Steel Dynamics Inc (STLD) 2015 Q4 法說會逐字稿

Good day, and welcome to the Steel Dynamics fourth-quarter and full-year 2015 earnings conference call.

(Operator instructions)

Please be advised that this call is being recorded today, January 26, 2016, and your participation implies consent to our recording this call.

If you do not agree to these terms, please disconnect.

At this time, I'd like to turn the conference over to Tricia Meyers, Investor Relations Manager.

Please go ahead.

Thank you, Kevin.

Good morning, everyone, and welcome to the Steel Dynamics fourth quarter and full year 2015 earnings 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, Russ Rinn, President and Chief Operating Officer for our Metals Recycling Operations, and Chris Graham, President of our Fabrication Operations.

Please be advised that certain comments made today may involve forward-looking statements about future events 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.

And we refer you to a more detailed form of this statement contained in the press release announcing this earnings call.

These predictive statements speak only as of this date, January 26, 2016, and involve many risks and uncertainties related to our businesses and the environments in which they operate.

Any of which may cause actual results to turn out differently than anticipated.

More detailed information about such risks and uncertainties may be found in our most recent annual report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors.

And our quarterly reports on Form 10-Q, or in other reports which we from time to time file with the Securities and Exchange Commission.

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

Tricia, perfectly done.

Today, you're first call, thank you.

Good morning, everybody, thank you for joining us.

I wish each and every one of you health and happiness in 2016.

2015, as we look back, turned out to be a period of considerable challenge.

Significant industry shifts took place in the [builders steel] community, as both product and raw material prices weakened dramatically.

And the US became the third home for unfairly traded steel.

That said, we believe the existing landscape provides a unique opportunity for Steel Dynamics.

We are well positioned with record liquidity, and a strong balance sheet.

Things most others in our industry today cannot say.

But before exploring further, I ask Theresa to comments on our results.

Great.

Thank you, Mark.

Before getting started, I do want to welcome Tricia Meyers.

She is our Investor Relations Manager.

She is just a starting.

She's been with the Company for quite some time, since 2008, and we're very excited to have her on board.

So with that, talking a little bit about the results for the full year and for the fourth quarter of 2015.

The reality of the excessive unfairly trade steel imports during the entire year significantly reduced our overall earnings.

However, despite this, we again achieved record performance that surpassed our industry peers, and we generated record levels of annual cash flow.

The year also had other record achievements.

With the inclusion of Columbus for one full year of operations, we shipped 8.3 million tons of steel in the year.

13% higher than last year.

The Fabrication team realized record shipments and operating income.

Well exceeding 2014's strong performance.

And we generated a record $1 billion in cash flow from operations, resulting in record liquidity of $1.9 billion.

For the full-year 2015, our adjusted net income was $178 million or $0.74 per diluted share, with adjusted operating income of $398 million.

The adjustments include three items.

During the first half of the year, we recorded $17 million of refinancing fees associated with a $350 million debt repayment.

And we recorded charges of $33 million related to idling our Minnesota operations, and a significant maintenance outage at Iron Dynamics.

The last and most recent item occurred in the fourth quarter of 2015.

As indicated in our December 16 guidance, during the quarter, we performed our required annual assessment of goodwill and indefinite [lived] intangibles.

We concluded that the book value of the segment was impaired, resulting in non-cash, goodwill and other related asset impairment charges of $435 million.

These results compared to 2014 adjusted net income of $323 million or $1.35 per share, which also excludes certain non-cash charges as outlined on our supplemental information page.

On an unadjusted basis or GAAP basis, 2015 reported net loss was $130 million or $0.54 per diluted share, compared to annual 2014 GAAP net income of $157 million or $0.67 per diluted share.

Before the non-cash impairment charges, our fourth quarter 2015 net income was $22 million or $0.09 per diluted share, above the range of our adjusted guidance of between $0.03 and $0.07.

Our adjusted operating income for the fourth quarter was are $47 million, compared to $131 million in the sequential third quarter.

Fourth-quarter 2015 consolidated revenues were $1.6 billion, 18% lower than the sequential quarter based on both lower steel shipments and average product pricing.

For our Steel Operations, annual 2015 volumes expanded due to our Columbus acquisition, but metal spread meaningfully contracted.

Our average annual sales price fell $152 per ton, while our average cost of scrap used declined only $105 per ton.

As a result, annual steel operating income for our Steel Operations decreased 41% to $412 million.

During the fourth quarter, steel shipments decreased 11%, reduced across all divisions.

But most notably, our [Flat Roll] group.

Imports although lower, customer inventory realignment and seasonality were all contributing factors.

Combined with metal spread compression, Steel Operating income was much lower in the fourth quarter, decreasing 47% to $67 million.

Our average sales price per ton decreased $51, while our average cost of scrap used declined $47 in the fourth quarter.

For our metals recycling platform, the dramatic drop in global ferrous and nonferrous commodity prices during 2015 resulted in significant metal spread contraction.

Shipments also declined, due to both lower domestic steel mill utilization and export demand.

Assets, prior to the impairment charges, annual 2015 metals recycling operating income decreased to $48 million, resulting in a loss of $4 million.

During the fourth quarter, metals recycling shipments decreased sequentially based on lower domestic steel mill production utilization and the traditional year-end steel mill scrap inventory reduction.

Additionally, sequential quarterly ferrous scrap pricing decreased substantially, resulting in a 34% margin reduction.

Prior to the impairment charges, fourth-quarter 2015 operating losses for the metals recycling segment was $16 million.

Our Fabrication Operations achieved incredible annual operating and financial results in 2015, earning record operating income of $116 million with record annual shipments.

Full year EBITDA per ton was also a record at $254, almost double 2014 results of $128 per ton.

Steady joist and deck in an otherwise typically seasonal slow quarter, combined with market share growth from our recent deck assets acquisitions allowed for a 10% increase in fourth-quarter fabrication shipments.

Operating income did decline to $30 million from record levels set in the third quarter, due to some market margin compression as average product pricing decreased more than raw material costs.

We continue to see improvement in underlying nonresidential construction demand.

Good news for all of our businesses, as the construction sector is the largest domestic steel consumer historically.

From a cash flow perspective, we generated record annual cash flows from operations in 2015 of over $1 billion, and $924 million of free cash flow after fixed asset capital investments.

Annual working capital provided $525 million in funding, mostly related to lower asset values.

But aside from any significant appreciation and finished inventory values, we currently don't anticipate a significant reinvestment requirement for the full year 2016.

