Marlene Owen - Director, Investor Relations Mark Millett - President and Chief Executive Officer Theresa Wagler - Executive Vice President and Chief Financial Officer Dick Teets - President and Chief Operating Officer, Steel Operations Chris Graham - President, Fabrication Operations.

Luke Folta - Jefferies Brett Levy - Jefferies Matt Murphy - UBS Tony Rizzuto - Cowen and Company Timna Tanners - Bank of America Merrill Lynch Evan Kurtz - Morgan Stanley Michael Gambardella - JPMorgan Sal Tharani - Goldman Sachs Andrew Lane - Morningstar Increase Phil Gibbs - KeyBanc Capital Markets, Inc. Nathan Littlewood - Credit Suisse.

Good day, and welcome to the Steel Dynamics Second Quarter 2014 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, July 22, 2014, and your participation implies consent to our recording of this call. If you do not agree to these terms, please disconnect. At this time, I would like to turn the conference over to Marlene Owen, Director of Investor Relations. Please go ahead..

Thank you, Kevin. Good morning, everyone and welcome to Steel Dynamics second quarter 2014 financial results conference call. As a reminder, today’s call is being recorded and will be available on the company’s website for replay later today.

Leading today’s call are Mark Millett, President and Chief Executive Officer of Steel Dynamics; and Theresa Wagler, Executive Vice President and Chief Financial Officer.

We also have our leaders for the company’s operating platforms, including Dick Teets, President and Chief Operating Officer for our Steel Operations; and Chris Graham, President of our Fabrication Operations. Just to note that Russ Rinn, our President and Chief Operating Officer for our Metals Recycling Operations is on vacation.

Please be advised that certain comments made today may involve forward-looking statements that by their nature are predictive. These are intended to be covered by the Safe Harbor protections of the Private Securities Litigation Reform Act of 1995.

As such statements, however, speak only as of this date today, July 22, 2014, and involve risks and uncertainties related to our metals business or to general business and economic conditions, which may cause actual results to turn out differently.

More detailed information about such risks and uncertainties may be found at the Investor Center Advisory Information tab on our Steel Dynamics website in our Form 10-K Annual Report under the captions Forward-Looking Statements and Risk Factors or as applicable in subsequently filed Forms 10-Q filed with the Securities and Exchange Commission.

And now, I am pleased to turn the call over to Mark..

Super. Thank you, Marlene. Good morning, everybody. Hopefully, everyone is enjoying the summer months. It’s certainly been a pleasant change from our first quarter conference call. We have the opportunity to speak with many of you yesterday concerning our strategic acquisition of the Severstal Columbus steel mill.

And as a brief recap, the purchase is an incredibly compelling needle moving growth initiative for us. We have been positioning ourselves, our balance sheet and organizational structure for growth just like this and is exciting to see our plans beginning to unfold.

We have been evaluating a number of strategic growth options for sometime now and generally excited about the step change prospects Columbus will bring us, our shareholders and our collective employees, and again, a real strong welcome to the Columbus employees to the SDI family. Acquiring Columbus is an incredible opportunity for Steel Dynamics.

With the benefit of our strong balance sheet and flexible operating base, we are in a position to execute on this highly strategic and value accretive transaction. The transaction price is substantially below Greenfield replacement value, particularly considering additional working cap and capitalized interest needs of a new plant.

The transaction represents a significant step in the continuation of our growth strategy and allows Steel Dynamics to leverage our strong core strengths. The acquisition introduces a state-of-the-art mini-mill into our portfolio. Columbus, which was constructed in 2007 and has a hot roll production capacity of 3.4 million tons.

It will significantly expand our steel operating platform, increasing our total steel production capacity by more than 40%. We will have an annual shipping capacity of 11 million tons for the company.

The mill is technologically advanced with 2D gases, thicker slab casting and rolling technology that provides greater capability than our Butler facility to make high end energy pipe scale and advanced high strength dual phase auto grades.

It is fully capable of achieving the efficiency and low cost structure consistently demonstrated by our Butler team. We will also expand our geographic market presence into the Southern U.S., but exposure to growing Southeastern industrial markets and Mexico, which again is another area, where we see significant growth and upside.

In short, this transaction leaves us both significant growth and exceptional financial returns all the while maintaining a prudent credit profile, which I believe is a win on all fronts.

With that, shifting our focus to our second quarter results and a broader end markets, all our reporting segments achieved meaningfully higher profitability compared to the first quarter improving well beyond the bad weather impact experienced in that quarter.

The meaningful improvement in our second quarter financial and operational performance supports our continued optimism as does the positive sentiment from our customers. The results are indicative for the strength of our business model and culture, both significantly important for maintaining our best-in-class position.

Furthermore, we are seeing the benefits of our organic earnings catalyst that started up earlier this year. But before continuing, I would like to turn the call over to Theresa for some brief comments about our financial performance this quarter.

Theresa?.

Thanks Mark. It’s great to be back online with everyone again this morning. Our second quarter results are also something to be excited about. All of the operating segments as Mark mentioned improved considerably and were well beyond recovery from the first quarter.

Our second quarter 2014 net income was $72 million, or $0.31 per diluted share which was at the upper range of our guidance of between $0.28 and $0.32. An increase in net income of $34 million compared to the first quarter and an increase of $43 million compared to the second quarter of last year.

While our second quarter net sales of $2.1 billion were more than 13% higher than both the first quarter and prior year second quarter, the true improvement in earnings was driven by improved margins based on both metal spread and volume-related cost compression.

