeline of organic growth opportunities of differing sizes and the team right now is in the process of prioritizing those over the next kind of 1- to 3-year time frame. We're going to be talking about those early next year in 2027. Right now for CapEx next year, it might be in the range of $600-plus million, but that needs to be refined. And we'll be talking about that during a Capital Markets Day sometime in the first half of next year as it relates to more specificity about what those projects look like. Mark, do you have anything to add?

Mark Millett

Well, I assume that the new steel mill is the [indiscernible] project that announced or suggested, let me put it that way, a week or 2 ago. And I think it's an incredulous on its fantasy. I would say, we do not feel that the chances of that coming to fruition in all honesty, this is going to occur.

Operator

Next question comes from Tim Tanners at Wells Fargo.

Timna Tanners

And it's been great working with you, Mark, over all these years. So best of wishes in the next chapter. Look forward to continuing to work with Theresa on to this Capital Markets Day. I wanted to talk about your supply flat-rolled volumes surprised us down year-over-year on the carbon side. And as you mentioned, markets are super tight for that and for merchants and spectral there anything in your system that you can flex a bit and produce more into next year? How do we think about your volumes and opportunities to reach this growing demand and opportunity?

Mark Millett

Well, I think obviously, Sinton room to expand materially in ones, it's doing incredibly well. it's running at, let's just say, 210,000 to 220,000 -- 210,000, 220,000 tons a month, right, the second. And the expectation is for that to continue to grow to 250,000 tons a month or perhaps more. But there's certainly room to improve there. And as that facility ramps up, they're also ramping up the products that they make. So they're X65 right now well on their way to X70 product. And as a reminder, it's about the only mill -- or it is the only mill, I believe, that can produce 84 wide, 1-inch coil plate at a sort of a X70 grade material. So certainly room to expand there. Our structure mill has a few little tricks up their sleeve, and that's going to add -- I don't know whether we've been saying how much. Theresa, have you been advertising that?

Theresa Wagler

80,000 to 100,000.

Mark Millett

Yes, about 80,000 to 100,000 tons of extra stuff out of that facility structures, out of that facility. And as we always have been able to do, we tweak here and tweak there and the guys and the goals just do better year-over-year. So yes, there's room to grow our capability for sure.

Timna Tanners

Okay. That's a lot of structural. That's great update. On Sinton, follow-up and ask why it hasn't been running full out? Is it a mix issue? Or is there anything else to explain?

Mark Millett

Well, we obviously, I think -- and hopefully, everyone considers our challenges there to be history. But we've got to that good solid state of 80%, 85%, and it just takes -- it takes a little bit of time to tweak and get the little bugs out of it. So there's no killings here whatsoever. The team has got a great attitude. They've got a plan to get there. It's just a matter of a little bit of time.

Operator

Next question comes from Samuel McKinney at KeyBanc.

Samuel McKinney

Coated product mix as a percentage of the flat-rolled volumes has increased every quarter for a year now, with galv spreads relative to hot rolled, nicely improved and looking poised to remain above their long-term average for a while. Just talk about the internal strategy and the demand drivers to keep increasing that mix, if you can.

Theresa Wagler

Yes. Samuel, it's a great observation. So that was done intentionally. If you'll remember, about a year, 1.5 years ago, we added for value-added flat roll coating lines, 2 at Sinton and 2 at one of our Indiana processing facilities. And so those have been ramping up during this period of time. very much supporting the increase of value-added product mix within the portfolio. And you should expect to continue to see that improve over the next probably 6 months as well because there's still room for higher utilization from those lines. So you should continue to see that increasing as we continue our strategy as much value added as we can to create a supply chain that's a little harder to change.

Mark Millett

And just to add to that, it's been our MO for years, and it's something one has to do in the steel industry because essentially no secrets, but the team is -- continues to have a pipeline of new coated type products. We've got digital print, which is an absolutely phenomenal technology, and we also have some pre-paint improvements that we're going to be bringing to market. So it's not just a volume thing. We will continue to expand our products on those lines.

Operator

Next question comes from Bill Peterson at JPMorgan.