Even in the fourth-quarter environment, our operating framework allowed us to generate meaningful cash from operations of $330 million.

We currently estimate 2016 fixed asset capital investments to be between $250 million and $300 million.

Which includes the $100 million paint line addition at our Columbus Flat Roll division, which is expected to begin operations the first quarter of 2017.

We maintained our quarterly cash dividends to shareholders during the year, which increased by 20% in the first quarter.

Our history of sustained and increasing cash dividends demonstrates the confidence that we and our Board of Directors have in the strength of our cash generation capability, our financial position and optimism concerning our future.

As demonstrated throughout 2015 and the years prior, our business model generates strong cash flow through varying market cycles.

Based on the low, highly variable cost structure of our operations and our diversified product portfolio.

Even after decreasing debt in the first quarter and increasing our cash dividends to shareholders, we achieved record liquidity of $1.9 billion at the end of 2015.

During the year, we reduced total debt $387 million to $2.6 billion.

And due to our free cash flow performance, our net debt decreased $753 million to $1.9 billion.

Our 2015 annual adjusted EBITDA was $706 million, resulting in net leverage at the end of the year of 2.7 times.

Our credit profile continues to be aligned with our preferred through cycle net leverage of less than 3 times, a testament to our disciplined approach to capital, growth, creating shareholder value through sound capital allocation and an efficient balance sheet.

Additionally, our debt maturity outlook is incredibly flexible, having no meaningful maturities until 2019.

Looking forward we believe our capital structure and credit profile have the flexibility to not only sustain current operations, but to support additional strategic growth investments.

Mark?

Super.

Thank you, Theresa.

The safety and welfare of our employees is the priority for our leadership team.

Because nothing surpasses the importance of creating and maintaining a safe work environment.

Our safety performance remains better than the industry average, but our goal remains zero safety incidents.

The team is doing a great job.

Over half of our locations achieved zero recordable injuries in 2015.

We reduced our total recordable injury rate by 19%, bringing it to the lowest level ever for our Company.

My sincere thanks go to the entire SDI team for their focus and their dedication.

The Steel platform teams performed commendably given the environment in combination with the ongoing flood of steel imports, customer inventory destocking, and seasonally lower demand pressured steel product pricing, resulting in domestic industry production utilization rates below 65% in the quarter.

Commodity grade hot roll was most negatively impacted.

CRU hot roll coil pricing fell almost $100 per ton from September to December, just over a 20% decline.

Based on our value added and diversified product mix, we were able to maintain production utilization for the fourth quarter above 73%.

Worthy of note, our Flat Roll utilization rates bottomed in October, and increased meaningfully in November and December.

We believe this was a result of the progress achieved thus far from the levy trade cases, coupled with better alignment for supply chain inventory and demand.

Despite a material decline in scrap pricing in the quarter, our metals spread contracted only slightly as average product pricing declined more than our actualized average scrap costs.

As production volumes fell, our scrap consumption obviously decreased, resulting in a higher average FIFO-based cost for the quarter as a scrap flowed through the system.

For the fourth quarter, we were probably closer to 1.5, 2 months scrap cost lag versus our typical one-month lag.

We will revert to our more normalized structure during the first quarter.

As metal spread compression and lower shipments resulted in significantly lower earnings from our Steel Operations during the quarter, the progress is occurring across the platform despite these market challenges.

The Columbus team is making tremendous progress towards diversifying its product mix and customer base away from energy-related markets, and toward the automotive and construction sectors.

They've added more than 100 new and valued customers in 2015.

Market shifts take time, but our paint line and Galvalume addition on the Columbus campus will be a significant catalyst.

I was at the groundbreaking yesterday, and the energy and expectations are high for the community and for our team.

The $100 million investment will provide 250,000 tons of annual coating capability, and further diversification into higher-margin products for Columbus.

We already have two paint lines and Galvalume capability in Indiana, and this project allows for higher quality, double-wide steel, up to 72 inch wide, and access to the southern markets, including Mexico.

We plan to sell service critical appliance grade steel as well as construction related products from the line.

We expect to have our first Columbus painted shipments in the first quarter of 2017.

In the interim, we continue to improve Columbus' operating costs, product portfolio and quality capabilities.

During the fourth quarter, Columbus continued to maintain shipments of value-added galvanized steel at rates much higher than compared to earlier in the year.

The value-added mix increased to 52% compared to 41% in the first quarter.

We continue to see the benefit of collaboration between our Columbus and Butler Flat Roll steel mills.

Along with production and process successes since the acquisition, Columbus is focused on implementing significant cost reduction initiatives, with many more in the works.

We have realized more than $15 million in sustainable annual cost savings through 2015, and identified plans for at least another $15 million and 2016.

In addition, we anticipate continued benefit for the progress seeing product mix shift.

Our Steel platform also continues to benefit from other organic growth investments that we've made, some of which began contributing in 2015, but should continue to increase momentum in 2016.

The $26 million investment in premium rail, the $96 million investment in engineered special bar quality diversification and capacity expansion, generally geared toward the automotive industry.

This diversification has already facilitated increased mill utilization and cost compression during this current weak, heavy equipment and energy demand environment.

Also, the $22 million investment for an additional 600,000 tons of annual flat roll pickling capacity at our Butler division.

Which will increase value-added sales while deemphasizing commodity grade half band.

The team began operating the line this month.

The metals recycling platform maintained profitability through the three quarters of 2015.

But the fourth quarter environment was too caustic, resulting in an operating loss of $16 million prior to the impairment.

From September to December, ferrous scrap index price fell another $65 to $75 per ton, about 30%, as weaker demand also drove shipments down 12%.

Prime scrap flow remained strong, but lower pricing significantly slowed the flow of obsolete grades.

Market dynamics overshadowed the cost reductions and operating efficiencies the team achieved through the year.

The recycling environment remains challenging.

Many regional players in the industry are either for sale or are headed to bankruptcy.

The continued significant over capacity of shredders, particularly in the southeastern United States, continues to constrain margins.

As processes are all competing for the same material, a tough challenge for OmniSource's southeast team.

Looking forward with the expectation of a continued strong US dollar and low scrap export volumes, we anticipate ample scrap supply and don't see drivers for any significant increase in ferrous scrap prices through the year.

The market will remain stable.

The Fabrication platform continues to achieve exceptional performance.

Steady demand in an otherwise seasonally slower quarter, combined with increased market share from our recent acquisition of additional deck assets, allowed us to increase fourth-quarter shipments by 10%.

