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Table of Contents

st

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period

      ended September 30, 2023

OR

       Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______

Commission File Number 0-21719

Steel Dynamics, Inc.

(Exact name of registrant as specified in its charter)

Indiana

    

35-1929476

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

7575 West Jefferson Blvd, Fort Wayne, IN

46804

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (260) 969-3500

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock voting, $0.0025 par value

STLD

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

    

Large accelerated filer

    

Accelerated filer

    

Non-accelerated filer

Smaller reporting company  

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

As of November 2, 2023, Registrant had 161,816,470 outstanding shares of common stock.

Table of Contents

STEEL DYNAMICS, INC.

Table of Contents

PART I. Financial Information

Item 1.

Financial Statements:

Page

Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

1

Consolidated Statements of Income for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)

2

Consolidated Statements of Comprehensive Income for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)

3

Consolidated Statements of Cash Flows for the three and nine-month periods ended September 30, 2023 and 2022 (unaudited)

4

Notes to Consolidated Financial Statements (unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

25

Item 4.

Controls and Procedures

25

PART II. Other Information

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

27

Item 6.

Exhibits

28

Exhibit Index

29

Signature

30

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30,

December 31,

2023

2022

Assets

(unaudited)

Current assets

Cash and equivalents

$

1,765,467

$

1,628,417

Short-term investments

500,844

628,215

Accounts receivable, net

1,807,313

1,976,282

Accounts receivable-related parties

74,736

79,769

Inventories

2,941,634

3,129,964

Other current assets

138,605

195,371

Total current assets

7,228,599

7,638,018

Property, plant and equipment, net

6,313,366

5,373,665

Intangible assets, net

265,845

267,507

Goodwill

477,471

502,067

Other assets

643,675

378,727

Total assets

$

14,928,956

$

14,159,984

Liabilities and Equity

Current liabilities

Accounts payable

$

1,049,317

$

1,007,304

Accounts payable-related parties

10,858

9,934

Income taxes payable

30,343

6,520

Accrued payroll and benefits

405,556

610,558

Accrued expenses

336,242

340,646

Current maturities of long-term debt

86,061

57,334

Total current liabilities

1,918,377

2,032,296

Long-term debt

3,009,010

3,013,241

Deferred income taxes

961,117

889,103

Other liabilities

182,161

129,539

Total liabilities

6,070,665

6,064,179

Commitments and contingencies

Redeemable noncontrolling interests

171,212

181,503

Equity

Common stock voting, $0.0025 par value; 900,000,000 shares authorized;

267,772,737 and 267,762,488 shares issued; and 163,489,456 and 172,936,163

shares outstanding, as of September 30, 2023 and December 31, 2022, respectively

650

650

Treasury stock, at cost; 104,283,281 and 94,826,325 shares,

as of September 30, 2023 and December 31, 2022, respectively

(5,510,983)

(4,459,513)

Additional paid-in capital

1,214,894

1,212,566

Retained earnings

13,189,468

11,375,765

Accumulated other comprehensive income (loss)

(494)

889

Total Steel Dynamics, Inc. equity

8,893,535

8,130,357

Noncontrolling interests

(206,456)

(216,055)

Total equity

8,687,079

7,914,302

Total liabilities and equity

$

14,928,956

$

14,159,984

See notes to consolidated financial statements.

1

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

Three-Month Periods Ended

Nine-Month Periods Ended

September 30,

September 30,

2023

2022

2023

2022

Net sales

Unrelated parties

$

4,408,861

$

5,438,747

$

14,061,569

$

16,814,051

Related parties

178,196

212,960

500,324

620,436

Total net sales

4,587,057

5,651,707

14,561,893

17,434,487

Costs of goods sold

3,635,038

4,187,278

11,246,894

12,304,203

Gross profit

952,019

1,464,429

3,314,999

5,130,284

Selling, general and administrative expenses

145,896

132,627

431,414

403,019

Profit sharing

64,413

105,122

224,978

373,333

Amortization of intangible assets

8,160

6,836

25,962

21,158

Operating income

733,550

1,219,844

2,632,645

4,332,774

Interest expense, net of capitalized interest

18,415

25,347

61,689

67,683

Other (income) expense, net

(39,464)

(13,975)

(105,748)

2,472

Income before income taxes

754,599

1,208,472

2,676,704

4,262,619

Income tax expense

174,817

289,997

636,412

1,022,138

Net income

579,782

918,475

2,040,292

3,240,481

Net income attributable to noncontrolling interests

(2,587)

(4,150)

(13,680)

(12,671)

Net income attributable to Steel Dynamics, Inc.

$

577,195

$

914,325

$

2,026,612

$

3,227,810

Basic earnings per share attributable to Steel

Dynamics, Inc. stockholders

$

3.49

$

5.07

$

12.04

$

17.33

Weighted average common shares outstanding

165,170

180,264

168,259

186,288

Diluted earnings per share attributable to Steel

Dynamics, Inc. stockholders, including the effect

of assumed conversions when dilutive

$

3.47

$

5.03

$

11.98

$

17.21

Weighted average common shares and share equivalents outstanding

166,105

181,613

169,150

187,531

Dividends declared per share

$

0.425

$

0.34

$

1.275

$

1.02

See notes to consolidated financial statements.

2

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three-Month Periods Ended

Nine-Month Periods Ended

September 30,

September 30,

2023

2022

2023

2022

Net income

$

579,782

$

918,475

$

2,040,292

$

3,240,481

Other comprehensive income - net unrealized gain (loss) on cash

flow hedging derivatives, net of income tax expense (benefit) of

($485) and $703 for the three months ended, and ($441) and ($205)

for the nine months ended September 30, 2023 and 2022, respectively

(1,521)

2,251

(1,383)

(657)

Comprehensive income

578,261

920,726

2,038,909

3,239,824

Comprehensive income attributable to noncontrolling interests

(2,587)

(4,150)

(13,680)

(12,671)

Comprehensive income attributable to Steel Dynamics, Inc.

$

575,674

$

916,576

$

2,025,229

$

3,227,153

See notes to consolidated financial statements.

3

Table of Contents

STEEL DYNAMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three-Month Periods Ended

Nine-Month Periods Ended

September 30,

September 30,

2023

2022

2023

2022

Operating activities:

Net income

$

579,782

$

918,475

$

2,040,292

$

3,240,481

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

107,418

98,714

326,082

281,961

Equity-based compensation

12,044

12,093

39,800

39,681

Deferred income taxes

19,625

3,990

72,013

3,986

Other adjustments

(12,163)

(12,409)

(20,628)

(1,892)

Changes in certain assets and liabilities:

Accounts receivable

260,915

326,731

173,022

(417,550)

Inventories

102,376

270,628

188,330

154,391

Other assets

(13,423)

(15,789)

(10,504)

(9,274)

Accounts payable

(57,532)

(264,313)

(54,233)

(152,763)

Income taxes receivable/payable

(7,105)

8,269

96,656

146,822

Accrued expenses

121,762

149,766

(195,542)

31,132

Net cash provided by operating activities

1,113,699

1,496,155

2,655,288

3,316,975

Investing activities:

Purchases of property, plant and equipment

(558,361)

(241,229)

(1,142,960)

(564,701)

Purchases of short-term investments

(170,887)

(283,188)

(692,716)

(634,698)

Proceeds from maturities of short-term investments

282,592

49,794

821,668

49,794

Business combinations, net of cash acquired

-

(47,638)

-

(47,638)

Investments in unconsolidated affiliates

-

-

-

(222,480)

Other investing activities

(5,891)

