Marlene Owen - Director of IR Mark Millett - President and CEO Theresa Wagler - EVP & CFO Dick Teets - President & COO, Steel Operations Russ Rinn - President & COO, Metals Recycling Operations.

Luke Folta - Jefferies Brian Yu - Citi Matthew Korn - Barclays Matt Murphy - UBS Timna Tanners - Bank of America Michael Gambardella - JPMorgan Phil Gibbs - KeyBanc Stacey Kerelska - Macquarie Jorge Beristain - Deutsche Bank Andrew Lane - Morningstar Research John Tumazos - John Tumazos Very Independent Research Frank Duplak - Prudential Securities Phil Gibbs - KeyBanc.

Good day, and welcome to the Steel Dynamics' Second Quarter 2015 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 21, 2015, and your participation implies consent to our recording this call. If you do not agree to these terms, please disconnect. At this time, I would like to turn the conference over to Marlene Owen, Director, Investor Relations. Please go ahead..

Thank you, Brenda. Good morning, everyone, and welcome to Steel Dynamics' second quarter 2015 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 from the company's operating platforms, including Dick Teets, President and Chief Operating Officer for our Steel Operations and Russ Rinn, President and Chief Operating Officer for our Metals Recycling Operations.

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.

Such statements, however, speak only as of this date, today, July 21, 2015, 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 Form 10-Q filed with the Securities and Exchange Commission.

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

Thank you Marlene. Good morning, everyone. Thank you for joining us. The first half of 2015 continue to be an interesting start of the year. Significant industry shifts taking place for the fundamental through the domestic steel community and raw material and product pricing as well as recent preliminary and trade case advancement.

But before exploring our thoughts regarding the domestic steel landscape and how Steel Dynamics is uniquely positioned for growth I have Theresa to comment on the second quarter financial results.

Theresa?.

Thank you, Mark. Good morning everyone. Our second quarter 2015 adjusted net income was $53 million or $0.22 per diluted share which was within our adjusted guidance of between $0.20 and $0.24.

The adjustment excludes two items, the first approximately $29 million or $0.07 per diluted share of expenses associated with idling our Minnesota iron operations and of that excluded amount, approximately $21 million represents non-cash inventory evaluation adjustments.

The second item represents approximately $9 million or $0.02 per diluted share of reduced earnings related to the planned furnace maintenance outage at iron dynamics. The last time a significant maintenance was required was in 2008 over seven years.

Including the adjustment, second quarter 2015 reported GAAP net income was $32 million or $0.13 per diluted share. Regarding Minnesota, the operations are in their expected idle state with the corresponding reduction in our employee base completed.

We expect the ongoing financial impact from the operations to Steel Dynamics financial results to be minimal at less than $1 million a month from both an earnings and EBITDA perspective and as such we don’t expect specifically identified and separately in the near future.

Second quarter 2015 consolidated revenues were $2 billion, 2% lower than the sequential quarter based on average product pricing reduction, not volume as both steel and metals recycling shipments increased sequentially.

Adjusted operating income was $120 million compared to first quarter results of $100 million a 20% improvement based on record fabrication performance and significantly improved Metals Recycling results. For the second quarter 2015 steel shipments increased 15% to over $2.2 million tons compared to the first quarter.

However, profitability remained relatively flat as metal spread contraction offset the improved volume. As steel imports remain high, steel prices were pressured and our average second quarter sales price declined at $101 per ton while our average scrap cost declined only $57 per ton.

For our recycling platform, ferrous shipments increased 10% in the second quarter stemming from domestic steel metal utilization improvement. First metal scrap stand at 9% as scrap cost volatility subsided. From a non-ferrous perspective, shipments also increased 6%; however, metal spread fleet fairly flat.

As a result our metal recycling operations second quarter operating income increased meaningfully over the sequential quarter to $12.2 million. A continuing terrific story for our fabrication operations.

The positive momentum in underlying non-residential construction demand combined with our national presence and stellar customer service, result in record performance metrics for the quarter and for the year so far. Second quarter 2015 record operating income from our fabrication platform was $20 million or 27% higher than our previous record.

Record operating income per ton was $252, over 30% higher than first quarter performance. We continue to see improvements in underlying non-residential construction demand, which is good news for all of our business as the construction factor is also the largest domestic steel consumer.

During the second quarter, we generated significant cash flow from operations of $309 million with operational working capital providing $193 million. The working capital reduction was a result of more normalized scrap volume at our steel mills as second quarter production utilization improved and also due to reduced overall scrap values.

Second quarter capital investments totaled $23 million. We estimate annual, excuse me, we estimate annual 2015 capital expenditures be in the range of $150 million. This includes some payments for the recently announced $100 million paint line expansion at Columbus. However, most of the cost for that project will be incurred in 2016.

We maintain our quarterly cash dividend to shareholders, which increased by 20% in the first quarter of 2015. Our history of increased quarterly dividend continues to demonstrate evidence of the confidence our Board of Directors have and the strength of our cash generation capability, financial position and optimism concerning our future.

As demonstrated during the first half of 2015, throughout market cycles, our business model generates strong cash flow, based on the low, highly variable cost structure of our operations. Even after deleveraging our balance sheet and increasing cash dividend, we have record liquidity of more than $1.6 billion at June 30, 2015.

Total debt remained consistent at $2.7 billion while net debt of $2.2 billion decreased another $258 million in the quarter or 10% due to free cash flow performance. I would like to point out that the adjusted EBITDA in the press release schedule denotes the number we use for financial covenant purposes.

However, if we would have fully adjust for the Minnesota and Iron Dynamics items that occurred in the second quarter, adjusted EBITDA was $197 million and pro forma trailing 12 months adjusted EBITDA is $973 million. This gets us to a net leverage of 2.4 times.