The Fabrication platform recorded strong fourth-quarter financial results, and achieved record annual 2015 operating income of $116 million, well over twice last year's record of $52 million.

As Theresa said, the team is executing on all fronts and doing an absolute phenomenal job.

Since the CSI acquisition, we have already gained market share in deck, achieving 31% in the fourth quarter of the year compared to an average 24% in 2014.

Additionally, the acquisition provides an opportunity for increased utilization of the Columbus Flat Roll division.

Over the last three years, the acquired assets averaged over 60,000 tons of annual steel purchases, predominately galvanized.

We plan to source a substantial amount of the steel from Columbus, which will help shift Columbus' product mix and increase the mill utilization.

The New Millennium team continues to form exceedingly well, both in market share gain and leveraging our national footprint.

Additionally, I think the strength of this business provides positive insight into the continued growth of nonresidential construction activity.

Relative to the macro environment, the steel consuming sectors that were weak in 2015 will likely remain so in 2016, such as energy, heavy equipment, and agriculture.

However, those that have been strong or recovering are also expected to continue this path, such as automotive, and construction.

Forecasts for these two largest domestic steel consuming sectors remain good.

Automotive will have continued strength, and overall construction spending should continue to improve, with additional forecasted growth in 2016.

SDI's growing exposure to both of these sectors through our Columbus Flat Roll division, additional long products production capability, and growing Fabrication Operations.

Driven by the strong US dollar low iron ore costs and global over capacity, steel imports were 2015's principal headwind.

Excessive steel import volume combined with high customer inventory levels, limited US steel mill utilization and pressured domestic steel pricing.

While SDI's production utilization remains well above our peers and the industry, there is certainly more to be achieved.

We believe that fundamentals are supportive of a continued positive trend in economic growth and for us in the US.

Additionally, import levels declined in the second half of the year, and the [crip] trade cases are likely to erode them further.

Reduced imports, idling of domestic capacity, along with steady demand should create a positive pricing and volume environment that could allow room for some price appreciation in 2016.

As raw material prices remain at lower levels and production utilization improves, there's margin expansion opportunity.

Importantly, as we typically do, we're not waiting.

In order to help insulate ourselves from imports, part of our strategy is to not only develop strong customer relationships, but to also manufacture products that are more difficult to compete on a global basis.

Such as our painted flat roll steel, our highly engineered SBQ steel and longer length rail.

As such, we're able to mitigate some of the import impact, and with our broad portfolio of value-added products, maintain higher steel mill utilization rates when compared to our peers.

In order to maintain a sustainable differentiated business, we are focusing on opportunities to maximize our financial performance.

In these challenging times, our low highly variable cost structure coupled with a highly diversified value-added product portfolio will continue to generate significant cash flow.

This was clearly demonstrated by our cash generation of over $1 billion in 2015.

We are uniquely positioned, having a strong capital structure with record liquidity that will allow growth as opportunities will inevitably arrive this year.

We will concentrate on opportunities that will improve the quality of our margins, with a particular focus on downstream value-added growth to mitigate the impact of imports and the inevitable cyclicality of our business.

The strong character and determination of our employees are unmatched.

They're a phenomenal group, and I'm proud to stand with them.

We look forward to creating new opportunities for them, for our customers and our shareholders in the months and years ahead.

So again, thank you for your time today.

Thanks for joining us.

Kevin, please open the call for questions.

Thank you.

(Operator instructions)

Tony Rizzuto, Cowen and Company.

Happy new year, Mark, Theresa, Dick, Russ, everybody.

I have got a little bit of a cold here, apologize.

Just a couple questions.

First of all, in your steel segment, shipments were down sequentially, but it looks like your conversion costs were up somewhat.

I wonder if you can provide a little bit of color on that, and then I've got some questions about mix shift too that I wanted to ask you.

Okay.

Regarding the conversion costs, Tony, they were up somewhat across really most of the divisions, and that had to do with a couple of different things.

One was because of the lower volume, and there was some additional, I think, maintenance that might have taken place in the fourth quarter, as well.

But predominately, it was related to the lower utilization rates.

Okay.

Great.

And then, Mark, you mentioned that you added over 100, I think I heard you say over 100 new customers in 2015, so congrats on that.

I was wondering, how many of those customers were because of the Columbus acquisition.

And are you generally seeing OEMs come to you and approach you about significantly changing qualification requirements, or trying to shorten them up and trying to get more of your product in their doors?

How is that playing out?

If you could provide some further color there that would be helpful?

Well, the additional 100 customers, I was down there yesterday, that is actually 120 right now, is specifically Columbus.

Not the Company as a whole.

I think that the team there has done an absolutely phenomenal job.

Not only on the cost structure, and I'm sure at some point Chris will speak to that, but the product diversification there has been incredible in a very short period of time.

As I said, we've seen a dramatic increase in value-added product mix there from earlier in the year.

Automotive, the automotive team has made, in all honesty, incredible progress on a couple of different fronts.

Firstly, as you know, we created our own team to go direct to automotive customers, and that's paying off very, very well.

And we're hoping to see about 200,000 tons or so, 150,000 to 200,000 tons of auto business emanate from that activity in 2016, and if we're successful, we will be successful there.

That's going to grow dramatically into 2017.

So kudos to the team there.

And one area that has helped us there and actually across our platform, also in engineered bar, is our financial strength.

Obviously, the consumers are getting a little concerned about some of our peers maybe.

And they, particular the Europeans, want to partner with people that are going to here for 10, 20, 30 years, and we're seeing a lot of activity based on that.

They like our team.

They like that we are innovative and where rapid that we can develop things very quickly.

And they like the fact that, again, we're going to do more than survive, we are going to grow and create better value for them going forward.

The Columbus team also is moving to lighter gauge high-strength low-alloy type of steels, and also X70, X80 pipe grades.

So they're expanding their product mix.

We've also had great fortune with our existing customer base, in our new process in particular.

They have got the facility on-site, and I think Chris, that activity is going to increase from almost 30,000 tons in prior years to about 120,000 tons in 2015.

So our partnering relationships and our consistency of commercial approach, I think, is paying huge dividends down there.

And then the paint line and the Galvalume expansion is only going to accentuate that.

It brings 250,000 tons or so of construction-type painted products, HVAC, appliance grades, service critical materials.

So the team is doing an absolutely phenomenal job there from my perspective.

Congratulations on the progress there, and you've piqued my interest.

You made a comment during your remarks about opportunities as they might open up this year, because of the financial stress you alluded to in your comments about some of your customers are getting increasingly concerned.