Second quarter 2014 operating income was $132 million, an increase of $51 million compared to the first quarter. Steel drove the increase in our second quarter operating income based on record quarterly shipments and metal spread expansion. Our scrap raw material prices decreased while steel product pricing was mixed.

Sheet pricing declined in the quarter, while long product pricing appreciated resulting in our average quarterly steel price declining $2 per ton in the second quarter compared to the first. Total shipments increased 16% over the first quarter hitting a quarterly record of 1.7 million tons.

This resulted in steel operating income of $158 million, or $98 per ton shipped, an increase of $50 million comparing to first quarter. Regarding our metals recycling operations, the environment is still challenging. Shipments improved and metal spread expanded for non-ferrous materials.

However, ferrous metal spread contracted when compared to the first quarter. Material procurement costs remain elevated from excess shredder competition.

Second quarter 2014 metals recycling operating income increased $9 million compared to the first quarter, as ferrous shipments improved 4%, while non-ferrous improved 17% primarily from improved aluminum demand. Moving on our fabrication operations continue to shine.

The second quarter 2014 benefited from record quarterly shipments of 105,000 tons, which resulted from seasonable and general improvement and non-residential construction as well as market share gains. Product pricing increased in this quarter as steel cost declined expanding profitability.

Additionally, volume is powerfully, excuse me, volume is a powerful lever for our fabrication operation. It allows the team to fully utilize our technologies and incentive systems resulting in dramatic cost compression of our conversion costs.

Second quarter fabrication operating income increased $4.5 million to $7.6 million compared to the first quarter. For comparison purposes, this quarter’s earnings alone surpassed all of 2013’s results. We continue to see improvements in the underlying non-residential demand as well as an opportunity for further market gain.

Good news all around in fabrication. Moving to cash flow, during the second quarter of 2014, we generated $76 million of cash from operations compared to utilizing $27 million in the first quarter of this year. Year-to-date working capital has increased $177 million with accounts receivable driving the increase. The key drivers are good things though.

They are based on improved demand environment in our organic growth ramp, which impacts both accounts receivable and to a much lesser extent inventory levels. While the quantity of our receivables have increased, the quality has not deteriorated and days outstanding are appropriately maintained. Our capital structure remains strong.

Liquidity was $1.4 billion at June 30. This includes cash of $357 million and the benefit of our unused $1.1 billion revolving credit facility. We are also pleased with conversion of our convertible notes which matured on June 15, 2014.

The holders of 272 million of this security exercise their option to convert the notes into approximately 15.9 million shares of our common stock. The remaining $60 million of outstanding notes were repaid in cash. The conversion will net – be net cash flow positive as interest savings are more than offsetting our current dividend payment rate.

This security provided an important component of our capital structure over the last five years and its conversion to equity further strengthens our financial position for growth supporting the planned acquisition of Columbus as well. Our credit metrics are again even stronger.

Our net debt capitalization ratio went from 40% at June 30 to 34% – excuse me from 40% at March 31 to 34% at June 30 with total debt of $1.8 billion and net debt of $1.4 billion. Our trailing 12 months adjusted EBITDA was $711 million, which results in net leverage of 2.1 times. We are really in great shape.

Finally, to conclude, as a brief confirmation from yesterday’s call, I will summarize a few points that were mentioned. The Severstal Columbus purchase price is $1.65 billion which we intend to finance through our available cash and new debt.

It’s early in the transaction, so we currently believe future annual maintenance capital for Columbus will be in the range of $25 million plus as currently configured an additional $10 million to $15 million for contracted services.

Additionally, we currently believe future depreciation and amortization will be in the range of $80 million to $100 million that’s before any purchase price allocation that because of the recent construction of the facility, we don’t expect a big step up in fixed asset base.

Several of you also had asked about the Mississippi state income tax rate, for 2013 and ‘14 for income above $10,000 the rate is 5% and that compares favorably. Last year’s Indiana income tax rate was 7.25%.

And finally, we believe our pro forma total average will be in the range of 3.5 times at closing with a clear path to return to our preferred net leverage of less than three times within around 12 months. Our balance sheet continues to be very strong based on our low cost, highly variable operating platforms which provide robust recycle cash flow.

Our capital structure has the flexibility to sustain current operations and more importantly support our growth.

Mark?.

Super. Thanks Theresa. Well, we will begin with safety and as I consistently communicate it’s the absolute highest priority for me, for each employee and for our families. Simply said, our goal is for all employees who work each day incident free.

Even though our results are better than industry averages, I believe there is more to be done and we continue to make progress. Towards that goal 90 of our 119 locations achieved zero recordable incidents through June. My personal congratulations and thanks to those teams.

Thank you for demonstrating that our goal to reach zero accidents is achievable and is sustainable. Keep up the great safe work. Corporately, our safety results continue to be better than industry averages. As we suggested, the first quarter softness in the U.S.

economy was weather-related and temporary and not a structural change in the progress of the economic recovery. As the U.S. economy regained its growth momentum and continues to improve, we believe the non-services sector growth is capable of increasing at a higher rate than the overall GDP. And we continue to see evidence of this.

As the employment rate continuing to improve, consumer confidence followed. The June consumer sentiment index was the highest level obtained since January 2008. The automotive market remained strong, sales continue to outpace expectations.