Our credit profile remains in line with our preferred through-cycle net leverage of less than three times, which is a testament to our disciplined approach to growth, creating shareholder value through sound capital allocation and an efficient balance sheet. Additionally, our debt maturity outlook is incredibly flexible.

We don’t have any near term meaningful maturities and those in the long term are well laddered and in the interim years have call provision flexibility. Looking forward, we believe that our capital structure and credit profile have the flexibility to not only sustain current operations, but to support additional strategic growth investment.

Mark?.

Thanks Theresa. I think it's never redundant to state that there's nothing more important to us than creating and maintaining a safe work environment. Safety is the forefront and integral to everything we do.

Though our safety performance is better than our industry average, our goal remains at zero safety incident work environment and the team did a great job in that respect in the second quarter. They reduced companywide recordable entries by over 25%.

We continue implementing new initiatives and reinforcing others to drive toward our ultimate goal of no injuries and no incidents. Operationally, the team has performed well in a continued challenging environment. The ongoing flood of steel imports continue to pressure steel product pricing to a greater degree than the benefit from lower scrap cost.

As a result the steel dynamics along with the industry in general experienced margin compression in the second quarter. Our average selling price fell $101 per ton, while our average scrap cost per ton only decreased by $57.

However, due to continued solid domestic demand, our steel shipments improved 15% offsetting the margin compression in the quarter. After operating at a trough utilization rate in March, our steel operations have been achieving monthly sequential volume improvements.

Driven by stronger flat row production, our second quarter steel utilization rate recovered significantly to 87%. It was meaningfully higher than our first quarter performance as well as the average domestic mill utilization.

While our company-wide exposure to the energy sector approximates only 8% it is higher at our recent acquired Columbus flat row steel mill, which was particularly impacted by both imports and reduced energy sector steel consumption.

As you may recall, our first order of business after buying Columbus was to significantly expand market and product diversification moving toward a greater number of customer relationships and a broader mix of value added products serving more industries. The teams are making tremendous progress in automotives and construction related products.

They are also making good progress in potential Mexican export opportunities. Market shifts take time, but our planned paint line and Galvalume addition on the Columbus campus will be a significant catalyst.

The $100 million investment will provide roughly 250,000 tons of annual coding capability and further diversification into higher margin products with Columbus. We already have two paint lines and Galvalume capability in Indiana, but this project allows for higher product quality, double-wide steel and access to seller markets including Mexico.

We plan to sell service-critical appliance-grade steel as well as construction related products. Operations are expected to begin during the first quarter of 2017. In the interim, we continue to improve Columbus' operating costs and product breadth and quality capabilities.

Columbus saw 34% more value added galvanized steel in the second quarter and achieved record production results on those lines. We continue to see the benefit of collaboration between our Columbus and Butler Flat Roll teams.

Along with production and process successes, since the acquisition, Columbus is implementing great cost reduction initiatives with many more in the works. Additionally, our steel platform continues to benefit from more significant organic growth investments. The additional of premium rail capability and expanded engineer special bar quality capacity.

In rail, all domestic class one railroads have qualified premium head-hardened rail. Year-to-date, rail shipments have increased over 45% from last year and premium rail has been the driver. Railroad investment forecast suggest domestic rail consumption will continue to be strong during the next three to five years despite the energy decline.

We're committed to the rail market and are targeting shipments of up to 350,000 tons per year. The capability to well 320 foot length rail versus the conventional 80 foot strips is a strong competitive advantage, improving rail safety and reducing our customer's maintenance cost and installation time.

Regarding SBQ, the product and capacity expansion within our engineered special bar quality operations also continues to ramp up. With the energy market weakness for the larger diameter SBQ market has not been as strong in 2015 and our addition of the smaller diameter bars has provided product diversification and aided mill utilization.

Metals recycling as we suggested less volatility in scrap prices and higher domestic steel mill utilization, the profitability from our metals recycling operations meaningfully improved in the second quarter.

Compared to a slight loss in the first quarter, we recorded a $12 million operating profit in the second based on increased storage shipments and metal spread. Additionally, the symbiotic relationship between our recycling operations and steel mills facilitates lower average input costs as compared to our peers.

The recycling environment remains challenging and there appears to be a shift in the supply and demand balance. The continued significant overcapacity of shredders, particularly in the Southeast and U.S. continues to constrain margin as processes are competing for the same material.

However scrap export levels have fallen in the past two consecutive years, with volumes significantly lower than recent historical norms. The expectation of the continued strong U.S. dollar reducing scrap exports and the resulting ample scrap supply, we don’t see any unlikely drivers for significant increases in ferrous scrap prices in the near term.

Based on this difficult operating environment, we believe there will be consolidation or rationalization of smaller scrap companies in the near future. As communicated in our May 26 press release, we elected to idle our Minnesota iron making operations for an initial 24-month period given the significant and sustained decline in iron pricing.

In this market condition, the cost to produce iron nuggets is meaningfully higher than product selling values. Again the strength of U.S. dollar and raw iron ore supply and demand factors support the thesis to sustain lower pig iron prices.

Since our investment in iron making capacity was indented to the hedge against high price pig iron is scraped, the indefinite idle was a prudent and necessary response to the prevailing market environment. While the lower raw material cost environment advantages our steel platform, it has resulted in our own economic situation in Minnesota.

Let me say, I want to sincerely thank the whole Minnesota team for their commitment and persistence in pioneering and succeeding in bringing a new pig iron production technology to life. Unfortunately, in the end it was not a matter of technology and/or management because the process works and is purely the result of the market economics.

I commend the dedication, hard work and strong commitment of the employees and the area of communities and I’m pleased to report that we were able to offer positions to approximately 90% of those employees who wish to have employment within the SCI family out of the locations.

The fabrication platform continues to achieve record operational and financial performance. Second quarter operating results was $28 million surpass the previous record by 27%, which was achieved in the fourth quarter of last year. The fabrication group achieved record operating income at four of our six plants. The team did a phenomenal job.