In addition to bolt-ons and maybe looking further downstream, would you be averse to looking if there are some opportunities that could open up, say in the upstream area and the mill side.

Or should we think about opportunities in addition to organic, the more acquisitive opportunities continuing to be more bolt on type?

Well, obviously the environment is a somewhat challenging for some of our peers.

And the team, as you heard, did an absolute phenomenal job last year in performing in a tough environment.

And I think generating over $1 billion of cash just demonstrates the strength of our business model and the phenomenal job our guys and girls did.

It put us into a phenomenal position, we've got record liquidity.

We have a lot of cash.

We're healthy and in a position to grow, and we still have if needed, access to capital markets because of all that.

Where as many of our, some of our peers perhaps will struggle there.

From an allocation perspective, because I think, Tony, that's where you're headed there.

We have said in the past and would like to continue a positive profile on our dividend.

We have focused internally in looking at organic opportunities, and there's some incredibly positive value creation, very efficient effective CapEx through some organic growth projects.

We have somewhere around 400,000, maybe 500,000 tons of excess hot metal capacity at Columbia City with our Structural and Rail Division that we can leverage.

The team has been working on the in balance in hot metal and downstream production at Roanoke, so there's some upside there.

And Steel West Virginia has a somewhat owed not cast environment, which we can I think improve on in some way, shape or form going forward.

And then there are, obviously, just the innovative tweakings that our guys seem to continually come up with that we've got a smaller hot room Galvalume line expansion potential (inaudible).

There's just a myriad of smaller projects that the guys just continue to come up with to create value and diversify our product mix even more.

On the acquisitional side, again, the industry is in stress.

Our main focus is in improving the quality of our margin, the profitability on our business, and I think that speaks more downstream than back stream.

So, value add, downstream processing, things that mitigate the cyclicality of our business, things that will mitigate, perhaps, the import situational import pressure that will be with us forever at some level.

Matthew Korn, Barclays.

Good morning, everybody.

On the Steel Operations side, we've seen industry capacity utilization numbers up from the December trough, but they are still low.

I'm curious, now that we're about a quarter through the quarter, is the velocity of orders that you're getting from buyers meaningfully improved?

Have the buyers pulled out of their deflationary expectations that it had set in for so long?

And overall, is the seasonality of demand, maybe even ex energy, is that following a normal track in your view, or are things still fairly fragile?

I think there's positive momentum generally.

I'm sure Dick can speak to some of it.

But the inventory overhang, there is continued destocking there, and it's becoming imbalanced.

It's still relatively high, particularly in hot band.

But in coated products and cold rolled sheet, I think it's getting into a good position.

And you speak to seasonal uptick, I think we're seeing that, as well.

We suffered in I think it was October/November is where we took a real hit to volumes.

And we were just talking this morning, in the last two weeks, Chris, the last two weeks of December, Columbus took 330,000 tons of orders.

Quite a flip in our (technical difficulties).

For some time, the customer base has been concerned as to where raw material pricing might go.

There is consumer confidence out there just from the global geopolitical environment is [a cloud].

But once they saw stability in raw materials, I think if they came back to market.

So our lead times have been stretching out.

They are weakest in hot band, and again, there is still a lot of inventory out there.

But lead time, Dick and Butler and Columbus, is in the two, probably those stretching to three, weeks.

Still, we keep it no longer than four weeks in any event.

But of all the products, hot band is probably the softest.

On cold rolled sheet and coated, I sense a tightness forming in that arena.

I think it's a combination of the automotive arena is strong, so the integrated mills have got a relatively good order book, construction continues to come back.

There is some destocking going on, and we have some relief from the trade cases and erosion of import levels.

So that's timing, and we're at about five weeks at Columbus.

We're over six weeks at Butler, and the techs are at six to seven weeks out.

So that arena, I think is, again, I sense a tightness growing there, and that obviously gives the ability for some further price appreciation.

And you may see, and strange, I saw it in the American metal market this morning.

But we are seeing, too, a slight divergence of the typical spread between hot band and other products.

I think hot band, near term, will be flattish, or as I said, cold rolled sheet and coated are likely to appreciate.

Thanks.

That's actually very helpful.

Let me switch over just really quickly to Fabrication.

And tell me if this isn't the right way to think about it.

But could you describe, what would be your order backlog today relative to your current staffing levels maybe compared to where you were a year ago?

In other words, do you have 8 weeks, 10 weeks of work pending, 12, 4, again, if that's a reasonable way of comparison?

And then you've mentioned that you still expect nonresidential growth, construction growth for 2016.

On terms of a rate, do you think that we're going to pick up from last year?

Anything softening from last year?

Have you seen any new activity spurred on by the lower prevailing prices at all?

Anything like that.

When you are comparing backlog from early in the year to the end of the year, one has to be a little careful.

Because the productivity of the teams up there have done -- the improvement in productivity has just been phenomenal.

Chris, do you want to speak to the backlog?

Yes, I'd say year over year, we have seen a change.

We're going into -- well we're in the middle of a quarter with a stronger backlog in this quarter than we had at this time last year.

As far as our capacity, we did not have to add too much capacity in 2015, which is remarkable given our results.

That's more leveraging our existing capacity to a greater extent, occasionally working some overtime.

We have a lot of flexibility in that regard.

So with about the same staffing, we were probably at -- all of our backlog is about 12 weeks.

Our backlog is always about 12 weeks out.

It just depends on how large that backlog is.

Because that's typical lifecycle of a product for us.

But we were soft last first quarter, first quarter I think was our lowest volume.

This year is up substantially, Mark.

Everybody is running full.

We have seen it no seasonal downtime yet.

That's always in the offing in February and March, depending on weather.

But right now, things are steady.

Super.

And I know we spoke about it already, but just to emphasize the CSI acquisition.

Relatively small for us, perhaps, but a very good value and it's already paying great dividends.

The deck share increased from the beginning of the year, 24% to 31% at the end of the year, I think is testament to the decision that the team made there.

Great.

Thanks, Chris, Mark.

Best of luck for the rest of the quarter.

Thank you.

Chris Terry, Deutsche Bank.

I've just got a couple.

Maybe if, Theresa, on the balance sheet, so following a good year where we had some wins on the working capital side.

Can you dig into some more details around the opportunities perhaps on the accounts receivable and the inventory throughout 2016, and how we should think about the free cash flow and working capital positions towards the end of the year?

Certainly.

As we look at 2016, from a working capital perspective, the premise for us is that we think raw materials, specifically scrap, are going to stay pretty flat throughout the year on an annual basis.