The expected build rate for 2014 is currently 16.5 million units and is forecast to grow to 17.8 million units over the next couple of years. Energy certainly one of the brightest spots for the U.S. is a significant contributor to overall domestic steel consumption. The U.S. oil rig count continues to increase.

And for the first time in 19 years, the U.S. is producing more oil than its importing. Fixed asset investments that support the domestic energy market are and will continue to be needed. The manufacturing sector particularly for end use products that require steel continues to strengthen.

And very importantly, construction we believe also continues to improve. Through May residential construction is up 9% year-over-year. Non-residential construction also continues to trend upward and through May has increased 8% year-over-year.

And for us more important than the macro market indicators is the strength of our order books and we continue to see them strengthen across our steel and fabrication segments. Our steel operations segment had a strong second quarter both financially and operationally.

They shipped a record 1.7 million tons both flat-rolled and structural and rail divisions hit quarterly records. Structural and rail division achieved the new monthly shipping record in June, the majority of the increase being from steel beams although rail continues to head upward momentum as well.

We continue to work closely with the Class I railroads through their qualification process for our premium rail. The quality of our premium rail is receiving high praise from our customers. Premium rail expansion positions us to become the preeminent supplier in North America as measured by product quality and value.

We are the only North American producer of 320 foot long rail which is a strong competitive advantage for us. Additionally, we are able to weld these longer rails together to produce 1600 foot length standard or premium rails that require significantly fewer weld points than our competition.

That creates significant value for our railroad customers through reduced installation cost, lower ongoing track maintenance expense and is importantly improved rail safety. Our new engineered bars smaller diameter rolling mill is on scheduled to be fully commissioned this month. Our customers are pleased with the limited product we ship to-date.

Throughout the expansion, the team is not distracted from its principal task delivering quality products to our customers. The team maintained a superior performance in quality and customer service as evidenced by the second quarter Jacobson & Associates survey results. They were ranked the number one domestic SBQ mill overall.

Quite a feat, given the tremendous effort required for the expansion project, so very kudos for the team now. We have heard comments regarding the impact of SBQ capacity being built and its impact on our ability to fully utilize the new 325,000 tons of capacity.

Our expansion is specific to the small diameter bar market which is approximately 4 million to 5 million tons of the total SBQ arena. So we are not taking a big bite of the apple. Furthermore, we are confident that our trusted customer relationships that have been built on quality and on-time delivery will allow us to increase that market share.

Our steel mill utilization rate increased to 90% in the quarter across all our mills, positively influencing the steel operations profitability as high utilization resulted in cost compression. Of note, our flat roll division achieved two back to back record Hot Band production months, an incredible achievement for that mill.

We continue to see our steel order book strengthen and in spite of the recent elevation in volume of imported steel during the quarter, likewise the domestic industry utilization has edged up. The considerable global overcapacity will certainly be a headwind to steel pricing for the foreseeable future.

But I believe that historic true cycle level of imports as a percentage of demand will continue to remain in the low to mid-20% range and that we will not see a glut of any consequence on a sustained basis. Nonetheless, as an American steel producer, we understand and desire the dynamics of a competitive market as long as its fair and it’s equitable.

We must remain vigilant as a nation and our administration must enforce world trade laws in order for us to compete on a level playing field. Our metals recycling business continued to work through another challenging quarter and the team did a good job managing through it.

The Midwest region realized scrap flow improvement in both ferrous and non-ferrous volume as the spring thaw took hold. However, downward pressure on ferrous prices the last two months of the quarter tightened ferrous metal spread.

The scrap export market for ferrous material appears to be shaping up similarly to 2013 as year-to-date total export volumes through May are lower than recent historical volumes for the same period. Compounded in the domestic scrap market volatility is the continuing overcapacity of shredders.

Non-ferrous metal spreads was the bright spot for our recycling segment and improved over first quarter largely due to higher metal spreads for copper and most particularly aluminum. Moving to fabrication, they also achieved record quarterly shipments. Our order book continues to strengthen and inquiries remain robust.

According to Steel Joist Institute, domestic year-over-year joist shipments have increased 14% as of May 2014. Our joist shipments increased over 30%. The team is doing a phenomenal job, is increasing market share and successfully leveraging our national footprint.

As mentioned in our press release, remaining operating trials were completed and a four-week outage was taken to upgrade the rotary hearth furnace during the second quarter at our Minnesota operations. As anticipated, these trials and the outage resulted in second quarter losses similar to those experienced in the first quarter.

However, the trials resulted in very encouraging results related to the improvement in yield, quality, volume and raw material input costs resulting in a potential cost structure that we believe is competitive relative to anticipated long-term market pig iron pricing.

We believe we can achieve a $340 to $350 per metric ton cash cost basis before the end of 2014. This assumes an operating rate of approximately 32,000 metric tons per month or 360,000 metric tons annually.

Given the pig iron prices that historically range from approximately $380 to $550 per ton NOLA since January 2010, we believe the Minnesota process is a good hedge based both on secure supply as well as quality and cost. However, this cost structure must be confirmed on a consistent ongoing basis over the coming months.

In the meantime, as the operations ramp back up, third quarter 2014 losses related to the company’s Minnesota operations are expected to be meaningfully less than those incurred in the second quarter.

Iron Dynamics operation produced 64,000 metric tons of liquid pig, slightly lower than the prior year first quarter, but the team continues to perform well. IDI is an integral contributor to the flat roll division’s productivity and is also a great sustainability story. A 100% of their iron needs are obtained through recycling steel mill waste oxides.