Going to the field joist institute, year-over-year domestic joist shipments increased about 2% year-to-date. We’ve gained market share as our shipments increased 11% over the timeframe. The team continues to perform exceedingly well both in market share advancement and leveraging our national footprint.

It's a credit to the foresight and positioning what the team did over the past several years. Based on sustainable increased demand and market share gain, we've added production shifts to several of our plants creating more jobs in our local communities.

The strength of this business provides insight into the continued growth of non-residential construction activity. Overall, while external challenges create a turbulent environment for us, all our employees performed well in the second quarter, driving operational and financial metrics that are gained with the top of our peer group.

Now to the macro environment, we believe the U.S. has solid demand dynamics in place. Consumer confidence is expanding, remains intact. Durable goods and construction investment continue to grow, both key measures of U.S. steel consumption. Forecast for the two largest domestic steel consuming sectors, automotive and construction, remain good.

Automotive is forecasted to grow to almost 80 million units over the next few years and overall construction spending and domestic manufacturing continues to trend favorably. However, excess steel import volume combined with higher than typical inventory levels has limited U.S. steel mill productivity, but we believe the tide is turning.

Inventory levels should continue to decline in the coming months. Underlying market demand should give further support to steel product pricing, which we believe has stabilized. On the raw materials side, scrap flow remains good and the strength of the U.S. dollar should continue to impede scrap export market.

Consequently, there doesn’t appear to be strong drivers for ferrous scrap price appreciation. We expect raw material pricing to remain relatively stable at current levels and perhaps trend lower for low iron ore pricing environment persists. We believe the fundamentals are supportive of stronger economic growth in the U.S.

during the second half of the year. However, the current uninterested global growth expectation, combined with severe worldwide steel production overcapacity will continue to be an industry headwind to steel pricing.

But we believe domestic pricing overcorrected based on the recent spread to foreign prices and we think there is room for price appreciation later this year. As raw material prices remain at lower levels and utilization improves, there is margin expansion opportunity in the second half.

Additionally, in order to insulate ourselves from imports, part of our strategy is not to only develop strong customer relationship, but to also manufacture products that are more difficult to compete with on a global basis, such as our painted flat roll steel, highly engineered SVQ steel and longer length rail.

As such we were able to mitigate some of the import impact and with our broad portfolio of value added products, maintain high steel metal utilization rates when compared to our peer group.

On the trade front, we believe the ITC has confirmed that the flood of unfairly traded imports of corrosion-resistant sheet steel has materially reduced our shipments, pricing and profitability. I believe in fair trade that the U.S. has a dumping grand for world excess steel capacity.

We are confident that such actions will create a more positive pricing environment for us going into the second half. So driven to maintain a sustainable differentiated business, we are focusing on opportunities to maximize our financial performance.

We believe our superior operating and financial performance clearly demonstrates the sustainability of our business model throughout the market cycle.

We’re focused on providing exceptional value to our customers, committing to the highest levels of quality and timeliness, partnering with them to create value and do what they need today and anticipating what they will need tomorrow. As we look ahead, we continue to be optimistic regarding our future.

Columbus is one aspect of the story and our organic growth project is another. Strong cash flow generation through the cycle will give us solid foundation from which we can take advantage of the near opportunities that lay ahead. With strong character and determination of our employees are absolutely unmatched.

The dedication to customers and passion for excellence compel us all to higher standards of performance. I thank each and every one of them and remind them safety is always the top priority each and every day, each and every hour. So again, everyone thank you for your time today and Brenda we'll open up the call for questions. Thank you..

[Operator Instructions] Our first question comes from the line of Luke Folta with Jefferies. Please go ahead with your questions..

Hi, good morning..

Good morning, Luke..

Great quarter..

Thank you..

Tough environment. Good execution. Well done..

We got a good team mate..

First question on SBQ, can you just give us some sense of what the order book looks like? Is the second quarter you think representative of what trough should look like near term, and any color in terms of just the end market dynamics there, I'm sure energy's weak.

Any color on the other markets and how much you are shipping from the small diameter mill would be very helpful. Thanks..

Luke, on the actual volumes on the SBQ side, Dick probable could give a little clearer picture, but I think all our markets the SVQ arena is a little more lengthy and a little flat, I would tell you. Things that have maybe picked up just ahead the last couple of weeks, but I think mainly the customer base is just patching holes at the present time.

Dick, any thoughts on the -- versus….

We really haven’t been the stated numbers and so forth and we are still in the start-up and is a very small market. We do report into our -- through the SMA and SVQ family, but we don’t report individual. But we are improving.

We've gotten our precision mill working and delivering a great product out there and as you pointed out in your original statement thank goodness for the expansion in that because of the bigger bars have been the weakest of the products there. So it’s really come to play quite well..

I think it’s -- emblematic or testament to the strategy because we've had since the very beginning to diversify our product mix across many products and market sectors as we possibly can and I think seeing the benefit of that right now and obviously when the market returns there is going to be leverage that to greater profitability.

But Luke I think you also mentioned that the general market and I think the markets remain somewhat mixed, but in aggregate, incremental demand growth remains intact. As we stated automotive continues to dominate. Truck trailing and material handling are actually having a peak year. Energy is almost stagnant, but we see manufacturing is solid.

Residential is recovered and non-residential construction continues to rebound. I think its testament to our new millennium billing systems platform, which had a record second quarter. Their quarter activity continues to be very strong.

Backlogs are suggesting another very strong year for us and so in general as the construction markets come back, I think we have considerable leverage to that because we've got about 1.5 million tons of latent unused volume that is highly correlated to that non-residential construction.