And with that, we really do try to manage our inventories to a less than four weeks on hand at our steel mills.

So we don't expect a big working capital funding requirement on the raw materials side of the equation.

So then you are really looking at finished goods and accounts receivable.

From a finished goods perspective, we also traditionally produce to ship.

There is only certain inventories that we keep at our bar mills and our structural mill.

And so with that, if there's any significant appreciation in price or value, there will be some funding requirements.

But otherwise, we don't see that changing materially either.

And from a receivables standpoint, we're pretty comfortable with our DSOs.

There's always room for improvement, but the expectation right now is that working capital in 2016 shouldn't require on an annual basis a great deal of additional investment.

Okay.

Thanks very much.

And then, Mark, you touched on in that last answer, but what would you expect, then, throughout the year on the gap between the HRC and the CRC?

Without giving too much detail, but I think we're at about $140 to $160 per short ton at the moment as opposed to a normal $100 to $120 margin.

Do you think it can blow out beyond that, or do you think that's the quantum that we should expect throughout the year?

Well, I think it will expand beyond the range today for sure.

Dick, don't you think?

I think there will pressure on it.

I think there's always boundaries, but I think under this current environment, you're right.

Okay.

Thanks very much.

Evan Kurtz, Morgan Stanley.

Good morning.

I hope you had a nice holiday.

Wonderful.

Thank you.

Just maybe one on the FIFO you mentioned that you had 1.5 to 2 months of lag on your scrap costs in the fourth quarter when everything was coming down.

Any way to quantify exactly how much that actually hurt in the fourth quarter, either on a dollar per ton basis, or overall?

I haven't personally quantified it, but off the top of my head, no.

No, Evan, that would be very difficult for us to quantify right at this time.

So we will pass on that question.

Okay.

So I have another one.

How about the strategic options at the metals recycling business?

I know it was a very difficult quarter in the and fourth quarter with prices falling so quickly, but is there anything you can do there as far as trimming some operations to maybe boost profitability in that business?

Russ can chip in with some detail.

But the softness in the fourth quarter, obviously, driven by reduced gross margins, not just ferrous margins, but the nonferrous as well.

But if you just look at the year, it's a tough environment when you have a progressively down-trending commodity market in every segment, copper, nickel, aluminum and ferrous.

When you start the year on a $380 a ton or so and you end the year at $160, $180.

The recycling business historically has earnings capability and volatility, not just a consumer downward trend.

So that certainly impacted the year as a whole in the fourth quarter.

And I would suggest we already mentioned that the market is somewhat stable going forward through 2016.

That unto itself should give that team some help.

But, Russ?

Yes, Evan, thanks for the question.

I think in more specific details, in 2015, we continued to try to mold our business around what markets are available.

And so in 2015, during that prolonged downturn in market prices, we did idle our shutdown I think 19 plants, locations, across the platform.

We also idled a couple of shredders to try to balance out the flow and the demand that comes through.

Again, in the scrap business, we're flowing material through on a constant basis.

And so as Mark talked about, that constant downturn does not give us a chance to pause or catch back up, so we're always trying to catch that falling knife.

All right.

And maybe on that, what's your near-term outlook for us for scrap?

Well I think, again, as Mark and Theresa both stated, Evan, I think we're seeing flat in pretty range bound in a pretty flat environment for the year.

Again, after a more than 50% price decrease in 2015, we think we've found a bottom point.

Again, there will be some volatility, but we don't expect gross ups or gross downs.

So our view is that it is a pretty flattish environment for 2016.

Great.

Thanks.

David Gagliano, BMO Capital Markets.

Thanks for taking my question.

It is related to the commentary regarding moving up the value chain, et cetera.

And I know traditionally, historically, Steel Dynamics has been more and has operated more in the spot end of the business spot as compared to contract.

Can you remind us your current mix between spot and contract, number one?

Number two, how that may change in 2016?

And number three, of the contract business, how much actually reprices on a calendar year basis?

Thanks.

Well, when we talk of contract business, those are not fixed-price contracts.

They are index -- they are volume contracts against the index.

So as the product pricing ebbs and flows, the pricing changes with it.

But we are not locked into fixed pricing all year.

I wouldn't say -- there's a few times, but absolutely meaningful in the scheme of the things.

And even those contracts, we don't have lots of those.

Many of them we work with scrap buybacks and we have many types of arrangements, and so I would tell you we have a host of them.

So we've had to adapt ourselves.

You ask how will we be changing in 2016, as we move up the value chain, as you pointed out, dealing with automotive, dealing with off-road heavy equipment and so forth, they have different expectations.

We've tried to modify those expectations to fall more in line with our comfort levels.

Some have been more willing than others to adapt towards our direction.

Some have been surprisingly pleased with the results of some changes in our direction, and some we just can't get there with.

But I think overall, there's always two parties that are satisfied, and we don't have long-term fixed contracts at all.

Okay.

So generally speaking, should we expect a meaningful shift in volume tied to whether -- obviously there's pass throughs for scrap, but volume is tied to either a fixed margin or a price in 2016 versus 2015, or very consistent verses 2015, you would say?

No, I would say that generally it would be consistent.

We are pretty happy with the balance between those volume commitments versus the spot market.

To emphasize Dick's point, because I think it's a critical point because there's a changing paradigm maybe.

But this past year when automotive pricing, we don't know for sure, but automotive pricing probably on a fixed basis was in the [$600] range-ish.

When we see or our prospective customers in that arena see the positive impact of a CR based index with us, they saved, in the spot world, considerable money.

I think you're going to see that paradigm actually change for the auto industry personally.

Okay.

And then just a quick follow-up.

Just remind us again, on the $100 million investment in Columbus on the paint line, as we get out into 2017, what's the combination, the volume and a rough rule of thumb on a margin expansion expectation for that investment?

So, the volume is the paint line has the capability of doing 250,000 tons annually, and then we also have the capability of Galvalume, as well, which could start a little bit earlier than the paint line.

But the paint line is expected to start in the first quarter of 2017.

Traditionally, we sometimes talk in payback periods.

And the idea around the paint line is that much like a lot of our other projects, that payback period is around a 24-type months payback period, two to three years.

So we're very comfortable there.

And if you look at our product portfolio across the Company, painted flat roll is really our highest margin, or very close to our highest margin product across the entire Company landscape.

So it should be meaningful for Columbus.

And as we draft that last 300,000 or 400,000 tons of capacity at current design, we think allows for -- that will just be some vanilla hot band that won't be sold.