4,113

(221,453)

9,340

Net cash used in investing activities

(452,547)

(518,148)

(1,235,461)

(1,410,383)

Financing activities:

Issuance of current and long-term debt

345,563

348,286

1,066,605

1,050,933

Repayment of current and long-term debt

(316,511)

(363,060)

(1,042,933)

(1,127,051)

Dividends paid

(70,713)

(62,088)

(201,834)

(177,131)

Purchases of treasury stock

(331,318)

(481,676)

(1,065,521)

(1,387,890)

Other financing activities

1,953

(6,057)

(39,075)

(88,825)

Net cash used in financing activities

(371,026)

(564,595)

(1,282,758)

(1,729,964)

Increase in cash, cash equivalents, and restricted cash

290,126

413,412

137,069

176,628

Cash, cash equivalents, and restricted cash at beginning of period

1,480,862

1,012,585

1,633,919

1,249,369

Cash, cash equivalents, and restricted cash at end of period

$

1,770,988

$

1,425,997

$

1,770,988

$

1,425,997

Supplemental disclosure information:

Cash paid for interest

$

9,848

$

9,214

$

61,225

$

59,496

Cash paid for income taxes, net

$

160,178

$

276,948

$

472,936

$

867,350

See notes to consolidated financial statements.

4

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies

Description of the Business

Steel Dynamics, Inc. (SDI), together with its subsidiaries (the company), is one of the largest and most diversified domestic steel producers and metals recycler, combined with a meaningful steel fabrication manufacturing platform. The company has three reporting segments: steel operations, metals recycling operations, and steel fabrication operations.

Steel Operations Segment. Steel operations include the company’s electric arc furnace (EAF) steel mills, including Butler Flat Roll Division, Columbus Flat Roll Division, Southwest-Sinton Flat Roll Division, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia, steel coating and processing operations at The Techs, Heartland Flat Roll Division, United Steel Supply (USS), Vulcan Threaded Products, Inc., and SDI Biocarbon Solutions, LLC, a joint venture to construct and operate a biocarbon production facility. Steel operations accounted for 68% and 66% of the company’s consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 66% and 67% of the company’s consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Metals Recycling Operations Segment. Metals recycling operations include the company’s OmniSource ferrous and nonferrous processing, transportation, marketing, brokerage, and scrap management services primarily throughout the United States and in Central and Northern Mexico. Metals recycling operations accounted for 11% and 8% of the company’s consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 12% and 10% of the company’s consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Steel Fabrication Operations Segment. Steel fabrication operations include the company’s New Millennium Building Systems’ joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 14% and 20% of the company’s consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 15% and 18% of the company’s consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Other. Other operations consist of subsidiary operations that are below the company’s quantitative thresholds required for reportable segments and primarily consist of joint ventures, including the company’s aluminum flat roll mill and satellite slab centers and the company’s idled Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior unsecured credit facility, senior notes, certain other investments and certain profit sharing expenses.

Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Steel Dynamics, Inc., together with its wholly- and majority-owned or controlled subsidiaries, after elimination of intercompany accounts and transactions. Noncontrolling and redeemable noncontrolling interests represent the noncontrolling owners’ proportionate share in the equity, income, or losses of the company’s majority-owned or controlled consolidated subsidiaries. Redeemable noncontrolling interests related to USS (owned 90% by SDI effective April 1, 2023 and 87.5% at December 31, 2022) are $60.0 million at September 30, 2023, and $70.3 million at December 31, 2022. On April 1, 2023, a noncontrolling member of USS exercised its option to require SDI to purchase its 2.5% equity interest, increasing SDI’s ownership to 90%. The remaining noncontrolling members’ option to require SDI to purchase the remaining 10% equity interest of USS has been extended to on or after February 28, 2025. Redeemable noncontrolling interests related to Mesabi Nugget (owned 85.5% by SDI) are $111.2 million at September 30, 2023, and December 31, 2022.

5

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies (Continued)

Use of Estimates

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, and accordingly, include amounts that require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the notes thereto. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment, intangible assets, and goodwill; valuation allowances for trade receivables, inventories and deferred income tax assets; unrecognized tax benefits; potential environmental liabilities; and litigation claims and settlements. Actual results may differ from these estimates and assumptions.

In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results. These consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Cash and Equivalents, and Restricted Cash

Cash and equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is primarily funds held in escrow as required by various insurance and government organizations. The balance of cash, cash equivalents and restricted cash in the consolidated statements of cash flows includes restricted cash of $5.5 million for all periods presented, which are recorded in Other Assets (noncurrent) in the company’s consolidated balance sheets.

Senior Credit Facility

On July 19, 2023, the company entered into a new unsecured credit agreement comprised of a senior unsecured credit facility (Facility), which provides a $1.2 billion Revolver, maturing July 19, 2028. The new Credit Agreement replaces the December 3, 2019 Credit Agreement. Subject to certain conditions, the company has the ability to increase the Revolver size by $500.0 million. The Facility is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to the company’s ability to incur indebtedness and permit liens on certain assets. The company’s ability to borrow funds within the terms of the unsecured Revolver is dependent upon its continued compliance with financial and other covenants.

The Facility pricing grid is adjusted quarterly and is based on either the company’s leverage of net debt (as defined in the Facility) to last-twelve-months (LTM) consolidated Adjusted EBITDA as defined in the Facility (earnings before interest, taxes, depreciation, amortization, and certain other non-cash items, as defined in the Facility), or the company’s credit ratings. The minimum pricing is adjusted Secured Overnight Financing Rate (SOFR) plus 1.000% and the maximum pricing is adjusted SOFR plus 1.75%. In addition, the company is subject to an unused commitment fee of between 0.11% and 0.275% (based on either the company’s leverage of net debt to LTM consolidated adjusted EBITDA, or the company’s credit ratings) which is applied to the unused portion of the Revolver.

Other Obligations

One of the company’s consolidated joint venture subsidiaries has a secured credit agreement with a maturity in June 2028, comprised of a $125.0 million revolving credit facility, which is subject to a borrowing base determined from eligible accounts receivable and inventory.

6

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of the Business and Significant Accounting Policies (Continued)

Goodwill

The company’s goodwill consisted of the following at September 30, 2023, and December 31, 2022 (in thousands):

September 30,

December 31,

2023

2022

Steel Operations Segment

$

272,133

$

272,133

Metals Recycling Operations Segment

203,413

228,009

Steel Fabrication Operations Segment

1,925

1,925

$

477,471

$

502,067

Credit Losses

The company is exposed to credit risk in the event of nonpayment of accounts receivable by customers. The company mitigates its exposure to credit risk, which it generally extends on an unsecured basis, by performing ongoing credit evaluations and taking further action if necessary, such as requiring letters of credit or other security interests to support the customer receivable. The allowance for credit losses for accounts receivable is based on the company’s reasonable estimate of known credit risks and historical experience, adjusted for current and anticipated economic and other pertinent factors affecting the company’s customers, that may differ from historical experience. Customer accounts receivable are written off when all collection efforts have been exhausted and the amounts are deemed uncollectible.

At September 30, 2023, the company reported $1,882 million of accounts receivable, net of allowances for credit losses of $8.1 million. Changes in the allowance were not material for each of the three and nine-month periods ended September 30, 2023 and 2022.