Regarding outlook and that we remain very optimistic. If you couple our organic growth projects and latent steel capacity with the planned acquisition of Columbus and our belief that steel consumption will continue to improve, we are foreseeing incredible growth for Steel Dynamics for our employees, customers and shareholders alike.

Our resolve to maintain a differentiated growth company that effectively and efficiently performs through the cycle is unwavering. We believe our superior operating culture and the strength of our financial performance provides evidence of our successful business model regardless of the market environment.

We recognize that we were in a relational business. Our focus on providing exceptional value to our customers, delivering the highest quality products when and where they are needed and actively engaging customers in discussions about their future needs are critical to our success.

We believe Steel Dynamics is best positioned to capitalize on the phenomenal growth opportunities that lay ahead. The strong character and fortitude of our employees are unmatched. The dedication to customers and passion for excellence compel us to achieve highest standards of the performance.

And I thank each and every one of them for their hard work and dedication and remind them that safety is the first priority always. Again, thank you for your time today folks. And Kevin, we would like to open the call for questions please..

Thank you. (Operator Instructions) Our first question today is coming from Luke Folta from Jefferies. Please proceed with your question..

Good morning, guys. Long time no talks.

I guess first one I had was on SBQ, can you talk about of the new 325,000 tons of capacity that you have at Pittsboro, how much you are shipping from those operations now, the new line?.

Hi, Luke. We have produced about 3,000 tons off of the new mill so far during our – just the last month or two of commissioning, because we really just put the sizing mill, put the last component to be commissioned and that was just here in the month of June and July.

And so the dimensions are dialed in and the service quality has been dialed in and so now we look to ramp it up, but about 3,000 tons and we are looking to move that up a couple of thousand tons each month now..

Okay.

And also there has been a couple of rounds of price increases for SBQ products this year, curious on your thoughts, so far have those price increases stuck and does that imply that if prices are kind of flat second half into 2015 that you could see price increases on the annual agreements into ‘15?.

Well, a lot of ours agreements are contractual. And those we maintained spot business, we took that in the upward direction, but we honored all of our prior agreements.

Needless to say, the alloys and so forth they are subject to surcharge mechanisms and those will move, but we took the general direction, but did not try to got out and run in a hard upward direction to alienate anyone. Some of our competitors have been having some problems and we have been the beneficiary of some of that business.

We have our most solid booking, our strongest book for the next quarter ever. And I think we have been the beneficiary of our marketing philosophy and so we are very pleased with our position..

Nice. Okay.

And then just on the target for Columbus for next year, there was some discussion around this on yesterday’s call, but just maybe add some granularity, can you give us some sense of what the shipment expectation is or the utilization expectation is for your ‘15 outlook? I guess I am just trying to – and also can you just discuss I guess what the discrepancy is in profitability between Columbus and Butler and I know you talked about over time you expected those could close and perhaps even Columbus couldn’t exceed that of Butler longer term, but just to get a sense of what that discrepancy is in your ‘15 outlook?.

Yes. I think Luke in total, we are looking at shipments around about 3, 3.1 million tons next in 2015. That actually is not a great deal more than they are shipping today. But you have to take into account a shift into downstream value add and the associated yield loss there.

So, I think 3, 3.1 is a pretty solid number, particularly as we anticipate the market is going to continue to improve. Relative to the differences in cost structure there, I think again several areas of improvement of synergy, you have just the conversion cost.

I think when you combine the talent and expertise of Columbus with our team we are going to edge that down. We are certainly going to get a benefit from our diverse portfolio. Obviously, there is synergies between Butler and Columbus from a product standpoint and directing the right orders to the right place for the least amount of price.

OmniSource will bring some benefit. We have the ability to increase its volume. We certainly have a huge appetite for scrap and everyone else is still going to have their supply capability, but we will be able to leverage OmniSource and bring perhaps a little more scrap in from the Southeast.

And then New Millennium obviously is it can be a good source of value.

And they have purchased – Chris, how much do you purchase from them last year?.

Little over 60,000 and that was with one of our Southwest plants just in kind of a startup mode..

Yes..

This year we look to exceed 80,000..

Yes. Yes, but given the geographic location of the mill and proximity to us, Southeast and Southwest plants, we expect that volume could quite easily grow to 180,000..

Yes..

So, that gives you almost an immediate boost in utilization of the value-add downstream lines down there. And that’s probably an area given better utilization and utilizing our knowledge in that arena we can certainly I think grow value. I think thirdly, we mentioned yesterday that there are legacy costs – legacy what I call contracts there.

The way the mill is built originally, a lot of CapEx was distributed to the – or delegated to the service provider and it’s kind of a shift of CapEx to an operating cost. And as those contracts unwind naturally over the next year or so, two years we believe we are going to get some synergy from that.

And then finally just logistics, I think combination of OmniSource and a couple of other things that we are going on, we can I believe get scrap and raw materials down to the facility at a slightly less, again not massively less, but slightly improved cost.

So if you add those all up, I think there is meaningful synergies, I think we have talked about $30 million yesterday, I think we also said about $10 million, Theresa or so is going to be in the very near future and the other 20 will come on over the next year or two..

Okay.

And just for clarification the 2.1 that’s a short turn?.

Yes..

Okay.

And then just as that compares to Butler should we be thinking of like 110, 120 per ton is kind of normalized Butler number?.