But 250,000 tons will be sold as painted that would otherwise maybe be sold as a vanilla plain hot band.

Perfect.

Thank you.

(Operator instructions)

Timna Tanners, Bank of America Merrill Lynch.

Good morning.

Happy 2016.

Thank you, Timna.

I wanted to follow up on the automotive discussion.

I thought it was a really interesting point about the concern over the financial strength of some of your competitors, but I have not heard you talk about as much about automotive in the past.

So can you remind us what applications you are targeting?

I know Columbus at one point was looking at exterior automotives before you bought them.

Is that still on your targets?

And how big either in a percent or absolute value could auto become over the next several years for Steel Dynamics?

Well, we have always been a reasonably large player in automotive.

Obviously, not anything close to the integrated mills, but relative to our electric out in front of space peers.

Butler, for instance is around about 30%, 32% of its product mix.

It has been for a long time going into automotive.

Supply chain different there, where we've used processes to be the conduit into that business.

Where as we are going to retain and keep those relationships.

At the same time, the automotive consumers have a mill direct buy or business which is substantial.

And so we are targeting that mill direct business through our automotive team of eight folks that we've brought on here.

And as I said, they've been doing a phenomenal job.

The addition of Columbus gives us some better product capabilities.

Obviously, the width, 72 wide, helps, and it also allows us to get into some of the, not all, but some of the high-strength low-alloy type products for automotive.

We are not targeting exposed.

There's plenty of steel on a car, on a vehicle, on a truck that doesn't need the super service-critical qualities that maybe an integrated producer can provide.

Okay.

If you had a percent or any more quantification that would be great.

I wanted to change gears to the trade cases, because you are the first of the mills in the US to host your conference call.

And the numbers that came out, at least in preliminary results so far, have been, aside from Chinese galvanized, have been small in terms of the damages awarded.

So I just want to get your sense, you did say in your prepared remarks that the trade cases should help keep imports lower than they have been.

But in light of what we've seen so far, what gives you that conviction or what do you expect to see happen?

Okay.

Just one follow-up from your original question, Timna.

The aim for automotive to come out of Columbus, we would like to grow that business about 400,000 to 500,000 tons a year.

Dick, do you want to talk to the trade?

Sure.

I will just make some quick observations.

From a timing perspective, we have preliminary rulings on corrosion resistance on both the anti-dumping and countervailing and the final determinations.

We asked them to be aligned as an industry, and those will come out the middle of May.

The ITC will likely rule on final injury in July.

Just why would industry ask for the alignment of the two determined final determinations by the DOC?

That would be because we think that not all the information was taken into account.

We believe that the findings on Taiwan on Galvalume and so forth weren't necessarily correct, and to give the Department of Commerce more time to review the information that was submitted to fairly evaluate it and possibly revise the information upon review.

And so therefore, we believe there is better value coming there.

I think the most important thing on both the CVDs and the ADs that we could say to date is that when you look at the percentages, huge percentages on the Chinese, 255% on the ADs and 235% on six firms on the CVDs.

28% to 34% of the total imports of coated products came from China, and the lowest pricing was driven by the Chinese products.

And so, by taking out really a non-market driven competitor, I think it's a tremendous advantage to the rest of the market and to all of us in the domestic field.

The others, you have India at 12%.

And again, the Chinese -- that was a million tons of coated products.

And if you take a million tons out of that coated products market, that is just a million tons, that is a jump ball for others.

Again, not all are going to get captured by the domestic market, but it's available to other suppliers.

India, 12%.

400,000 tons, 400,000 -- and these are metric tons, so it's even bigger, as we talk, available to us.

Again, 7%, 5%, most again just on CVs, and get another 6% to 7% on ADs.

Again, they are driven by profits.

So you add those together, that is 13%, 14% on top of -- that comes out of their profit.

So they have to be driven by a question, am I here to make a profit or not?

And if they're not here just for creating employment in their home state, then they will have to make hard choices.

Do they really want to participate in this market versus going somewhere else?

I could go through all of these, I don't know if you want to take the time.

But you have got cold rolled that's going to have a preliminary AD coming in February.

You've got hot rolled, the preliminary AD in March, and we've asked for alignment on all of those final determinations again.

That gives the Department of Commerce plenty of time.

Those will be coming, cold rolled on July 15, and hot rolled on July 29.

And the ITC will rule in August and September on those respectively.

So again, you take out the bad apples in each case.

Whenever anyone is really looking to make a profit here, I'd tell you that 6% or 7% on either countervailing or dumping, and you add those together, you get 10%, 15%, 20%.

That's a real disincentive to be in this market.

And these are big tons.

So it provides our salespeople an opportunity to get out and get moving and to capture them.

Timna, if you look at the market generally, imports early in the year are around about 34% of our domestic consumption.

That eroded to about a 30% in the fourth quarter, with a lot more activity to be determined here in this month, next month.

So we strongly predict that imports will continue to erode.

Will they get back down to 21% or 23% in the near term?

Probably not.

But again, you knock a million tons here and a million tons there out of the marketplace, that is meaningful.

And yes, there is the old whack-a-mole game.

You totally shut China out, but maybe Vietnam is growing a little bit here and there and you're getting some tons substituted elsewhere.

But to Dick 's point.

You add counter duty and anti-dumping, you may think 15% relative to the 200% against China is small, but these products are selling.

They are not hot band products, they are coated and painted.

So they are selling at $600, $700 a ton,10%, 15%, that is $60, $90, $100 impact.

And as we talked to a larger, I won't name names, but several of our very large processing customers out there, they also anecdotally indicate to us that these are meaningful duties and will erode the import number.

Okay.

Thanks for that perspective.

Phil Gibbs, KeyBanc Capital Markets.

Thanks.

Good morning.

I had a question on the SBQ business, and I know there are some out there that price that business on an annual basis with annual, call it, contract prices.

Any sense you could provide us as to how much of that business may be more on an annual contract reset?

Because I know you typically are commercially a bit more nimble than maybe some others.

Yes.

So, from that perspective, you're right.

We are much more spot-focused.

So what you would consider a truly annual reset on base pricing, aside from obviously we have the alloy and the scrap surcharges and whatnot.

We would say that maybe about 25% to 35% of our volume, and that did price down somewhat heading into 2016, but we still have a lot of opportunity on the spot side of the equation and just on volume in total.

And that 20% to 25% is based on 2015 volumes, not on capacity, which obviously capacity is a lot higher than that at 950,000 tons.

Okay.

And then I appreciate that.