Note 2. Earnings Per Share

Basic earnings per share is based on the weighted average shares of common stock outstanding during the period. Diluted earnings per share assumes the weighted average dilutive effect of common share equivalents outstanding during the period applied to the company’s basic earnings per share. Common share equivalents represent potentially dilutive restricted stock units, deferred stock units, restricted stock, and performance awards, and are excluded from the computation in periods in which they have an anti-dilutive effect. There were no anti-dilutive common share equivalents as of or for the three and nine-month periods ended September 30, 2023 and 2022.

7

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Earnings Per Share (Continued)

Three-Month Periods Ended September 30,

2023

2022

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

577,195

165,170

$

3.49

$

914,325

180,264

$

5.07

Dilutive common share equivalents

-

935

-

1,349

Diluted earnings per share

$

577,195

166,105

$

3.47

$

914,325

181,613

$

5.03

Nine-Month Periods Ended September 30,

2023

2022

Weighted

Weighted

Average

Average

Net Income

Shares

Per Share

Net Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share

$

2,026,612

168,259

$

12.04

$

3,227,810

186,288

$

17.33

Dilutive common share equivalents

-

891

-

1,243

Diluted earnings per share

$

2,026,612

169,150

$

11.98

$

3,227,810

187,531

$

17.21

Note 3. Inventories

Inventories are stated at lower of cost or net realizable value. Cost is determined using a weighted average cost method for raw materials (including scrap and purchased steel substrate) and supplies, and on a first-in, first-out basis for other inventory. Inventory consisted of the following (in thousands):

September 30,

December 31,

2023

2022

Raw materials

$

1,288,497

$

1,608,344

Supplies

692,738

629,074

Work in progress

341,036

256,071

Finished goods

619,363

636,475

Total inventories

$

2,941,634

$

3,129,964

Note 4. Changes in Equity

The following tables provide a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to stockholders of Steel Dynamics, Inc., and equity and redeemable amounts attributable to noncontrolling interests for each of the three and nine-month periods ended September 30, 2023 and 2022 (in thousands).

8

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Changes in Equity (Continued)

Stockholders of Steel Dynamics, Inc.

Accumulated

Additional

Other

Redeemable

Common

Treasury

Paid-In

Retained

Comprehensive

Noncontrolling

Total

Noncontrolling

Stock

Stock

Capital

Earnings

Income (Loss)

Interests

Equity

Interests

Balances at December 31, 2022

$

650

$

(4,459,513)

$

1,212,566

$

11,375,765

$

889

$

(216,055)

$

7,914,302

$

181,503

Dividends declared

-

-

-

(72,316)

-

-

(72,316)

-

Noncontrolling investors, net

-

-

-

-

-

(7,387)

(7,387)

4,702

Share repurchases

-

(353,997)

-

-

-

-

(353,997)

-

Equity-based compensation

-

12,997

(18,487)

(138)

-

-

(5,628)

-

Net income

-

-

-

637,310

-

7,023

644,333

-

Other comprehensive income, net of tax

-

-

-

-

911

-

911

-

Balances at March 31, 2023

650

(4,800,513)

1,194,079

11,940,621

1,800

(216,419)

8,120,218

186,205

Dividends declared

-

-

-

(70,694)

-

-

(70,694)

-

Noncontrolling investors, net

-

-

-

-

-

(1,877)

(1,877)

(14,993)

Share repurchases

-

(380,206)

-

-

-

-

(380,206)

-

Equity-based compensation

-

997

10,055

(140)

-

-

10,912

-

Net income

-

-

-

812,107

-

4,070

816,177

-

Other comprehensive loss, net of tax

-

-

-

-

(773)

-

(773)

-

Balances at June 30, 2023

650

(5,179,722)

1,204,134

12,681,894

1,027

(214,226)

8,493,757

171,212

Dividends declared

-

-

-

(69,483)

-

-

(69,483)

-

Noncontrolling investors, net

-

-

-

-

-

5,183

5,183

-

Share repurchases

-

(331,318)

-

-

-

-

(331,318)

-

Equity-based compensation

-

57

10,760

(138)

-

-

10,679

-

Net income

-

-

-

577,195

-

2,587

579,782

-

Other comprehensive loss, net of tax

-

-

-

-

(1,521)

-

(1,521)

-

Balances at September 30, 2023

$

650

$

(5,510,983)

$

1,214,894

$

13,189,468

$

(494)

$

(206,456)

$

8,687,079

$

171,212

Stockholders of Steel Dynamics, Inc.

Accumulated

Additional

Other

Redeemable

Common

Treasury

Paid-In

Retained

Comprehensive

Noncontrolling

Total

Noncontrolling

Stock

Stock

Capital

Earnings

Income (Loss)

Interests

Equity

Interests

Balances at December 31, 2021

$

649

$

(2,674,267)

$

1,218,933

$

7,761,417

$

(2,091)

$

(195,884)

$

6,108,757

$

211,414

Dividends declared

-

-

-

(64,344)

-

-

(64,344)

-

Noncontrolling investors, net

-

-

-

-

-

(21,633)

(21,633)

16,500

Share repurchases

-

(389,190)

-

-

-

-

(389,190)

-

Equity-based compensation

-

12,960

(14,910)

(121)

-

-

(2,071)

-

Net income

-

-

-

1,103,931

-

3,423

1,107,354

-

Other comprehensive income, net of tax

-

-

-

-

11,387

-

11,387

-

Balances at March 31, 2022

$

649

$

(3,050,497)

$

1,204,023

$

8,800,883

$

9,296

$

(214,094)

$

6,750,260

$

227,914

Dividends declared

-

-

-

(62,088)

-

-

(62,088)

-

Noncontrolling investors, net

-

-

630

(2,495)

-

1,235

(630)

(59,611)

Share repurchases

-

(517,024)

-

-

-

-

(517,024)

-

Equity-based compensation

-

1,028

8,828

(144)

-

-

9,712

-

Net income

-

-

-

1,209,554

-

5,098

1,214,652

-

Other comprehensive loss, net of tax

-

-

-

-

(14,295)

-

(14,295)

-

Balances at June 30, 2022

$

649

$

(3,566,493)

$

1,213,481

$

9,945,710

$

(4,999)

$

(207,761)

$

7,380,587

$

168,303

Dividends declared

-

-

-

(60,031)

-

-

(60,031)

-

Noncontrolling investors, net

-

-

-

-

-

(4,743)

(4,743)

4,100

Share repurchases

-

(481,676)

-

-

-

-

(481,676)

-

Equity-based compensation

-

1,614

6,466

(141)

-

-

7,939

-

Net income

-

-

-

914,325

-

4,150

918,475

-

Other comprehensive income, net of tax

-

-

-

-

2,251

-

2,251

-

Balances at September 30, 2022

$

649

$

(4,046,555)

$

1,219,947

$

10,799,863

$

(2,748)

$

(208,354)

$

7,762,802

$

172,403

9

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Derivative Financial Instruments

The company is exposed to certain risks relating to its ongoing business operations. The company utilizes derivative instruments to mitigate commodity margin risk, and occasionally to mitigate foreign currency exchange rate risk, and have in the past to mitigate interest rate fluctuation risk. The company routinely enters into forward exchange traded futures and option contracts to manage the price risk associated with nonferrous metals inventory as well as purchases and sales of nonferrous metals (primarily aluminum and copper) and ferrous metals. The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements.