110, 120 I don’t think good try, but I don’t think we have necessarily given that number out..

Okay..

Tried..

Last one Theresa, what’s the diluted share count and interest expense going to be now with the convert retirement just to square that up?.

Sure. So the share is actually for the third quarter had come down slightly because not all of the notes converted. So I would say probably like $240.2 million is probably a good number to you. And for interest expense I would say probably somewhere around $27 million, $28 million per quarter..

Okay. Alright. Thank you and congrats again..

Thank you..

Thank you. Our next question today is coming from Brett Levy from Jefferies. Please proceed with your question..

Hey guys.

Can you talk about earlier you said the order books are stronger, can you sort of talk about how far they go out in sort of each of the relevant product areas?.

I think the sheet mill is very, very strong. Obviously, yes there are some upper price – upward price momentum just recently. I think on the hot-rolled band side of things we are probably we are into….

Look we don’t know our policies, we don’t open our books in flat rolled except like a month out for the Hot Band and a little bit further for our coated products and that’s our standard because we really do play in the spot market.

So we are and that’s why we got a little bit of notoriety here recently in the press when we sent note to our customers to say we were full because that was in the close order..

So that four weeks or so for Hot Band and….

And six to eight weeks for our coated products and that’s as they are basically for across the board. Our structural and rail has a good backlog, solid for July probably three quarters of August, but we always expect to pick up the orders as we go through the rollings and so August is not an issue.

And I know that we have orders in rails so forth already passed that. We are looking at only quarter-to-quarter and don’t open up the final quarter, yet at all-in the structural and rail yet, even someone who placed an order we don’t see it on our logs.

As far as I mentioned SBQ, we have the strongest backlog right now than we have had in years and actually the strongest book in the month ever. And so that’s very heartening.

Probably the weakest place we have, excuse me is at Roanoke but strongest in the most recent past because we are back to rolling mill full time as we were taking two days a month out, but we are rolling merchant bar and shapes.

And so I am pleased to say that strengthened and Steel West Virginia, this past week we have been rolling full and there is a little bit of a weakness possible, but we are not concerned about it. It’s going to be a very solid year at Steel West Virginia..

Yes..

And I think and The Techs because we are working in a flat roll, the sales is working as a team. Again MetalTech is the strongest book we had quite in quite a while. I mean the most difficult place I would tell you is the NexTech which is the very light gauge in our products and that was under attack from China and India and so forth.

And now it will be open and (indiscernible) trade cases behind us, we are gathering data and want to deal with it as we keep it along with our competitors and that’s to be done..

So, it’s on the steel side – thanks you, very, very solid. I think additionally though our optimism comes from the – where we see the improvement in the construction arena.

So Chris can you give us a little insight as to your non-residential construction move?.

Yes Mark, we – quote activity remained strong. We had mentioned in the past call or two that the Southeast was lagging a bit. We are pleased to see that the Southeast activity is picking up at a nice pace. Bookings remained strong and our joist and deck backlogs currently are at record levels.

The joist industry bookings are on pace to exceed 950,000 tons for 2014, that would represent the biggest year by far since 2008. And the team is capitalizing on these new opportunities, stands prepared to handle even higher levels. The activity going forward, we find strength and been able to move work around our national footprint.

And so the team is ready to go. They have done a good job..

The earnings for the second quarter were pretty good too..

Well, we don’t, yes we got work to do, but it’s all improving..

Okay. And then you guys mentioned on yesterday’s call that you potentially look at Galvalume were offered for sale kind of fits your footprint kind of down the middle of the country.

Would you guys be committed to keeping the same sort of conservative debt to equity ratio as if you were to look at that transaction as well?.

From the financial perspective, we are very much committed to again growth, but if growth gets us outside of our metrics of preference which we really do look at is net leverage three times or less. We will do it as long as within an 18 to 24 months period, we are able to get back into that alignment. So I think, yes we still are committed to that..

And then, the last ones sort of the acute question, $16 million of the converts were just matured, would it have been possible to like buy them back and then convert them, or I mean it seems like somehow money was left on the table there by somebody?.

Money was left on the table by them, yes. And no, it wasn’t at our option. So we had to pay them in cash..

Got it. Thanks very much..

Thank you..

Thanks Brett..

Thank you. Our next question today is coming from Matt Murphy from UBS. Please proceed with your question..

Good morning.

I am just wondering for a bit more color on Minnesota operations and where you’re targeting about, a need to confirm the cost structure, I guess trying to get a sense of how well do you understand the process rate now, has there been sort of in these trials, has there been sort of a clear outcome and you just want to run with that for a while, so just a bit more color there? Thanks..

Well, I am not sure I can articulate it any better than you just did that the trials were very indicative. It showed us a combination. Theresa used the analogy that we know the ingredients and had to bake the cake, we would just go do it each and everyday.

I think the startup – and again we started back up at the end of June, but July month-to-date we are running at around about 95% availability and a little over actually it was 340,000 ton annualized run rate. So the volume I think is we are very comfortable with the 360 or perhaps even more run rate.

The year improvements and the raw material input changes all point to a cost structure as I mentioned in that 340, 350 range and it’s just a matter of doing it month in month out and so we’ll see what that yields appear in the next month or two..

And you said a significant change in the degree of loss in Q3 I guess is there any scenario you would look at where you would actually not be loss making there in the near future?.

Well Q3, we wouldn’t get to a non loss posture in Q3 and on a pre-tax basis probably not the fourth quarter. The financial profile will be meaningfully improved..