And then second, just real quickly, for Dick The downstream products like cold rolled and galve have made their way incrementally higher relative to hot-rolled.

I know, Mark, you had talked a little bit about that earlier in the call.

But is there more -- does that invite more import on that side if that gets too far out of whack relative to hot-rolled?

Thanks.

It always has the opportunity if it gets out of align.

And so, I would tell you that I think there's -- right now there is an opportunity for, as we said earlier, some more expansion, but it can't go stupid.

So everyone is very conscious of it, and I think our salespeople are working very hard at trying to find where that fine line is.

Thanks so much.

Thank you.

Aldo Mazzaferro, Macquarie.

Good morning, gentlemen, and, Theresa.

Thanks, Aldo.

And, Tricia.

I like the business philosophy, don't do anything stupid.

But in terms of the scrap business, can I just ask -- the numbers are actually better than I expected given the major drop.

And I'm wondering, you must have at least kept pace with the decline in pricing on your import costs.

Would you say that's fair, or do you think you trailed it somehow?

Aldo, I would tell you, you can't keep complete pace with it.

That's the problem with a falling market.

What you think you're getting ahead today, you get slammed at the next market turn.

We kept fair pace with it, but it was virtually impossible last year to try to get out in front of it and try to make a headway on it, us and the entire industry.

I'm sure you've seen the entire industry is struggling, as Mark talked about earlier.

Yes.

So if you take this forward a couple -- like a quarter or two and you see a sideways pattern, then you probably gained back some of that stuff you missed on the spread, right, going forward the next couple of quarters?

I think we've got an opportunity -- as Mark said earlier, in a volatile market, one that moves up and down, provides the best opportunity for the guys in the scrap business.

But after last year, I'll take a flat market all day long.

Yes.

So Russ, does this opportunity -- Mark mentioned how the regional competitors are either for sale or on their way to bankruptcy.

Do you see this is an opportunity to increase your stake at all in the scrap business?

Or do you think the opposite, or not at all?

No, Aldo, I would tell you our team has been very busy in trying to secure business where those opportunities arise.

Again, I think just like Mark alluded to or talked to about earlier, the strong financial condition of our Company, certainly that bears in mind when you've got people who are generating scrap that want to get paid.

And so we've certainly used that leverage to try to help get the right kind of business for us for the long term.

And our teams have done a great job.

They been very active in trying to do what is right for us in the long term.

Aldo, I think the emphasis there would be the focus on secure business, not necessarily assets.

The industry obviously is going through incredible financial stress.

If you read -- if one reads the American metal market literally every morning, there are two or three scrap yards, scrap organizations either idling, going bankrupt, selling, it's a stressed, stressed industry.

You might see us on a very small basis on a very regional basis pick up a small asset here and there, but I'm talking small, small dollars, not huge.

And you may also see us strengthen our abilities around the Columbus mill to provide some security there.

But we're not in a big let's roll the scrap industry up and consolidate.

Could I ask one more question?

In terms of your -- if you look across your assets, across all the Company assets, can you say which mills might be underutilized today because of the fact that they are ramping up the new equipment and bringing on equipment to full utilization?

Compared to how many mills would you say are underutilized because of the demand reasons at this point?

And you're talking about SDI mills now?

Yes.

Across SDI, I'm thinking obviously you have got the engineered bars that are coming up and you probably have some rail coming up.

I'm wondering, how much of your capacity utilization might reflect the fact that you've invested in new capacity and are bringing that onto the market, as opposed to just plain and simple demand weakness?

I'll take a stab at that, and then Mark can clean up where I might have missed.

But I will start from the East and work my way West and South.

But Roanoke is not running full because the market.

We run short of both on -- we have excess both melt and excess -- we used to have more billet sales as well as merchant sales.

But because of the imports, we are lacking a little bit of both.

So that's the market.

Steel of West Virginia actually runs very full on both of their mills.

As Mark alluded, we're actually melt short and so they do get billets from Roanoke.

So they are not lacking anything from an output perspective from the mills, so they are running full.

The Techs could use more business.

But as we see a strengthening in the galvanized and we are diversifying the product there, so forth, and we have Galfan product that had record tons last year.

We're going to look for bigger tons this year, that's a matter of market acceptance and we're also expanding our capabilities.

We're looking at maybe making some improvements in MetalTech which has been sometimes the weakest, and so therefore, we're looking at making a little bit more capacity there.

I come here, Butler.

As mark Mentioned, we just started pickling on our push-pull pickle line last week.

And if we had that running stronger, we would be pulling more hot band tons through there.

Because we're backlogged amazingly in front of the pickle line.

So we'd have more capacity running through.

And as mark alluded, then we have some other projects in tow that will put more value-added product through Butler.

But now that we have the pickling capacity in house, and so, Butler stands to improve.

Columbia City has the capacity to do more tons.

The number one mill, the heavy section mill and rail mill, it runs full.

I think right now, railroads are -- class one railroads are cutting back somewhat on their capital projects.

I think some of that is energy-related, so forth.

Still pulling, I think, their maintenance is fine, but I think their capital is a little bit weaker.

But we will see nonresidential I think continue to improve.

So the number one mill, the heavy section mill, is full.

The number two mill, the medium section mill, struggles to ever -- we haven't filled it up ever.

We have two to three crews there.

The third crew bounces back and forth between rolling the mill and going out to rail welding.

Wherever they are most efficiently utilized.

So that's some capacity that is yet to be used.

And Mark has also mentioned that we have more melt and capacity there.

They do send some balloons to Steel West Virginia, based on whatever Steel West Virginia needs are.

Dropping down to Pittsboro, that's a market that has been weakened by even the automotive is strong.

As we all know, agriculture, off-road, you name it, forgers, there's a lot of opportunity to improve that.

We made a great investment in our smaller section, the 14-inch mill, as we call it, has kept that utilization up, making small bars, precision bars, great acceptance in the marketplace.

When the market recovers, we are prepared for it.

We do not run our melt shop there during the day, Monday through Fridays, due to higher power costs.

We make up for it on off-peak and the weekends and so forth.

And so we really are standing ready to pound that if we want to, and when the market recovers.

And then you have Columbus.

And you've heard enough about that.

That we are growing that market with customers.

So that's the utilization, and we stand ready to fill up wherever we can.

And very little of it is equipment.

Probably as I mentioned, really only Butler is the one -- and that's not anyone's fault, we just started last week.

But in aggregate, Aldo, the steel team has done a phenomenal job growing its capabilities, I would tell you, over the last five years, since 2008.