Commodity Futures Contracts. If the company is “long” on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is “short” on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the company’s significant futures contract commitments as of September 30, 2023:

Commodity Futures

Long/Short

Metric Tons

Aluminum

Long

5,100

Aluminum

Short

10,425

Copper

Long

20,933

Copper

Short

40,665

The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of September 30, 2023, and December 31, 2022, and gains and losses related to derivatives included in the company’s statement of income for each of the three and nine-month periods ended September 30, 2023 and 2022 (in thousands):

Asset Derivatives

Liability Derivatives

Balance sheet

Fair Value

Fair Value

 location

September 30, 2023

December 31, 2022

September 30, 2023

December 31, 2022

Derivative instruments designated as hedges

Commodity futures

Other current assets

$

1,591

$

2,169

$

1,775

$

2,119

Derivative instruments not designated as hedges

Commodity futures

Other current assets

5,075

2,102

4,082

5,269

Total derivative instruments

$

6,666

$

4,271

$

5,857

$

7,388

10

Table of Contents

STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Derivative Financial Instruments (Continued)

The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $20.9 million at September 30, 2023, and $23.5 million at December 31, 2022, and are reflected in other current assets in the consolidated balance sheets.

Amount of gain (loss)

Amount of gain (loss)

recognized in income

Location of gain (loss)

recognized in income

Location of gain (loss)

on derivatives for the

recognized

on derivatives for the

recognized

three-month periods

Hedged items in

in income on

three-month periods

in income on

ended September 30,

fair value hedge

related hedged

ended September 30,

derivatives

2023

2022

relationships

items

2023

2022

Derivatives in fair value hedging relationships

Commodity futures

Costs of goods sold

$

(684)

$

(7,663)

Firm commitments

Costs of goods sold

$

(536)

$

3,389

Inventory

Costs of goods sold

(88)

4,941

$

(624)

$

8,330

Derivatives not designated as hedging instruments

Commodity futures

Costs of goods sold

$

2,179

$

18,164

Amount of gain (loss)

Amount of gain (loss)

recognized in income

Location of gain

recognized in income

Location of gain (loss)

on derivatives for the

(loss) recognized

on derivatives for the

recognized

nine-month periods

Hedged items in

in income on

nine-month periods

in income on

ended September 30,

fair value hedge

related hedged

ended September 30,

derivatives

2023

2022

relationships

items

2023

2022

Derivatives in fair value hedging relationships

Commodity futures

Costs of goods sold

$

1,591

$

5,618

Firm commitments

Costs of goods sold

$

(423)

$

(2,146)

Inventory

Costs of goods sold

(217)

(1,440)

$

(640)

$

(3,586)

Derivatives not designated as hedging instruments

Commodity futures

Costs of goods sold

$

9,428

$

34,333

Derivatives accounted for as fair value hedges had ineffectiveness resulting in gains of $172,000 and losses of $151,000 during the three-month periods ended September 30, 2023 and 2022, respectively, and gains of $219,000 and $145,000 during the nine-month periods ended September 30, 2023 and 2022, respectively. Losses excluded from hedge effectiveness testing of $1.5 million increased cost of goods sold during the three-month period ended September 30, 2023, while gains excluded from hedge effectiveness testing of $817,000 decreased cost of goods sold during the three-month period ended September 30, 2022. Gains excluded from hedge effectiveness testing of $732,000 and $1.9 million decreased cost of goods sold during the nine-month periods ended September 30, 2023 and 2022, respectively.

Derivatives accounted for as cash flow hedges resulted in net losses of $2.3 million and net gains of $10.0 million recognized in other comprehensive income for the three-month periods ended September 30, 2023 and 2022, respectively, and net losses of $38,000 and net gains of $6.8 million for the nine-month periods ended September 30, 2023 and 2022, respectively. Net losses of $341,000 and $7.1 million were reclassified from accumulated other comprehensive income for the three-month periods ended September 30, 2023 and 2022, respectively, and net gains of $1.8 million and net losses of $7.7 million for the nine-month periods ended September 30, 2023 and 2022, respectively. At September 30, 2023, the company expects to reclassify all $651,000 of net losses on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months due to the settlement of futures contracts. The maximum term over which the company is hedging its exposure to the variability of future cash flows for forecasted transactions is less than 12 months.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Fair Value Measurements

Accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:

Level 1—Unadjusted quoted prices for identical assets and liabilities in active markets;
Level 2—Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table sets forth financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheet and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of September 30, 2023 and December 31, 2022 (in thousands):

Quoted Prices

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

September 30, 2023

Short-term investments

$

500,844

$

-

$

500,844

$

-

Commodity futures – financial assets

6,666

-

6,666

-

Commodity futures – financial liabilities

5,857

-

5,857

-

December 31, 2022

Short-term investments

$

628,215

$

-

$

628,215

$

-

Commodity futures – financial assets

4,271

-

4,271

-

Commodity futures – financial liabilities

7,388

-

7,388

-

The carrying amounts of financial instruments including cash and equivalents, and restricted cash approximate fair value (Level 1). The fair values of short-term investments and commodity futures contracts are estimated by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on references available (Level 2). The fair value of long-term debt, including current maturities, as determined by quoted market prices (Level 2), was approximately $2.7 billion at September 30, 2023 and December 31, 2022 (with a corresponding carrying amount in the consolidated balance sheet of $3.1 billion at September 30, 2023 and December 31, 2022).

Note 7. Commitments and Contingencies

The company is involved in various routine litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are expected to have a material impact on the company’s financial condition, results of operations, or liquidity.

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Segment Information

The company’s operations are primarily organized and managed by reportable operating segments, which are steel operations, metals recycling operations, and steel fabrication operations. The segment operations are more fully described in Note 1 to the consolidated financial statements. Operating segment performance and resource allocations are primarily based on operating results before income taxes. The accounting policies of the reportable segments are consistent with those described in Note 1 to the consolidated financial statements. Intra-segment sales and any related profits are eliminated in consolidation. Amounts included in the category “Other” are from subsidiary operations that are below the quantitative thresholds required for reportable segments and primarily consist of joint ventures, including the company’s aluminum flat roll mill and satellite slab centers and the idled Minnesota ironmaking operations. Also included in “Other” are certain unallocated corporate accounts, such as the company’s senior unsecured credit facility, senior notes, certain other investments and certain profit sharing expenses.

The company’s segment results, including disaggregated revenue by segment to external, external non-United States, and other segment customers, are as follows (in thousands):

Metals

Steel

For the three-month period ended

Steel

Recycling

Fabrication

September 30, 2023

Operations

Operations

Operations

Other

Eliminations

Consolidated

Net sales - disaggregated revenue

External

$

2,904,204

$

334,922

$

630,045

$

247,123

$

-

$

4,116,294

External Non-U.S.

232,241

185,824

139

52,559

-

470,763

Other segments

124,622

531,559

3,023

172

(659,376)

-

3,261,067

1,052,305

633,207

299,854

(659,376)

4,587,057

Operating income (loss)

470,335

13,981

330,020

(95,638)

(1)

14,852

733,550

Income (loss) before income taxes

472,051

15,319

329,554

(76,801)

14,476

754,599

Depreciation and amortization

81,517

17,195

2,448

6,258

-

107,418

Capital expenditures

111,843

83,858

5,581

357,079

-

558,361

As of September 30, 2023

Assets

$

8,665,334

$

1,475,378

$

972,462

$

3,947,177

(2)

$

(131,395)

(3)

$

14,928,956

Footnotes related to the three-month period ended September 30, 2023, segment results (in millions):

(1)

Corporate SG&A

$

(20.7)

(2)

Cash and equivalents

$

1,607.8

Companywide equity-based compensation

(11.5)

Short-term and other investments

729.0

Company profit sharing component

(63.6)

Accounts receivable

35.7

Other, net

0.2

Inventories

126.6

$

(95.6)

Property, plant and equipment, net

1,076.0

Intra-company debt

37.0

Investments in unconsolidated affiliates

238.2

Other

96.9

$

3,947.2

(3)

Elimination of intra-company receivables

$

(76.7)

Elimination of intra-company debt

(37.0)

Other

(17.7)

$

(131.4)

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Segment Information (Continued)

Metals

Steel

For the three-month period ended

Steel

Recycling

Fabrication

September 30, 2022

Operations

Operations

Operations

Other

Eliminations

Consolidated

Net sales - disaggregated revenue

External

$

3,512,202

$

328,187

$

1,140,272

$

314,104

$

-

$

5,294,765

External Non-U.S.