I think customers are affirming sort of active demand, but right now are still reluctant to take inventory positions until I see more market transparency. They just don't want to take it in good position. As I think you just saw inventory destocking is slow, we sold I think it was the fifth month in a row of slight destocking.

They were around about 2.6 months on hand today. Higher sure than last year, but slowly, slowly trending there and that destocking, I think is obviously positive for us..

One other observation Mark is that some of our forging customers have basically given us a double size order, but they haven’t given us multiple month worth of order. So we're still trying to interpret that but we do believe that there is some strengthening, but they still have a reluctance to take along view of yet..

I guess on a similar note, the bounceback in shipments from the Columbus mill was pretty robust, and I know that energy tubulars is a pretty decent sized end market for them. You talked about some initiatives to expand the product offering at that facility.

It seems a little early to be having that big of an impact from some of those initiatives, so if you can talk about what drove the big bounceback in Columbus shipments sequentially..

Well, I don’t know that it was really the tonnage that was a big bounce back. We're very proud of the percentage of bounce back of the value-added I think is what Mark said because we've had the -- we're focused on additional customers, additional products, value added in particular..

To your point, they did have over 100,000 ton increase in shipment and that was again just to the marketing pushback that Dick is talking about. So it was quite a bit on volume side as well..

Yeah I think, we continue to say for a long time now that demand truly has incrementally grown and that underlying demand was there, which is that we had a slow imports coming in kind of the February, January, February, March timeframe and that just suffocated the market for Columbus in particular because they’re obviously exposed to the Huston import arena.

I think we’re incredibly excited though the Columbus team is doing incredibly well. I think the collaboration between Butler and Columbus teams is incredible and it really is growing fruit.

As Dick said our value-added shipments have grown quite significantly and we made great strides in quality there and are regaining a lot of the customers that another ones had. We’re also leveraging our existing customer base.

We have some promise that we had great working relationship over the years and their volumes have picked up dramatically and New Millennium building products also has been sourcing more steel from the Columbus..

Great color. Thank you..

Our next question comes from the line of Brian Yu with Citi. Please go ahead with your questions..

Thanks. Good morning and congrats on a good quarter especially on the free cash flow side. First one is just you guys have impressive shipments in the second quarter Mark and you said you’re expecting improved financial results from the back half of the year.

Does that -- embedded in there is that you will maintain these strong shipments in the back half and then I think you mentioned earlier that you think price will probably recover and those are the two combination of factors continued high volumes and some improvement in the underlying markets going to drive better results?.

Yeah there’s nothing that we see that should change the volume profile and in fact I would consider that volume profile appreciating and I think just generally with good volume, I think in turn was with margin expansion it's a positive.

I think imports even though imports June, July are incredibly simple I would say, domestic pricing through the first quarter and into May declined dramatically and kind of eroded the spread and when we saw a slight decline in the import number. That is the increase.

Unfortunately China’s profits price dramatically and dropped by about 18% in May and the import number today is probably $390, but I think because the global spread has mitigated somewhat, I think that the trade case success will certainly bring things to a greater -- a more level playing field and the continued inventory destocking and alignment is going to help the supply demand balance to our favor.

Automotive will be strong, construction is growing, manufacturing is good. You never know. Maybe the politicians will come through finally and do some infrastructure build, which will be very, very positive too.

So I think there’s a climate for short, stabilized, slightly appreciating pricing and at the same time raw material costs scrapped in particular I think is selling on a trend more unlikely than you got a iron ore supply all today I think is round about $50ish and will remain low and that’s going to draw scrap down.

Strong dollar is going to continue to impede exports. The billet pricing, global billet pricing is very, very low and therefore that will help that also.

You got solid scrap flows, absolute flow has come back pretty well, a prompt flow due to the strong automotive production is incredible I would suggest and nuclear is that going to market with inline supplying some other mills.

So I think we’ve got an environment whereby raw material pricing is at minimum high most likely banned and you have some appreciation drivers for pricing. So I think from a second math perspective, we’re still optimistic..

Okay. Great.

And second question is just on working capital, there’s been a significant improvement year-to-date, if we look at some of the relative metrics like days outstanding or churn rate are these at your targets or is there further room for improvement?.

What you’re seeing in the quarter Brian is again a realignment on the scrap volume at the steel mills based on the improved utilization in the second quarter and a decreased scrap value. But going forward, there is still room for improvement.

One example is that we still don’t necessarily have the finished goods volumes at Columbus where we’d like to see those. So there is different areas where we still think we can lift some additional cash from working capital but we feel pretty good about where we are. I wouldn't expect huge strings in the second half..

Okay, would you say at today's prices, would you be able to quantify and how much more working capital you could extract from Columbus?.

I don’t think it’s unreasonable. I think it’s not unreasonable to say probably in the $50 million range..

Okay. Helpful. Thank you..

Our next question comes from the line of Matthew Korn with Barclays. Please go ahead with your questions..

Good morning, everybody. Thanks for taking my call..

You’re welcome..

So Mark as you pointed out, raw materials are low, steel shipments for the overall industry steel seem weighted down by the energy markets who got domestic capacities still in the lower mid-70s, couple months back there was a smattering these price hike announcements, but the index has really only moved gradually.

Do you think we can get above $500 and for hot rolled in this environment and how much do you think we need to be worried that the China Midwest spread is starting to blow out a little bit again as the prices in Asia crumble?.

I think the domestic pricing kind of over corrected to some degree and I was pretty back in April, May pretty confident that you could see some metal price increase. With them coming down even further, that’s almost going to be a headwind and put pressure on pricing. But the -- you can see a $500 or $480 number domestically.

I think that is more than reasonable particularly when you have the potential trade case kicking in next month or two well June second quarter it’s going to have more and more of an affect..

Second half..

Yep..

Okay. All right. Then let me ask this a little bit specifically I remember the last time we all spoke, how you took the lead time that expanded Butler and Columbus, but from I think it was terrific levels, orders moving up the best rates since the fall.