Okay thanks a lot..

Expected at least to be meaningfully improved..

Thank you. Our next question is coming from Tony Rizzuto from Cowen and Company. Please proceed with your question..

Thank you very much congrats on the acquisition and all the progress across the company?.

Thank you..

It appears as there is use potential alone at product mix shift at Columbus and I just wanted to pursue that a little bit more I think in 2013 hot-rolled comprised about 70% of the overall shipments there can you provide some guidance as to where you guys expect that mix to be say two years down the road hot-rolled cold-rolled and coated?.

I am not sure I have actually booked it from a percentage basis..

No, but I think just in general just like above we pull it down to close to the 45% to 50% high band no don’t really shift much people on oil because they run their mill and they don’t have a disconnect for the people line there.

Now they push full, kept the line but it only runs one or two turns a week which is – I am going to say tragic but an asset has been totally underutilized and then from a galvanized standpoint we recognize that annual basis to and so I’m not trying to criticize and then but that’s where we look to push the tons through and get the value there.

And so therefore that will pull those Hot Band tons down and we need to get the tons through the mill and down through the - Hot Band galvanized or cold-rolled galvanized. And it will become more over balanced like Butler I would believe..

This is actually….

Obviously but as we mentioned yesterday, the capture is much thick of diameter we have the ability, heavier gauges, wider widths and the team there is already working on developing and evolving to the X70, grade energy scale which carries a good premium. So I think there is continued focus there.

They are having some success with some of the dual phase steels, again good premium for those and that will be our focus also..

Can you guys give me an idea of what the approximate cost would be going from hot-rolled to cold-rolled and to coated?.

Again, the time we don’t really give our conversion cost out..

Okay. I have got a question on dual CTG market if I may, of the hot-rolled coil at Columbus that’s going to tubers currently.

Is it fair to say that this is the more basic low carbon alloys substrate and could you give us an idea of what price level the tubers may be selling this product for at present the ERW product?.

Mostly the focus at Columbus is not necessarily, and correct me if I am wrong, but it’s not been the focus to supply just absolute basic carbon ERW. They are supplying the X40, X50 today, X60..

And there is a whole range, they do quite a nice job of supplying quite a few different tubers and full complement of – across the board. So and what they sell for, I – what the tuber sell for, I can’t tell you. I have no idea..

Alright, no problem.

And then finally just a question guys on the overall domestic flat roll market and I wonder, do you feel that the supply, demand improvement may be partly related to the lack of CapEx in 2009 and 2010 timeframe principally by the integrated players and the effect that this may be having somewhat on the equipment uptime or operational stability, how do you guys feel about that?.

Well obviously they've had over the last 12 months a few outages here and there, to be honest, I'm not so sure where folks do not know whether it’s regular maintenance or sort of monies that they haven't spent over the last two, three years. So, I don’t think we can comment on that time..

I always respect your views though Mark on that because you obviously – you have some great vision into that but I appreciate any comments you can make on that? Thank you..

Yes..

Thank you. Our next question today is coming from Timna Tanners from Bank of America Merrill Lynch. Please proceed with your question..

Yes. Hello, good morning guys..

Good morning..

Okay, I wanted to ask a little bit about the margin in the second quarter.

So, prices fell what in average of about two bucks and scraps off 16 bucks which is a bit unusual, you also had the problems with some of the integrated peers and production, you just mentioned some of your SBQ peers had some problems producing so I guess I just wanted some thoughts on how sustainable second quarter margins might be in light of those elements?.

I think as we see the market today, most of our revenues is stable to positive from a pricing standpoint.

And I think the potential and we don’t really like to prophesize as to where the scrap market is going but given the export market is not incredibly strong and flows are good we expect scrap at least in the near term to be kind of side ways to edge down may be a few bucks. So, I think the current environment is probably sustainable..

So, this – even if the production comes back from some of your peers on those products we just discussed, it can continue to see the differential between scrap and steel where it's been you're seeing?.

I think SDI at least will not be impacted by that..

Okay.

And just switching gears, I just want to make sure I understand on Mesabi, I think I missed the number that you gave for you cost structure going forward and can you also just provide I'm still sorry it's not really clear on what its going to take to get to a more advantageous position and sorry if I am being dense but I'm just not really clear on what's improved, if you could give us a little more detail there?.

Yes. The number, the range I gave was the cash cost basis of $340 to $350 per metric ton. And again – it's a matter of executing on the results that we saw in the prior trials earlier this year..

Okay, maybe I will follow up later on. Thanks a lot..

Thank you. Our next question is coming from Evan Kurtz from Morgan Stanley. Please proceed with your question..

Hi good morning guys..

Good morning..

So, maybe just a follow-up and it sounds like here in the 3Q, are you looking for scrap to be sideways to down, pricing is certainly stable, may be moving up a little bit right now.

Are there any sort of offsets to that or should we expect to see some improving margins in the third quarter?.

I think I’ve already opened our crystal ball as far as we invite the (indiscernible)..

Okay. I will probably give it a try. Maybe moving on then to Columbia City, how much upside is left on the long product side.

I know you had a pretty strong quarter but it seems like there is still quite a bit of availability at that plant and as the non-res recovery unfolds, may be if you could just provide some color on where do you see upside as beam volumes improve and perhaps beam margins improve, I know back in 2007 beam margins are better than rail margins, do you think we can get back to a time and place like we were back then?.