208,623

143,879

-

4,440

-

356,942

Other segments

152,719

512,559

5,554

-

(670,832)

-

3,873,544

984,625

1,145,826

318,544

(670,832)

5,651,707

Operating income (loss)

654,677

6,735

676,726

(137,160)

(1)

18,866

1,219,844

Income (loss) before income taxes

646,426

5,415

674,718

(136,613)

18,526

1,208,472

Depreciation and amortization

76,453

12,932

2,454

6,875

-

98,714

Capital expenditures

131,753

11,137

4,975

93,364

-

241,229

Footnotes related to the three-month period ended September 30, 2022, segment results (in millions):

(1)

Corporate SG&A

$

(15.5)

Companywide equity-based compensation

(14.6)

Company profit sharing component

(103.8)

Other, net

(3.3)

$

(137.2)

Metals

Steel

For the nine-month period ended

Steel

Recycling

Fabrication

September 30, 2023

Operations

Operations

Operations

Other

Eliminations

Consolidated

Net sales - disaggregated revenue

External

$

8,874,866

$

1,086,286

$

2,278,121

$

859,415

$

-

$

13,098,688

External Non-U.S.

719,909

610,301

240

132,755

-

1,463,205

Other segments

460,156

1,685,770

3,248

441

(2,149,615)

-

10,054,931

3,382,357

2,281,609

992,611

(2,149,615)

14,561,893

Operating income (loss)

1,514,741

86,674

1,343,372

(315,389)

(1)

3,247

2,632,645

Income (loss) before income taxes

1,518,438

99,093

1,343,173

(286,104)

2,104

2,676,704

Depreciation and amortization

246,583

52,321

7,201

19,977

-

326,082

Capital expenditures

334,188

128,814

17,215

662,743

-

1,142,960

Footnotes related to the nine-month period ended September 30, 2023, segment results (in millions):

(1)

Corporate SG&A

$

(66.9)

Companywide equity-based compensation

(36.3)

Company profit sharing component

(220.5)

Other, net

8.3

$

(315.4)

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STEEL DYNAMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Segment Information (Continued)

Metals

Steel

For the nine-month period ended

Steel

Recycling

Fabrication

September 30, 2022

Operations

Operations

Operations

Other

Eliminations

Consolidated

Net sales - disaggregated revenue

External

$

11,015,050

$

1,252,323

$

3,155,824

$

941,799

$

-

$

16,364,996

External Non-U.S.

610,293

449,103

183

9,912

-

1,069,491

Other segments

426,470

1,782,398

10,117

1,030

(2,220,015)

-

12,051,813

3,483,824

3,166,124

952,741

(2,220,015)

17,434,487

Operating income (loss)

2,920,412

106,138

1,742,792

(473,889)

(1)

37,321

4,332,774

Income (loss) before income taxes

2,885,437

104,591

1,736,680

(500,385)

36,296

4,262,619

Depreciation and amortization

217,097

39,207

7,317

18,340

-

281,961

Capital expenditures

403,807

37,893

13,234

109,767

-

564,701

Footnotes related to the nine-month period ended September 30, 2022, segment results (in millions):

(1)

Corporate SG&A

$

(47.8)

Companywide equity-based compensation

(39.3)

Company profit sharing component

(366.1)

Other, net

(20.7)

$

(473.9)

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate", "intend", "believe", "estimate", "plan", "seek", "project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) domestic and global economic factors; (2) global steelmaking overcapacity and imports of steel, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as COVID-19 or its variants; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes and supplies, and our potential inability to pass higher costs on to our customers; (6) cost and availability of electricity, natural gas, oil, or other energy resources are subject to volatile market conditions; (7) increased environmental, greenhouse gas emissions and sustainability considerations or regulations; (8) compliance with and changes in environmental and remediation requirements; (9) significant price and other forms of competition from other steel and aluminum producers, scrap processors and alternative materials; (10) availability of an adequate source of supply of scrap for our metals recycling operations; (11) cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance; (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; and (17) the impacts of impairment charges.

More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors for the year ended December 31, 2022, in our quarterly reports on Form 10-Q, or in other reports which we from time to time file with the Securities and Exchange Commission. These reports are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on our website, www.steeldynamics.com under “Investors – SEC Filings.”

Description of the Business

We are one of the largest domestic steel producers and metal recyclers in the United States, based on estimated steelmaking and steel coating capacity of approximately 16 million tons and actual metals recycling volumes, with one of the most diversified product and end market portfolios in the domestic steel industry, combined with meaningful downstream steel fabrication operations. Our primary sources of revenue are from the manufacture and sale of steel products, the processing and sale of recycled ferrous and nonferrous metals, and the fabrication and sale of steel joists and deck products.

Operating Statement Classifications

Net Sales. Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of our steel products. Except for the steel fabrication operations, we recognize revenues from sales and the allowance for estimated returns and claims from these sales at the point in time control of the product transfers to the customer, upon shipment or delivery. Our steel fabrication operations recognize revenues over time based on completed fabricated tons to date as a percentage of total tons required for each contract.

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Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel substrate, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, utilities such as electricity and natural gas, and depreciation.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments, including, among other items, labor and related benefits, and professional services.

Companywide profit sharing and amortization of intangible assets are each separately presented in the statement of income.

Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt, net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.

Other (Income) Expense, net. Other income consists of interest income earned on our temporary cash deposits, short-term and other investments, and any other non-operating income activity, including income from investments in unconsolidated affiliates accounted for under the equity method. Other expense consists of any non-operating costs, such as certain acquisition and financing expenses.

Results Overview

In the third quarter of 2023 we achieved quarterly steel shipments of 3.1 million tons, as steel demand remained steady. Our metals recycling operations benefitted from consistent domestic steel industry demand during the third quarter of 2023 compared to the same period in 2022, while our steel fabrication segment achieved historically strong results on solid non-residential construction demand.

Consolidated operating income decreased $486.3 million, or 40%, to $733.6 million for the third quarter of 2023, compared to the third quarter of 2022 as metal spread contracted in our steel operations and steel fabrication operations had reduced volumes along with metal spread contraction. Third quarter 2023 net income attributable to Steel Dynamics, Inc. decreased $337.1 million, or 37%, to $577.2 million, compared to the third quarter of 2022, consistent with decreased operating income.

Consolidated operating income decreased $1.7 billion, or 39%, to $2.6 billion for the first nine months of 2023, compared to the first nine months of 2022. Lower earnings were driven by metal spread contraction in our steel operations and reduced volumes in our steel fabrication operations. First nine months 2023 net income attributable to Steel Dynamics, Inc. decreased $1.2 billion, or 37%, to $2.0 billion, compared to the first nine months of 2022, consistent with decreased operating income.