William Peterson

Also echoing the congratulations for the entire team there. First question is on long products. I think you answered partially in relation to Tim's question, but the shipments continue to outperform year-to-date relative to flat rolled. Can you describe some of the key drivers in the market and I guess you have the ability to expand capacity? How should we think about this outperformance continuing? And what would be driving that?

Theresa Wagler

I'll start and then Mark can put the icing on the top. There was a change built at the very beginning of the year that Jim Anderson and the team executed incredibly well aware. We actually at our Steel West Virginia facility. We shuttered an agent, if you will, melt shop. And so internally, that's allowed us to send bill it throughout the system from our other facilities. So that's helped create a much more efficient supply chain internally and help improve margins and utilization across the other 3 mills, if you will. So that's one part of it.

The second part of it is just that the markets are so incredibly strong, and it really dovetails from what we mentioned around the demand for steel joists and deck on industrial and nonresidential construction it's really driving specifically within structural beams and increased demand environment that we see, and it is actually dovetailing into 2027 as well. Mark, do you want to add something?

Mark Millett

Yes. I wouldn't -- the -- to show long products, structural markets are incredibly, incredibly strong. Spreads are at very, very good levels. I wouldn't get too overexcited thinking that we're too focused in like data centers or whatever. It is pretty broad-based across a lot of sectors, to be honest. I think the -- our exposure to the data center pushes only about 15% in the structural world.

William Peterson

That was actually lead to my -- that was going to lead to my second question. And obviously, there's some concerns in the market around data center, 15%. That's a great data point. But can you give us a sense of how that compares to the last year in terms of the backlogs or just other sort of reference point? Has it grown as a portion of the backlog? Or has it been steady? And recognizing that you've called out manufacturing industrial strength more broadly?

Theresa Wagler

From the -- Mark mentioned structurals, steel joists and deck in our fabrication business. It represents less than 10%, generally around 8%. That's been pretty steady. As it relates to the structural world, it's probably increased in 2026, but it's leveled off. It's not something that's driving a frenzy or driving the demand dynamic itself. It's much more broadly based than that.

Operator

Next question comes from John Tumazos, Very Independent Research.

John Tumazos

Congratulations, and thank everyone for their service to the company. In terms of the aluminum business, is there room in the scrap market to supply in the finished product market for a second, say, northerly Columbus Complex? Is that something that could be a potential use of funds or compete for capital allocation?

Theresa Wagler

So I'm just going to tip in for a second, John, that those were kind of 2 questions. So the scrap environment and the demand environment can support another rolling mill in the U.S. or in North America for sure, whether that's at Columbus or not is a different question. Mark, I don't -- you can go ahead.

Mark Millett

Yes. No, no. The market is definitely there. Even when Novelis' [indiscernible] facility finally comes online, there's still at least -- in today's market, that's only going to grow in the future. There's still a space for [indiscernible] -- certainly one form Columbus based mill for sure. And there is definitely the scraps to pay out there, John, to support it.

John Tumazos

Your highest cost debt is [ 5.375 ]. So today, do your cash balances yield more than your debt costs?

Theresa Wagler

Come on. Don't you want to go out [indiscernible] bank. No. From a capital foundation perspective, we do have some notes next year that will be coming due, I think, in December of next year. And we're constantly looking at the balance between the capital stack, John, and what our opportunities are. We're pretty opportunistic on the financing side. So well pointed out point.

John Tumazos

I model debt repayments because I don't know where the money is going to go, but it seems like your yields might be more in congratulations. .

Operator

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

Mark Millett

Well, super. Well, for those remaining on the line, thank you for your support and our employees really, really -- you've done a phenomenal job. And I think as was noted, it's likely my last conference earnings call anyway, still going to be associated at a distance to help out wherever I'm asked to help out in the future. But again, thank you for your patience and support over the years. It's been an absolutely incredible journey, and it's only going to be continued by why I consider a phenomenal team and the best leadership team in the world. So thank you, everyone. Have a great day. Be safe.

Operator

Once again, ladies and gentlemen, that concludes today's call. Thank you for your participation, and have a great and safe day.