Where are we now comparably? It would be helpful maybe you can do a rundown of the major product groups, give a little bit visibility on where lead times have shifted from last quarter?.

I’m not so sure we’re going to go through each mill, but the principle players obviously are Butler and Columbus and they are in a three to four week run, and the balance that's where we typically hold that backlog through the cycle in good times or bad times to be honest.

So we’re quite happy obviously with little more price, but nonetheless backlog and lead time there is on target..

All right. Thanks very much. Congratulations again on the quarter..

Thank you..

Our next question comes from the line of Evan Kurtz with Morgan Stanley. Please go ahead with your question..

Hey good morning, everyone..

Hey Evan..

I thought some of your commentary on end market demand was pretty encouraging and certainly congruent with everything we’re seeing on construction data as far as permits and non-res spending and auto sales and so forth.

So kind of one question that I have in my mind is if you look at the service center data for the past couple of months, their shipments are actually been down year-on-year.

So it’s kind of inconsistent with kind of what we’re seeing from the bottom up and I was just curious to get your thoughts on for one, what’s driving that and then also what these drivers speed and how long would that take and any thoughts there would be appreciated?.

Well, I’m not sure, but a clarity than anyone else, but I do believe you’ve got a -- you still have a sort of imports still on the dark side and that is kind of slowing or is a resistance to the destocking.

We certainly just from the order profile that with people patching holes, they're certainly not taking positions yet and just also the possible sentiment in our discussions but it just slow drill down but it will continue..

Okay..

No, yeah very strong comments some of our larger service center accounts and they don’t have any concerns about the year so can’t give any color on it..

I think the other thing that the service center industry in general is essentially taken advantage of the situation, I don’t blame them, but times have been short, but they're increasing.

And also on the structural side, rolling schedules, I do believe have been shortened hours and that allows that sector to be well closer to the jet so to speak on inventory and on ordering. So they're ordering almost on a just in time type basis..

And in chemical products, our long products its mill direct shipments and don't even go to the service centers many cases..

Okay. Thanks. The other question I had was on some of the trade legislation that’s gone through and maybe you guys are close to this than some of your peers.

But what do you think this all means as far as leveling the playing field, new ways to define material injury and it sounds like in conference right now and the customs build, there could be some enforcement measures that are added to the market, how do you see that from a timing perspective actually impacting pricing the U.S.

and any thoughts on magnitude?.

I would tell you that I don't see it right now. From a pricing perspective, I think it’s a little bit longer term. I think it has a real meaningful impact to us because it gives commerce department greater clarity and gives us a greater opportunity to be more expeditious in our trade case filings and so forth coming up.

So I think there is a lot of benefit to our industry and other industries and like situations, but right now from a direct impact on crude products or in upcoming cold rolled or hot rolled load cases, ultimately it may influence that final determination which would be in 2016 and so forth.

but not in our short term quarter to quarter results that there will be nothing there for us right now..

Okay. All right great guys. Good luck on the quarter. Thanks..

Cheers..

Our next questions comes the line of the Matt Murphy with UBS. Please go ahead with your questions..

All right. I have a question just on the longer term margin picture at Columbus with these investments.

Is this -- you talked about when you bought Columbus, trying to eventually get to a sustained butler type of profitability, do you think these investments put you on track for that or is there more to be done beyond this?.

The addition in the paint line..

You mentioned 15, I don’t know where the 15 came from, but I would say we’re absolutely confident that the earning profile of the Columbus mill has every bit more surpass equal or surpass the butler mill with the changes that we’re doing.

Again as I said earlier, the cap collaboration of the butler and the Columbus teams brining actually benefits to build both locations, but certainly has brought great quality, great thought diversification of capabilities there.

The synergies, the near-term synergies that we advertised through 2015 are intact and the week before last, the team is incredibly focused and passionate and have a lot of opportunity to further decrease the cost structure.

Obviously as we withstand the value add quoted output that's going to bring our margins up appreciably and got to believe and painted the expansion that we announced is going to be a major catalyst I think to greater earnings there and to greater diversification in great times and also improved profitability in the troughs..

Great. Okay. And then I guess longer term on fabrication profitability, in the short term it sounds like the outlook is good, which is great, but medium to longer term, I am just wondering has anything changed from, if you look at 2006 through 2013 it was basically a breakeven segment.

So we are in this great market for demand right now, but has anything changed you think in the long-term from an operating income perspective and your ability to sustainably report this type of operating profit?.

Well, I think there is certainly in recent years been a market shift. Obviously if you go back a number of years, there was pretty fragmented market.

Today there are essentially three players, Nucor has ramped up is got lion’s share of the market was second and then Canam is another principal players, but there are couple of other little organizations out there. So I think the industry has changed. It's allowed stronger spreads, stronger margin on a per ton basis.

The team I think has done a phenomenal job in recent years positioning New Millennium for this expected growth. We have a national footprint and we're leveraging that incredibly well across the country. As I think the earnings profile long-term is high highs and high lows for that business..

Matt, we're structurally different. If you look back to 2006, in 2006 we only had a couple of facilities in Indiana and in Florida and we had just added a couple of foreign acquisitions. Today we have six facilities that are throughout the United States. So structurally we have the ability to earn more as Mark said on a more sustainable basis.

So I am suggesting not compare back to 2006 and 2007 timeframe..

Sure. That's fair. And I guess if I look at 2013 and 2014 you had a pretty strong bump up in volumes in Q3, I am just wondering on the short term basis you talked about adding a shift.

Should we -- is there a possibility we see kind of that Q2 to Q3 type of volume bump that we've seen in recent years?.

Given that we're looking at construction is somewhat being obviously the strongest timeframe and given that we've been ramping up the facilities over the last several years, I think that volume and appreciation is something that would be reasonable..