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Segment Operating Results 2023 vs. 2022 (dollars in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2023

% Change

2022

2023

% Change

2022

Net sales:

Steel Operations Segment

$

3,261,067

(16)%

$

3,873,544

$

10,054,931

(17)%

$

12,051,813

Metals Recycling Operations Segment

1,052,305

7%

984,625

3,382,357

(3)%

3,483,824

Steel Fabrication Operations Segment

633,207

(45)%

1,145,826

2,281,609

(28)%

3,166,124

Other

299,854

(6)%

318,544

992,611

4%

952,741

5,246,433

6,322,539

16,711,508

19,654,502

Intra-company

(659,376)

(670,832)

(2,149,615)

(2,220,015)

$

4,587,057

(19)%

$

5,651,707

$

14,561,893

(16)%

$

17,434,487

Operating income (loss):

Steel Operations Segment

$

470,335

(28)%

$

654,677

$

1,514,741

(48)%

$

2,920,412

Metals Recycling Operations Segment

13,981

108%

6,735

86,674

(18)%

106,138

Steel Fabrication Operations Segment

330,020

(51)%

676,726

1,343,372

(23)%

1,742,792

Other

(95,638)

30%

(137,160)

(315,389)

33%

(473,889)

718,698

1,200,978

2,629,398

4,295,453

Intra-company

14,852

18,866

3,247

37,321

$

733,550

(40)%

$

1,219,844

$

2,632,645

(39)%

$

4,332,774

Steel Operations Segment

Steel operations consist of our electric arc furnace steel mills, producing steel from ferrous scrap and scrap substitutes, utilizing continuous casting, automated rolling mills, numerous value-added downstream steel coating and processing operations, and distribution operations. Our steel operations sell directly to end-users, steel fabricators, and service centers. These products are used in numerous industry sectors, including the construction, automotive, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube (including OCTG) markets. Steel operations accounted for 68% and 66% of our consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively and 66% and 67% during the nine-month periods ended September 30, 2023 and 2022, respectively.

Steel Operations Segment Shipments (tons):

Three Months Ended September 30,

Nine Months Ended September 30,

2023

% Change

2022

2023

% Change

2022

Total shipments

3,104,251

(2)%

3,154,857

9,624,822

5%

9,163,930

Intra-segment shipments

(353,526)

(339,980)

(1,013,422)

(1,080,989)

Steel Operations Segment shipments

2,750,725

(2)%

2,814,877

8,611,400

7%

8,082,941

External shipments

2,632,617

(2)%

2,694,709

8,169,117

5%

7,796,390

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Graphic

Steel Operations Segment Results 2023 vs. 2022

During the third quarter of 2023, our steel operations achieved shipments of 3.1 million tons (2.8 million excluding intra-segment) consistent with the same period in 2022, including 264,000 tons from Sinton during the third quarter 2023. Customer order activity and steel demand were steady during the quarter, supporting consistent shipping volumes excluding the lost volume of approximately 90,000 tons from our Sinton division’s unplanned July outage. Sheet steel pricing was 15% lower than the third quarter of 2022, as prices steadily declined throughout the end of 2022 and beginning of 2023. Third quarter 2023 total steel segment average selling prices decreased 14%, or $190 per ton, compared to third quarter of 2022. Steel operations segment shipments decreased 2% in the third quarter 2023, as compared to the same period in 2022. Net sales for the steel operations in the third quarter 2023 decreased 16% compared to the same period in 2022, due to the decrease in average steel selling prices and shipments. Net sales for the steel operations decreased 17%, in the first nine months of 2023 when compared to the same period in 2022, due to the decrease in average steel selling prices more than offsetting increased shipments.

Metallic raw materials used in our electric arc furnaces represent our single most significant steel manufacturing cost, generally comprising approximately 55% to 65% of our steel mill operations’ manufacturing costs. Our metallic raw material cost per net ton consumed in our steel operations decreased $67, or 14%, in the third quarter of 2023, compared to the same period in 2022, consistent with overall decreased domestic scrap pricing noted below in the metals recycling operations segment discussion. In the first nine months of 2023, our metallic raw material cost per ton decreased $75, or 15%, compared to the same period in 2022.

In the third quarter of 2023, as a result of average selling prices decreasing more than scrap costs, specifically for our sheet steel products, metal spread (which we define as the difference between average steel mill selling prices and the cost of ferrous scrap consumed in our steel mills) decreased 13% compared to the third quarter of 2022. As a result of this metal spread compression, operating income for the steel operations decreased 28%, to $470.3 million, in the third quarter of 2023, compared to the same period in 2022. First nine months 2023 operating income decreased 48%, to $1.5 billion, compared to the first nine months of 2022 due to a 24% decrease in metal spread as reduced average steel selling prices more than offset lower scrap prices.

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Metals Recycling Operations Segment

Metals recycling operations includes both ferrous and nonferrous scrap metal processing, transportation, marketing, brokerage, and scrap management services. Our steel mills utilize a large portion of the ferrous scrap sold by our metals recycling operations as raw material in our steelmaking operations, and the remainder is sold to other consumers, such as other steel manufacturers and foundries. In the third quarters of 2023 and 2022, 62% and 68%, respectively, of metals recycling operations ferrous scrap was sold to our own steel mills, while our steel mill utilization (excluding Sinton) was 90% and 93% in the third quarters of 2023 and 2022, respectively. Metals recycling operations accounted for 11% and 8% of our consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 12% and 10% of our consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Metals Recycling Operations Segment Shipments:

Three Months Ended September 30,

Nine Months Ended September 30,

2023

% Change

2022

2023

% Change

2022

Ferrous metal (gross tons)

Total

1,442,964

9%

1,320,117

4,415,949

12%

3,944,068

Inter-company

(895,318)

(0)%

(896,933)

(2,722,921)

3%

(2,645,655)

External shipments

547,646

29%

423,184

1,693,028

30%

1,298,413

Nonferrous metals (thousands of pounds)

Total

279,877

9%

257,710

845,477

8%

785,381

Inter-company

(43,043)

(37,523)

(123,552)

(98,183)

External shipments

236,834

8%

220,187

721,925

5%

687,198

Metals Recycling Operations Segment Results 2023 vs. 2022

During the third quarter of 2023, our metals recycling operations continued to benefit from solid domestic steel industry demand, resulting in higher ferrous and nonferrous scrap shipments compared to the same period in 2022, resulting in increased net sales of 7%. We were able to increase shipments even as domestic steel mill utilization rates declined slightly to approximately 76% in the third quarter of 2023, as compared to approximately 78% in the third quarter of 2022. Ferrous and nonferrous scrap average selling prices decreased 2% during the third quarter of 2023 compared to the same period in 2022. Ferrous metal spreads (which we define as the difference between average selling prices and the cost of purchased scrap) increased 8% during the third quarter of 2023 compared to the same period in 2022, and nonferrous metal spreads increased 11%. As a result of the increased metals spreads, metals recycling operations operating income increased 108% to $14.0 million in the third quarter of 2023 compared to the third quarter of 2022.

Net sales for our metals recycling operations in the first nine months of 2023 decreased 3% compared to the same period in 2022, as increased shipments were more than offset by lower ferrous and nonferrous average selling prices that decreased 13% and 10%, respectively, during the first nine months of 2023 compared to the same period in 2022. Ferrous and nonferrous shipments increased 12% and 8%, respectively, in the first nine months of 2023 compared to the same period in 2022. Ferrous metal spreads decreased 11%, while nonferrous metal spreads increased 14% in the first nine months of 2023 compared to the first nine months of 2022. Metals recycling operations operating income in the first nine months of 2023 of $86.7 million decreased 18% from the first nine months of 2022, as decreased ferrous metal spread more than offset increased shipments.