I will say that Columbus City does have the opportunity to continue to move up in volume that goes to say they, number one mill, the rigs on heavy section mill is fully loaded and with rail and heavier section productions.

We have recently added a third crew on to the medium section mill and now that they’ve trained and operating the sales force is out trying to fill up that shifts. And so there is the opportunity is there.

And again it’s lighter section, so you need to see you are ending up selling time under mill because it turns a lot of linear feet and from a margin perspective I think the industry has done well with the support from the customers and so forth.

Imports have recently backed off a little bit and so we have cleaned up I think our discounts that were floating around out there and now I think we’re back to nice pricing and there is a may be an underpinning of may be some upward movements so it depends on scraps.

So I think the opportunity is at Columbia City out of all our mills and so our sales force is out working their tails off..

I can you tell us I am sorry?.

On brands of basis if you think I don’t think you see we shift the record level at 6.1 million tons last year and excluding Columbus for a moment we have about 7.8 million ton shipping capability. So we have about 1.5 million tons of what I consider late and value or volume that we’ve never had a steel consuming economy to exploit.

So that I think considerable upside to us..

And what sort of operating range was going to be you said in the last quarter?.

I never calculated it again the heavy section mill is four, and so they shipped record rate of about 117,000 production..

We will get for you as we take another question..

Okay. Great.

Maybe just last question and I referred a lot in that trade press about the potential flat rolled trade case and cold-rolled and perhaps some one could apprise as well, any thoughts on when we might see that as it close?.

I will just say again I can’t speak everyone now I know is that we continue to be distressed by the amount of inputs that are out there both by light gauge rolled and Galvalume and other coated and paint products and so I think we are out gathering data and looking at our own results.

And so, we talked our trade attorneys and they are out there having discussions. So I first spend to be a sooner rather than later..

Great, thanks guys..

On the utilization perspective the structural metal division operated around 75% range in the second quarter..

Okay. It’s been helpful. Thanks guys..

Thank you..

Thank you. Our next question today is coming from Michael Gambardella from JPMorgan. Please proceed with your question..

Yes, good morning..

Good morning..

Question on the potential for the integration between Butler and Columbus currently how much of an overlap those two mills have in terms of regional competition and is there quite a bit of potential to really shorten up your markets or tight up your market may be Butler doesn't have to go as far South and Columbus doesn’t have to go as far North.

And what’s the potential for that and also how are you going to handle the integration in terms of making sure that the mills aren’t competing against each other?.

I think the – again the purchase has been fully based on where we think we can drive it from the cost perspective and mix shift. If you look at the geographies it is a or there a Southern Mill; I would say versus the Midwest Northern mill.

So there's very little overlap to say geographically and then also from a product perspective, a little overlap yes there is I think Dick articulated. They are heavily into the energy pipe markets today, 45% to 50% output whereas Butler is I think these are 10%, 15 percentage is that – Butler is 30, we estimate about 30% – 32% automotive.

Unexposed automotive, but still automotive where I believe Columbus currently is about 5%. So there's a very large sort of dislocation in both geographic and product overlap. Okay billets – and again until we closed with – we’ve announced to push this agreement, but until we close, we were full competitors, so..

Right, sure.

Another question, just on the non-res construction demand, have you seen any additional improvement sequentially in the last quarter?.

Yes, this is Chris. I was just looking at six week trends versus 13, 26, 52. We have seen increase from our 52 week average to our 13-week average of probably 30%, 30% to 40%. And so we continue to see signs of increased strength..

And then down to the six-week?.

Six week is, that’s where we start to talk about how far our crystal ball works and the six week averages are as high as they have been, six and 13 right on top each other which are marked improvements over last point 6 and 52 and so as far as we can see the strength continues..

Okay. Thank you very much..

You’re welcome..

Thank you. Our next question today is coming from Sal Tharani from Goldman Sachs. Please proceed with your question..

Good morning, Mark..

Good morning, Sal..

I wanted to ask you a question, yesterday you made a remark that since the new management of Severstal has come in there has been quite a bit of change in terms of profitability of the company and last six months have been pretty good, you heard similar remarks from AK Steel, I was wondering, you know I mean I am sure when new management came in selling of the plant was probably on the table immediately and I was just wondering that how much of this, and these are big ships who turned around that quickly and I am just wondering their due diligence are you comfortable that all these measures they have taken which have improved profitability over the last six months are sustainable, there is not little bit of window dressing in there, and have you done quite a bit of diligence on that?.

I think we have done more due diligence on this project than anything we have done before by far and we brought in the OmniSource recycling team and they have done a great job looking at the logistics of getting scrap to the mill where the scrap draw regions will be and have been.

We see that the changes that the team has made are definitely sustainable, there is no doubt about it..

Great. Thanks. So I have another question on the metal recycling and ferrous resources operations to report, so if I look at your OmniSource operating income and even if I subtract the, or add or just for the realized or unrealized hedging losses or gain.

I come up with a number per ton which is – much better than what we see at other scrap companies or other steel companies which are on scrap so that’s pretty good and kudos to your OmniSource team that put on profitability has been pretty good compared to others.

But when I do the math and I look at your at $18 million plus worth of operating income in OmniSource and take the unrealized hedging lost out and then if I subtract your loss from the Minnesota iron producing asset 9.1 million post tax or may be 14 with a pre-tax, it still leaves me a gap of $3 million of loss was that at IDI or is that something I am missing in here?.