Okay. Thanks a lot guys. That's helpful..

Our next question comes from the line of Timna Tanners with Bank of America. Please go ahead with your questions..

Hey, good morning, guys..

Good morning..

Good morning, Timna..

So I don’t want to beat the dead horse here, but I think that one of the things that I hear from a lot of people is that concern that it will be difficult to see steel prices rise much with scrap prices weak.

What do you -- how do you comment on that? I know you said there is certain conditions with the trade case and with the scrap market being over-supplied, but is it really possible to get much margin expansion in a depressed over supplied steel market as well?.

I think Timna we kind of answered that, applicable probably is no greater than most, but in case of supply and demand, the supply side we think in Americas for the second half is going to target imports will mitigate a little. Entry is certainly coming down and the trade cases should put us on a more level playing field from a pricing standpoint.

So I think those three in concert will certainly give or drive us for price appreciation..

Okay.

And you did, sorry I just was clarifying because this is something we hear a lot about?.

So that being said imports is the headwind and I think if you look at SBI, we're incredibly well positioned across the whole steel space. We have organic growth. We have latent volume that we can capitalize on as the construction markets come back. So even in status quo, I think we're going to continue to take more..

I think just a clarification on coated products the prior countries, there are seven countries that supply more than 3% of the imports, that's the criteria, the benchmark for filing trade cases, two of them being in Canada and Mexico.

And so they were two, the other five made up 67% of all imports and so when kind of availing duties are applied and dumping, it's hard to imagine how quickly that void will be created because no one is going to want to be caught having to owe those duties.

So as soon as the preliminary duties are announced, it's going to become an interesting -- we already have traders looking for substitutes, but those that magically appear. It's a process..

Yes that's great. So we address the margins, but talking about volumes a little bit, historically it had been the case that steel makers have more profitable in the first half than the second half, but that's kind of broken down recently and I am just wondering on fabrication, do you think fabrication long products with this end of destocking.

Talk us a little bit more about what kind of volume recovery or why we could see a nice strong recovery second half from what's normally a typically seasonally strong first half?.

I think if you look at the steel consuming economy and everyone at least when you got blinkers on in all business, its more just because profitability isn’t where we would like to see it. But from the standpoint of the American economy it's strong.

If you look at the steel consuming economy, it's strong, but we're consuming around about 120, 125 million tons on pace right now. The demand is there. I saw the three headwinds is the import issue. The premises would be to increase utilization in increased volume domestically would have to be that the imports mitigate to some degree.

You've got a continued slight increase in demand with a erosion of imports and that would give you greater utilization in America..

I was talking more about fabrication on long products.

I hear what you're saying for flat rolls, if you could just add a little more because long products I was kind of surprised the second quarter decline year-over-year and structural and declining first quarter to second quarter, seasonally I wouldn’t expect that and then similarly on the fabricated side better profitability, but a little lighter volume than we would have expected.

Thanks..

Again our order book and our bidding rate is still very strong and must assure certainly we see huge strong second half. Relative to structural, I think our actual order of structural beams in the second half were slightly off.

Our actual market share relative to domestic produces actually increased because imports have been just progressively successfully increasing quarter-over-quarter..

Okay. Thank you..

Our next question comes from the line of Michael Gambardella with JPMorgan. Please go ahead with your question..

Yes, good morning and congratulations on the quarter and the process..

Thank you. Good morning, Michael..

I have a question thought on your market share and if you could just -- if you could just take a look at your flat roll shipments were up 24% quarter-on-quarter and while, your scrap -- you mentioned your scrap cost didn't go down as much as the selling prices clearly they went down lot more than the iron ore cost of imports and your domestics integrate competitor.

So you must be gaining some market share.

Can you give us some color on that in your flat roll business?.

Well I guess the broad numbers would suggest that Michael. I think we are -- we don't necessarily specifically culprit that or analyze it on a very specific month by month basis.

But I would say, yes we're picking up market share at a what I would consider a reasonable selling value without sacrificing profitability on margin necessarily due to additional volume..

And on the flat roll side of the business, how much more volume capability do you have in reserve that you could possibly push out in the second half of the year?.

The utilization there, I don’t have the….

Well we’ve -- let’s say the text and again that’s not molding capacity but coating capacity and we're probably operating at about 70% to 75% of capacity and all three lines running at little less or little more than three crews worth.

We're looking at addressing more on those lines by adding some new products and new opportunities there to boost it up. We're not sitting ideally by just limping along but we're excited about an opportunity there, but there is about 25% of texts and if we had, we actually said, that's about a million ton or some thousand.

We would say that’s 200,000 tons of idle coating capacity and we do have some capacity down at Columbus, but others running too faster for months now. Right now we're down for a five-day outage. We pulled our maintenance outage ahead.

It was supposed to be in October, but we found cracks on our melt shop -- our melt shop cranes and we're addressing those right now and so we won’t take maintenance outage again until the spring. And so we're pulling all of our larger products soon and so we're comfortable with that, but then we will be back and going full strength again.

So there is no real capacity available at Butler..

So Mike, we have 7.2 million tons of total flat roll shipping capability and that includes detect, which if you think about it from that perspective, that’s about 1.8 million to 1.9 million tons per quarter and I think in the second quarter we had total shipments of just under 1.6.

So you got 200,000 to 300,000 tons on a quarterly basis, but if you look first half to second half obviously the first quarter utilization was down significantly. So there is more already in the second half than that..

Great. Okay. Thank you..

Our next question comes from the line of Phil Gibbs with KeyBanc. Please go ahead with your questions..

Good morning. Good morning, Phil..

Mark, we saw a little bit of pick up in scarp in June and I think July has come off a little bit, but is it reasonable to think that in third quarter relative to the second quarter that we can see your raw material cost stay relatively flat or should we expect them to be up a little bit given the fact that scarp bounce in the middle of the year?.