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Steel Fabrication Operations Segment

Steel fabrication operations include seven New Millennium Building Systems joist and deck plants located throughout the United States, and in Northern Mexico. Revenues from these plants are generated from the fabrication of steel joists, girders, trusses, and steel deck used within the non-residential construction industry. Steel fabrication operations accounted for 14% and 20% of our consolidated net sales during the three-month periods ended September 30, 2023 and 2022, respectively, and 15% and 18% of our consolidated net sales during the nine-month periods ended September 30, 2023 and 2022, respectively.

Graphic

Steel Fabrication Operations Segment Results 2023 vs. 2022

Our steel fabrication operations continue to benefit from the solid non-residential construction market, as evidenced by a strong order backlog that extends through the first quarter 2024. The continued onshoring of manufacturing, coupled with the robust U.S. infrastructure and Inflation Reduction Act programs and industrial construction, supports consistent strong demand. Net sales for the steel fabrication operations decreased 45% during the third quarter of 2023 compared to the record level earnings during the same period in 2022, as average selling prices decreased $1,329 per ton, or 25%, and volume decreased 26% from record volume during the third quarter of 2022. Net sales for the segment decreased 28% during the first nine months of 2023, compared to the same period in 2022, as volume and average selling prices decreased 21% and 9%, respectively.

The purchase of various steel products is the largest single cost of production for our steel fabrication operations, historically representing approximately two-thirds of the total cost of manufacturing. The average cost per ton of steel consumed decreased 24% in the third quarter 2023, compared to the same period in 2022. As a result of decreased selling prices per ton more than offsetting decreased steel input costs per ton, metal spread (which we define as the difference between average selling prices and the cost of purchased steel) contracted 26% in the third quarter of 2023 compared to the same period in 2022. This metal spread compression coupled with decreased volume resulted in operating income decreasing 51% to $330.0 million in the third quarter 2023, compared to $676.7 million in the same period in 2022. For the first nine months of 2023, operating income decreased 23% to $1.3 billion compared to the first nine months of 2022, as a 1% increase in metal spread was more than offset by the 21% decrease in volume.

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Other Operations

Third Quarter Consolidated Results 2023 vs. 2022

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $145.9 million during the third quarter of 2023 increased 10% from $132.6 million during the third quarter of 2022 primarily due to an 11% increase in payroll and benefits expense related to the execution of our growth strategy during 2023. Selling, general and administrative expenses represented 3.2% and 2.3% of net sales during third quarter 2023 and 2022, respectively.

Profit sharing expense during the third quarter of 2023 of $64.4 million decreased 39% from the $105.1 million during the same period in 2022, consistent with decreased pretax earnings. Profit sharing expense for eligible employees is 8% of consolidated pretax income excluding noncontrolling interests and other items.

Interest Expense, net of Capitalized Interest. During the third quarter of 2023, interest expense was $18.4 million, a decrease of $6.9 million compared to the third quarter of 2022. The lower interest expense in the third quarter 2023 compared to the same period in 2022 was due to higher capitalized interest in 2023 related to construction at our Sinton and Heartland divisions and the aluminum flat rolled products mill and satellite slab centers.

Other (Income) Expense, net.  Net other income was $39.5 million in the third quarter of 2023, compared to $14.0 million in the third quarter of 2022, due primarily to an increase in interest income of $20.3 million associated with an increase in invested cash and short-term investments.

Income Tax Expense. Third quarter 2023 income tax expense of $174.8 million, at an effective income tax rate of 23.2%, decreased 40% compared to the $290.0 million, at an effective income tax rate of 24.0%, during the third quarter of 2022, consistent with decreased pretax earnings.

First Nine Months Consolidated Results 2023 vs. 2022

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $431.4 million during the first nine months of 2023 increased 7% from $403.0 million during the first nine months of 2022 primarily due to a 9% increase in payroll and benefits expense related to the execution of our growth strategy during 2023. Selling, general and administrative expenses represented 3.0% and 2.3% of net sales during the first nine months of 2023 and 2022, respectively.

Profit sharing expense during the first nine months of 2023 of $225.0 million decreased 40% from the $373.3 million during the same period in 2022, consistent with decreased pretax earnings.

Interest Expense, net of Capitalized Interest. During the first nine months of 2023, interest expense of $61.7 million decreased 9% from $67.7 million during the first nine months of 2022, due to higher capitalized interest in 2023.

Other (Income) Expense, net.  Net other income was $105.7 million in the first nine months of 2023, compared to expense of $2.5 million in the first nine months of 2022, due primarily to an increase in interest income of $69.7 million associated with an increase in our invested cash and short-term investments in the first nine months of 2023, as well as an increase in net earnings from investments in unconsolidated affiliates of $6.7 million.

Income Tax Expense. First nine months 2023 income tax expense of $636.4 million, at an effective income tax rate of 23.8%, decreased 38% compared to the $1.0 billion, at an effective income tax rate of 24.0%, during the first nine months of 2022, consistent with decreased pretax earnings.

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Liquidity and Capital Resources

Capital Resources and Long-term Debt. Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, including expansion projects, principal and interest payments related to our outstanding indebtedness (no significant principal payments until the fourth quarter of 2024), dividends to our shareholders, and potential stock repurchases and acquisitions or investments. We have met and intend to continue to meet these liquidity requirements primarily with available cash and cash provided by operations, long-term borrowings, and we also have availability under our unsecured Revolver. Our liquidity at September 30, 2023, is as follows (in thousands):

Cash and equivalents

$

1,765,467

Short-term and other investments

729,018

Revolver availability

1,190,683

Total liquidity

$

3,685,168

Our total outstanding debt of $3.1 billion is consistent with our total outstanding debt at December 31, 2022. Our total long-term debt to capitalization ratio (representing our long-term debt, including current maturities, divided by the sum of our long-term debt, redeemable noncontrolling interests, and our total stockholders’ equity) was 25.9% and 27.7% at September 30, 2023 and December 31, 2022, respectively.

In the third quarter of 2023, we entered into a new unsecured credit agreement, replacing the previous one, which has a senior unsecured revolving credit facility (Facility), which provides a $1.2 billion Revolver and matures in July 2028. Subject to certain conditions, we have the ability to increase the Facility size by $500.0 million. The unsecured Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to our ability to incur indebtedness and permit liens on certain assets. Our ability to borrow funds within the terms of the unsecured Revolver is dependent upon our continued compliance with the financial and other covenants. At September 30, 2023, we had $1.2 billion of availability on the Revolver, $9.3 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.

The financial covenants under our Facility state that we must maintain an interest coverage ratio of not less than 2.50:1.00. Our interest coverage ratio is calculated by dividing our last-twelve-months (LTM) consolidated Adjusted EBITDA as defined in the Facility (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as defined in the Facility) by our LTM gross interest expense, less amortization of financing fees. In addition, a debt to capitalization ratio of not more than 0.60:1.00 must be maintained. At September 30, 2023, our interest coverage ratio and debt to capitalization ratio were 38.48:1.00 and 0.26:1.00, respectively. We were, therefore, in compliance with these covenants at September 30, 2023, and we anticipate we will continue to be in compliance during the next twelve months.

Working Capital (representing excess of current assets over current liabilities). We generated cash flow from operations of $2.7 billion in the first nine months of 2023 compared to $3.3 billion in the same 2022 period. Working capital decreased $295.5 million, or 5%, during the first nine months of 2023 to $5.3 billion at September 30, 2023, due primarily to a $362.3 million decrease in accounts receivable and inventories, a $127.4 million decrease in short-term investments, partially offset by a $205.0 million decrease in accrued payroll and benefits related to company-wide profit sharing, consistent with decreased pretax earnings.