No, and Sal we can go offline with this if you would like the number that you are looking at for Minnesota is actually a net of tax it’s not pre-tax and it’s not the operating level. So the number that you’re looking at for Metals Recycling and double segment is operating and the number that we give for Minnesota is not.

So there is bridge to do and I am happy to do that with you offline..

Okay. We will do that. Thank you very much..

You’re welcome..

Thank you. Our next question today is coming from Andrew Lane from Morningstar Inc. Please proceed with your question..

Hi good morning..

Good morning..

A couple questions here, first you mentioned that the purchase of the Columbus facility will provide with access to the Mexican steel market, I am curious as to what portion of Columbus’ sales are currently derived from Mexico.

And then kind of along those lines are there already significant business relationships in place or is this more of a growth opportunity that will come from low base?.

I think it’s the latter it’s a very large growth opportunity coming from a low base..

Okay, are you willing to share it?.

Fortunately, we have existing customer relationships that have assets in Monterry in particular currently and I would certainly think that as I trusted loyal relationships, I think we can expand on those and create commercial opportunity for the Columbus mill..

Okay. And then could you provide some colors for just the broader big picture strategy for addressing the Mexican steel market.

It didn’t really hear what product types might constitute your key exports and what end markets might predominantly fuel growth in the region for you?.

I think the, well the right answer is we haven’t explored and got an absolute precise strategy in place. But given the relationships we’ve had the items would cover total sheet, total valves and Hot Band, yes..

There is a lot of industries that are growing down I need to say are appliance, automotive and energy..

Okay, thanks..

Thank you. Our next question today is coming from Phil Gibbs from KeyBanc Capital Markets, Inc. Please proceed with your question..

Good morning..

Good morning..

The contract at service piece you mentioned I think it was $10 million to $15 million annualized that you expect to wind down over the course of the next couple of years.

Is that right now in the operating expenses of Columbus is that what you were saying?.

No, it’s actually capitalized to CapEx. Typically these services would be part of our operating expense for Columbus it actually comes across as capital investment..

Okay.

So are we seeing that 10 million to 15 million then when it’s transferred over to your P&L, we should see that as operating expense on, is that what you are trying to convey?.

Not necessarily, Phil, because again we are looking at what we believe operating rates and things might be going forward, these are some of the contacts that Mark talked earlier that we might be able to renegotiate at some point in time, but so it’s a little – it’s less clear than that..

Okay.

I was just trying to decide for whether your EBITDA thought process included headwind from those contract services or was included in your CapEx assumptions?.

It’s currently included in our CapEx assumption..

Okay..

But just a little clear and we are on the same page. Theresa mentioned that there was CapEx of 25 plus $10 million $15 million of contracted service, al right.

That is a little different than the legacy contract services that I was alluding to whereby the service providers that showed some of the CapEx which and those contracts are going to unwind over the next couple of years..

Okay. Appreciate that.

And Theresa, can you provide the mix of flat roll products in the quarter as you typically do?.

Sure, Phil, I am sorry. Okay, so for the flat roll division second quarter shipments hot roll shipments were 358,000 tons, P&L 91,000 tons, cold rolled 47,000 tons, hot-roll galvanized, 128,000 tons. Cold-rolled galvanized 42,000 tons. Painted products were 101,000 tons and finally Galvalume was 11,000 tons..

Thanks so much..

Thanks, Phil..

Thank you. Our next question is coming from Nathan Littlewood from Credit Suisse. Please proceed with your question..

Good morning, guys. Congrats again and thanks for the opportunity. I just had a question falling upon yesterday and I apologize if I missed it amongst all that was going on but Theresa, you are kind enough to sort of breakout your estimate for next year’s EBITDA for this Columbus mill.

Now, clearly that has lot of the same sort of macro and commodity price drivers as your existing steel fabrication business.

I was wondering if you might be able to help us sort of close the gap between 260 mill at Columbus and what the equivalent number would be for your existing steel fabrication business as we can see it today?.

Couple of things. First of all, yesterday we didn't confirm what we thought EBITDA would be for the Columbus mill.

What we did was, we talked around a multiple that was given during the presentation, but secondly I think more importantly our steel fabrication business is not related to the Columbus mill, the steel fabrication is really producing joist and decking and we have some more facility on our flat roll division but it is very similar to Columbus but not our steel fabrication operation..

So, when you look at this, okay they are different products.

So when you look at the general sort of macro environment, scrap prices, demand all that sort of stuff, these things are all incredibly correlated and when in fact you look at the historic correlation between Severstal’s North American earnings and your own earnings or AK Steel’s earnings again they were very highly co-related.

So in an environment where Columbus can do 260 about what sort of ballpark range would you think the existing business is doing?.

You are looking for us to give an estimate for Steel Dynamics for 2015 EBITDA, yes we…...

Correct..

Won’t do that. We don’t believe in giving guidance out that far. So I am sorry I cannot help you with that..

Okay, no problem. Thank you very much..

Thank you. That concludes our question and answer session. I would like to turn the call back over to Mr. Millett for the final and closing comments..

Super. Thanks, Kevin and thank you for all those still on the call listening. I would like to thank you for your support, online support for our company and to our customers. Thank you, your loyal support also and to – our employees, keep up the great work and be safe each and everyday guys and girls. Thank you very much..

Thank you. Once again ladies and gentleman this does conclude today’s call. Thank you for your participation and have a great day..