Well, I'll let Russ give you some color, but I think we don’t see any massive shift downwards like another $100 or anything crazy, but Russ do you think a general erosion..

I think the trend is definitely going to be down. I think you've got no exports. The strong dollars and limited exports and actually has encouraged some imports of scarp, which again is going to be really mean that excess scarp or scrap supply in the U.S.

is going to be clinical, which logically puts pressure on the -- downward pressure on scrap price in the near term..

Are you thinking August is going to be a reasonable reset given what we see in the export markets right now given what at least the Turkey come of 50 to 55 in the last six weeks?.

I think the question is what's reasonable. I think from this perspective reasonable would be maybe different than mine, but no, I think certainly there will be a downward price pressure in August and probably the next couple of months..

Okay. And then in terms of the fabrication momentum, you're running up against a tough volume comparison in the second half of the year.

Are we looking for fabrication volumes to be relatively in line with where they've been in the first half of this year or should they step up and try to compete with the volumes that you had in the second half of last year, because I heard you say earlier on the call that you have added some headcount..

From a volume perspective Phil, based on where the market would allow us, I think that we could see a second half that has pretty reasonable volumes and definitely higher than we've seen in the first half of this year..

Okay.

And then just lastly here if I could, the recycling business Russ, how much of that $12 million or so profitability at OmniSource was driven by some of the work that you've done behind the sense to clean up some of these higher cost operations in the South, thanks?.

Well I don't know that we can point to a specific, but certainly we’ve taken some steps in idling some shredders or some shredders and closing some unprofitable yards down in the south. We've also done that in the Midwest.

So we continue to focus on again adjusting our business levels and our business is what the market would allow us to operate profitably and we still got some more to do..

Thanks..

Our next question comes from the line of Stacey Kerelska with Macquarie. Please go ahead with your question..

Good mornings, guys and congrats on a good quarter.

My first question is how much of the $100 a ton decline in sequential pricing in the flat roll was due to mix and how much due to the lower market pricing?.

No, I think the question was how much of the $100 a ton was….

Just for me to clarify that $101 per ton reduction was not flat roll specifically that’s over all of our product lines. So that average pricing bodes across long products and flat roll products. So I need to clarify that. So how much was I guess the mix and how much was lower pricing. Was it more due to shipping more flats or….

I would suggest that it wasn’t unbalanced to mix versus just lower pricing. We had lower pricing throughout in the mix. You're right, its flipped a little bit more the flat roll side equation, but I would say it was just more overall reduction pricing..

Okay. And my second question has to do with your capacities in galvanized coded and painted products.

Could you give us a little bit of color on how much do you have of those at Columbus, Butler and the tax currently?.

The tax is a million tons. We're going to give you the exact numbers that we report here I think the way Theresa would like to….

So from a coding perspective, the tax has a million ton of galvanizing capability and at Butler we have 720,000 tons of galvanizing capability and 240,000 tons of painting capability.

And at Jeffersonville, which we've included in the flat roll division results, we have an additional 300,000 tons of galvanizing and additional 190,000 tons of painting.

And then at Columbus, we have about a little over a million tons of galvanizing capability and we will be adding the painting capability in 2017 and that will be about 250,000 tons of painting capability..

Okay. Great. Thank you.

And how do you think your positioned for the case and coated?.

How do we think about it?.

Yes. How are you positioned, you just give us some of the capabilities you have..

We are positively inclined but we’re able to stick to zero passage by the ITC in the commerce department we'll be scheduled to at least or scheduled to from account and duty perspective, give a ruling and late in August. Now again I’ll tell you, they're understaffed and so many times they delay that and so forth.

But I think we have a very, very strong case on the coated products and it will only get stronger as people start reporting their earnings for the second quarter..

Great. Thank you, Mark..

Thank you..

Our next question comes from the line of Jorge Beristain with Deutsche Bank. Please go ahead with your questions..

Hey guys just to again recap and beat the dead horse here, what do you think the market is missing here in the sense that I think you guys clearly articulated that two-thirds of coated imports of five countries could be targeted with anti-dumping duties anywhere north of a 100% as early as August and yet we’re not seeing accelerated buying from your end clients.

So what do you read through to that? Is it that the market is expecting that maybe the countervailing duties will not be as strong as the recent collapse in Asian prices take in a little bit of that potential price hike away. Could you just comment as to what you think the market is seeing, because there seems to be a disconnect..

I think the -- Dick, you probably add more color, but from my perspective you still have a large inventory that has to be consumed. Again as you said earlier, the customer base is currently not -- they are reluctant to take a position.

They're patching holes and you just see that the inventory levels are slowly coming down once we get back to the market and those imports are not available to them, I think is when you start seeing the price appreciation, Dick?.

Yeah and again I think that again there will be a preliminary number possibly here by the end of August. So there is still time for some deliveries before that.

And as we noted prices are still coming down, which mostly from the Chinese and so they’re in almost total disregard, which will not only improve the duty calculation in the very end to the final determinations, but I think that people are expecting is a delay in that ruling that may go.

It’s theoretically it could be delayed until the end of December.

And so they’re hoping and anticipating that delay and still get some tons in before the hammer calls and so that’s their right to do that, but once the anti-dumping act ruling comes, which is pretty firm in November, I think everything will firm up very quickly and no one will want to have steel on the water couple of weeks before either those two rulings..

Perfect, that helps tighten up the timing outlook. Thank you..

Thank you. Your next question comes from the line of Andrew Lane with Morningstar Research. Please go ahead with your question..

Hi good morning all..

Good morning..

Just one question here I would also like to ask about the fabrication segment, by my account we’ve now seen margin expansion for six straight quarters and just really impressive results this quarter.

Could you provide some color as to the texture of the improvement in non-res construction activity that you're seeing? Are there any particular project types or particular regions that have really been driving the pickup in activity? Thank you..