Capital Investments. During the first nine months of 2023, we invested $1.1 billion in property, plant and equipment, primarily within our steel operations segment and aluminum flat roll mill and supporting satellite recycled aluminum slab centers, compared with $564.7 million invested during the same period in 2022. As announced in 2022, we plan to invest $2.5 billion in a new state-of-the-art low-carbon aluminum flat roll mill with two supporting satellite recycled aluminum slab centers, which is planned to be funded by available cash and cash flow from operations. Related

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expenditures began in the third quarter of 2022 and are expected to continue through 2025. Our liquidity of $3.7 billion and anticipated future operating cash flow generation is sufficient to provide for our planned 2023 capital requirements.

Cash Dividends. As a reflection of continued confidence in our current and future cash flow generation capability and financial position, we increased our quarterly cash dividend by 25% to $0.425 per share in the first quarter and continuing into the second and third quarters of 2023 (from $0.34 per share in 2022), resulting in declared cash dividends of $212.5 million during the first nine months of 2023, compared to $186.5 million during the same period in 2022. We paid cash dividends of $201.8 million and $177.1 million during the first nine months of 2023 and 2022, respectively. Our board of directors, along with executive management, approves the payment of dividends on a quarterly basis. The determination to pay cash dividends in the future is at the discretion of our board of directors, after taking into account various factors, including our financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and growth plans.

Other. Our board of directors has authorized share repurchase programs during prior years, the most recent of which occurred in November 2022 for a program of up to $1.5 billion of the company’s common stock. Under the share repurchase programs, purchases take place as and when we determine in open market or private transactions made based upon the market price of our common stock, the nature of other investment opportunities or growth projects, our cash flows from operations, and general economic conditions. The share repurchase programs do not require us to acquire any specific number of shares, and may be modified, suspended, extended, or terminated by us at any time. The share repurchase programs do not have an expiration date. There were $1.1 billion and $1.4 billion of share repurchases during the first nine months of 2023 and 2022, respectively. As of September 30, 2023, we had $277.7 million remaining available to purchase under the November 2022 share repurchase program. On October 31, 2023, our board of directors authorized an additional share repurchase program of up to $1.5 billion of the company’s common stock.

Our ability to meet our debt service obligations and reduce our total debt will depend upon our future performance which, in turn, will depend upon general economic, financial, and business conditions, along with competition, legislation and regulatory factors that are largely beyond our control. In addition, we cannot assure that our operating results, cash flows, access to credit markets and capital resources will be sufficient for repayment of our indebtedness in the future. We believe that based upon current levels of operations and anticipated growth, cash flows from operations, together with other available sources of funds, including borrowings under our Facility, if necessary, will be adequate for the next twelve months for making required payments of principal and interest on our indebtedness, funding working capital requirements, and funding anticipated capital expenditures.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk

In the normal course of business, we are exposed to the market risk and price fluctuations related to the sale of our products and to the purchase of raw materials used in our operations, such as metallic raw materials, electricity, natural gas and its transportation services, fuel, air products, zinc, and electrodes. Our risk strategy associated with product sales has generally been to obtain competitive prices for our products and to allow operating results to reflect market price movements dictated by supply and demand.

Our risk strategy associated with the purchase of raw materials utilized within our operations has generally been to make some commitments with suppliers relating to future expected requirements for some commodities such as electricity, water, natural gas and its transportation services, fuel, air products, zinc, and electrodes. Certain of these commitments contain provisions which require us to “take or pay” for specified quantities without regard to actual usage for periods of generally up to 5 years for physical commodity requirements and commodity transportation requirements, with some extending beyond, and for up to 15 years for air products and 29 years for water products. We utilized such “take or pay” requirements during the past three years under these contracts. We believe that production requirements will be such that consumption of the products or services purchased under these commitments will occur in the normal production process.

In our metals recycling and steel operations, we have certain fixed price contracts with various customers and suppliers for future delivery of nonferrous and ferrous metals. Our risk strategy has been to enter into base metal financial contracts with the goal to protect the profit margin, within certain parameters, that was contemplated when we entered into the transaction with the customer or vendor. At September 30, 2023, we had a cumulative unrealized gain associated with these financial contracts of $0.8 million, substantially all of which have a settlement date within the next twelve months. We believe the customer contracts associated with the financial contracts will be fully consummated.

ITEM 4.    CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

As required, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2023, the end of the period covered by this quarterly report, our disclosure controls and procedures were designed to provide and were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in Internal Controls Over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are involved in various litigation matters, including administrative proceedings, regulatory proceedings, governmental investigations, environmental matters, and commercial and construction contract disputes, none of which are currently expected to have a material impact on our financial condition, results of operations, or liquidity.

We may also be involved from time to time in various governmental investigations, regulatory proceedings or judicial actions seeking penalties, injunctive relief, and/or remediation under federal, state and local environmental laws and regulations. The United States EPA has conducted such investigations and proceedings involving us, in some instances along with state environmental regulators, under various environmental laws, including RCRA, CERCLA, the Clean Water Act and the Clean Air Act. Some of these matters have resulted in fines or penalties, exclusive of interest and costs, which did not exceed $1 million in aggregate, as of September 30, 2023.

ITEM 1A.    RISK FACTORS

No material changes have occurred to the indicated risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Purchases of Equity Securities

We purchased the following equity securities registered by us pursuant to Section 12 of the Exchange Act during the three-month period ended September 30, 2023.

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Programs (1)

Maximum Dollar Value of Shares That May Yet be Purchased Under the Programs
(in thousands) (1)

Quarter ended September 30, 2023

July 1 - 31

815,946

$

105.37

815,946

$

520,601

August 1 - 31

945,020

105.69

945,020

421,729

September 1 - 30

1,396,878

104.14

1,396,878

277,731

3,157,844

3,157,844

(1)In November 2022, our board of directors authorized a share repurchase program of up to $1.5 billion of our common stock. On October 31, 2023, our board of directors authorized an additional share repurchase program of up to $1.5 billion of the company’s common stock.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

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ITEM 5.    OTHER INFORMATION

During the three-month period ended September 30, 2023, none of the Company’s directors or executive officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.

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ITEM 6.    EXHIBITS

Reference is made to the Exhibit Index preceding the signature page hereto, which Exhibit Index is hereby incorporated into this item.

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EXHIBIT INDEX

Articles of Incorporation

3.1

Amended and Restated Articles of Incorporation of Steel Dynamics, Inc., reflecting all amendments thereto through May 11, 2023, incorporated herein by reference from Exhibit 3.1 to our Form 10-Q filed August 8, 2023.

3.2

Amended and Restated Bylaws of Steel Dynamics, Inc., reflecting all amendments thereto through January 23, 2023, incorporated herein by reference from Exhibit 3.2 to our Form 10-K filed February 28, 2023.

Executive Officer Certifications

31.1*

Certification of Chief Executive Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Chief Financial Officer required by Item 307 of Regulation S-K as promulgated by the Securities and Exchange Commission and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL Documents

101.INS*

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Document

101.DEF*

Inline XBRL Taxonomy Definition Document

101.LAB*

Inline XBRL Taxonomy Extension Label Document

101.PRE*

Inline XBRL Taxonomy Presentation Document

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*

Filed concurrently herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 9, 2023

    

STEEL DYNAMICS, INC.

By:

/s/ Theresa E. Wagler

Theresa E. Wagler

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

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