And we still have more than 2 million tons of what I call late capacity that we've never had a steel consuming environment in which to totally exploit that.

So our capabilities today are so much ahead of our prior peak, it's untrue.

Thanks so much.

That was an excellent rundown.

Thank you very much.

Take care, Aldo.

Justine Fisher, Goldman Sachs.

Good morning.

I know it's been a long call, so I have one question for Theresa.

As far as the potential acquisition opportunities that you are looking at, are most of the opportunities that you are seeing in a range that could be financed with cash, or are more of the opportunities big enough such that they would require coming to the capital markets?

Well first of all, we are in a unique position that the capital markets are a bit messy right now.

But we believe that we are one of the few still have access, which is important and a good thing.

So we see that improving throughout the rest of the year.

But I think that we're looking at all ranges of potential growth.

And so with that, were we to need to access capital markets, we believe we have the ability to do so.

If not, the cash generation you've seen is pretty significant, with over $700 million of cash on the balance sheet.

We've got quite a capacity just with that in and of itself.

But for meaningful long-term investments, we'd like to use the capital markets as appropriate to invest long term.

Okay.

So it could be something in the high $100 millions, $1 billion range there?

I think everything is on the table.

All right.

Thanks very much.

Thank you.

Theresa, we had a question here on it -- sorry.

No, please proceed.

Chris?

I'm sorry, this is Chris.

I just wanted to report on our Columbus acquisition.

We owed some answers or some information to the team.

Just an update, when we contemplated the Columbus division, we had identified about $30 million in what you might call non-operating cost savings opportunities.

That might have been power renegotiations, headcounts, things like that.

We identified about $15 million in 2015, which we capitalized on, about another $15 million or so in 2016 is on the horizon.

Those kind of pale in -- we have a unique incentive program for our folks that stresses not only quality production, but also cost of conversion.

And the savings in 2015 that we realized in conversion costs are multiples of the numbers we talked about in non-operational.

More non-operational opportunities in 2016.

We are nowhere near Butler's cost structure in some departments, so another big opportunity for multiples of that number in 2016.

So, I just wanted to report that the plan is coming through, and the Columbus folks are executing well.

So what you're saying is the $30 million in total synergies pales in comparison to the opportunity in conversion costs in market share shifts.

That would've made for a shorter call.

Okay.

Thank you.

All right, Kevin, we can with the next question.

Garrett Nelson, BB&T Capital Markets.

Hello, everyone.

Great quarter from a free cash flow perspective.

Could you talk a little bit more about some of the uses of cash we should expect in 2016?

In addition to the CapEx increase from the paint line project and the potential acquisition opportunities that you talked about.

In the past, it looks like you've typically raised your quarterly dividend in the second quarter.

Is this something we should expect again this year?

And is debt paydown a priority, are you comfortable with your current leverage ratios given the strong cash flow and record high liquidity?

Well, I think from a net leverage basis, we're at 2.7 times.

So that is under hurdle of 3, so we're relatively comfortable there.

That's not to say we wouldn't take advantage going forward.

From a dividend perspective, we have or you've seen what we call a positive profile, but an improvement or an increase year over year.

Last year, was a big step up, 20% or so.

And that was really a reflection of the acquisition of Columbus and the step up in natural cash flow from that asset.

So that would not suggest that when we say a positive profile, you're going to see 20% every year.

But I would suggest that the positive profile will hopefully remain intact going forward.

We've got substantial cash flow generation as you saw last year, and our business model will continue to provide the ability for that dividend payment.

Okay.

Great.

Thank you.

Phil Gibbs, KeyBanc Capital Markets.

I just had a question on capital allocation, Teresa.

Approaching $800 million in cash right now, your debt maturities are pretty well laddered, CapEx under control.

Any thoughts on what the hierarchy of capital allocation is at this point, and how we should be thinking about deployment?

Thanks.

I think from the team's perspective, and Mark can kick me under the table if he disagrees.

But growth, we believe, is still going to drive the greatest value to the shareholder.

And so especially in this environment when things are pretty weak for our peers to wait and watch to see what assets might become available.

And then also on the organic side, we mentioned several projects were we have extra melting capacity that we want to utilize.

So that tends to be capital efficient.

So I think that's our primary focus.

And then obviously, we have the positive dividend profile.

We have additional potential debt reduction, but you're right, the maturity ladder is really flexible for us from a long-term great rate perspective.

But we evaluate all different aspects of returning value to shareholders.

But I would say that's the hierarchy.

Mark, do you agree?

Yes, totally.

We continually assess options.

I would tell you that the current environment is certainly unique, I think, in most of our short life spans in the industry.

But it's going to be an interesting year, interesting 18 months.

And I think it's a case of a good time to keep one's gun powder dry.

Be patient.

Because I think there are going to be -- there are already tremendous opportunities -- I take that back.

There are already a myriad of opportunities coming to market.

And I think that the focus needs to be in being prudent and patient, and waiting for those opportunities that will really, really improve our margin profile.

I'm not just taking the first thing that comes down the road, so to speak.

That's really helpful.

I appreciate it.

And the last one and I will take off.

If you had to guess right now, Mark, would you expect your steel utilizations to be better in the first quarter than the fourth quarter?

Thanks.

Utilization, yes.

For the first-quarter, volumes will be improved.

I think margins will -- one needs to realize that there is going to be a carry through of pricing.

We do have index pricing, so the contract pricing will carry through into January through December.

So that's going to mute things a little bit, but no, volumes utilization definitely will improve.

Thanks so much.

Thank you.

That concludes our question-and-answer session.

I'd like to turn the call back over to Mr. Millet for any closing remarks.

Super.

For those on the line, we certainly appreciate your support.

I continue to say that we are incredibly and uniquely positioned in our industry.

Our business model has paid off.

We have and we will continue to generate a strong cash flow in these difficult times.

We have, as I said earlier, a couple million tons of latent capacity to exploit over the year.

We have inorganic opportunities.

We have certainly organic opportunities to improve.

Columbus continues to do a phenomenal job, and we expect great things there.

And as we've discussed, I think there are going to be opportunities available for acquisitional growth, as well.

We just need to be careful and make sure they are the right ones.

We are excited.

Even in this tough environment, we all get excited every day to come to work.

We've got a phenomenal team, and we are supported by phenomenal customers.

And we certainly appreciate your support too.

Thank you.

Have a great day and be safe.

Think you.

Once again, ladies and gentlemen, that does conclude today's call.

We thank you for your participation.

Have a great and safe day.