I think the problems that shifted last year there tended to be a lot of big bulk warehouse Amazon type construction that shifted to more institutional I do believe today and it's across a broader spectrum of construction segments.

So it gives us optimism, but it’s sustainable and again, we have certainly a plethora of bidding, engineering backlog on the tables. So we continue to see a strong market..

The one thing I would add to that Andrew is that we’re at record strategy right now in the fabrication side of the equation. So you mentioned that in the last six quarters we keep seeing improved margins that weren’t just about the volume side of the equation.

So we’ve been able to because of the strength of the market with prices that have stayed very steady and the raw material, which has been flat with steel has been declining.

So that there’s really been a benefit there and I’m not sure that one should expect that we stay at record levels in the second half of the year necessarily, although I believe volume can more than offset that..

Great, very helpful. Congrats on a good quarter..

Thank you..

Our next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead with your question..

Thank you very much. There have been reports in the trade press of Chinese billet exports to turkey near $100 a ton, and while this is a liquid contract, the LME steel billet future has been at $100 a ton for seven weeks.

Why don't you buy some of those cheap Chinese billets and either run them through your long mills or chop them up and mill them as scrap?.

While we like quality. John I think you raised a good point, but again that's a big step to take. We’ve got some loyal dedicated employees doing some great things there and the improvement that we would see is I don’t think will be massive, but….

Do you think the scrap prices we read in the trade publications are accurate given the overseas markets being in a different place in terms of pricing?.

Well John I had seen the $100, I saw like $202 and I was doing my calculations going back through the metrics and beating on Russ and trying to figure out how I get lower cost scrap and strap in Roanoke and to compete because I’m after them to trying to figure out how to move some billets little less extensively and so forth.

But I’ve never seen the $100 number and even $200 is the stressing, with the $202 or $210. So again I don’t know how to even say on that.

Again we were pressed to bring in Chinese coils to the text to quote and we had a customer who demanded it and when a customer demands it and it’s only part of the portfolio, originally I had said no, but I didn’t want to jeopardize the value of that customer's business.

It’s been long standing and we had our tough times supplying any other reasonably priced products.

I was willing to take a hit on certain amount of the product, but then truth be told, after -- it was after Sparrow's Point went away and the light gauge became a tighter market and people -- it was a tough time to find the product, when we brought some in and think goodness it's been run really well and the customer wasn’t happy with the supply, but they're the ones who source it.

So it wasn’t us, but even that was the stressing, but I justified it because it kept our employee working and earning bonus and so forth, but any kind you start dabbling in that world you start worrying about me.

I worry about the appropriateness of it because I’m finding them every day in Washington through trade cases and so forth and how would I look to that was an importer of the same product and my customers not to enjoy the benefits of the cheap steel..

Some steel is out there at less than scrap values, you don't want the Chinese to be subsidizing your nice Turkish competitors when they could be subsidizing you instead..

We're not looking for the subsidy. We want the fair trade and we want to compete on the basis of what we do well and so we haven’t considered that..

Thank you. And our next question comes from the line of Frank Duplak with Prudential. Please go ahead with your question..

Good morning all. Just a quick one. You may have already done this, I hopped on and off the call.

Have you guys updated your CapEx forecast for 2015?.

We have Frank. We're expecting 2015 CapEx to be in the range of $150 million..

Okay. Thanks a lot..

Our next question comes from the line of Phil Gibbs with KeyBanc. Please go ahead with your questions..

Thanks.

Just had a question, broad question for you Mark on M&A as to whether or not you see that as a potential in the next 6 to 12 months for your company or would you continue to do more of these internal investments like you've been doing and things like a downstream assets in Columbus? What's the priority for your company in terms of capital allocation within that view of M&A? Thanks..

Okay. Well, Phil as we spoke in the past, I think we frequently assess our cash allocation. We're blessed to have a phenomenal team doing phenomenal things in a challenging market and our cash generation remains incredibly strong and it’s to your point what do we do with it. From a balance sheet standpoint its net leverage is under $2.4 million.

We got liquidity of $1.6 million and so we got phenomenal foundation to grow. We will continue to consider to opportunities but, first going back to early this year, obviously we increased our dividend 20% or so, but to obviously with some of our value back to the shareholder.

But from a growth standpoint, we continue to look at organic opportunities there. I would say few from a standpoint of capitalizing on the assets, but Roanoke has access metal capping capability obviously arguably as some excess metal capability.

And so we’re looking to optimize that and further diversifying and looking at that value-add sort of at that. On the MA front, I do believe there will be opportunities have been and will continue to be opportunities available to assess..

Thank you..

Thanks. This concludes our question-and-answer session. I would like turn the floor back to Mr. Millett for any final and closing remarks..

Thank you, Brenda and again thank you, everyone. Just I guess to recap, SDI, I think is incredibly well positioned. We don’t manage to hope, but we try and control our destiny. Obviously the important arena is little bit out of our control maybe, but we’re certainly managing our business I think prudently.

Low high variable cost structure and low fixed costs and highly divested product mix I think continues to generate strong cash flow through the cycle. I think we’ve clearly differentiate ourselves. We have consistently outperformed our peer group and we'll continue to do so.

We've talked about the latent capacity that we're yet to unleash in our steel capacity in total energy about a million tons and we’ve got a million plus tons to truly leverage and are going to continue to capitalize on engineered bar expansion and our rail expansion and we’re going to continue to capitalize on the contact position going forward.

So we continue to partner with our terrific customer base and we've got a phenomenal team, I believe is passionate is driving whole company toward a new level of excellence.

So we're fully engaged, fully focused, fully passionate and fully optimistic about our future and certainly appreciate your support, but you've given us in the past and do so currently and hope be with us for our growth in the future. So thank you everyone..

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