斯蒂尔动力 (STLD) 2026年第三季度财报电话会议：钢铁出货量创纪录，铝产能爬坡改善

斯蒂尔动力（Steel Dynamics，纳斯达克代码：STLD）公布的2026年第三季度业绩较上季度更为强劲，主要受益于创纪录的钢铁出货量、更高的实现钢材价格以及升高的轧钢厂产能利用率。铝业务仍处于产能爬坡模式，但管理层表示热轧机组的运营问题已得到解决，预计业绩将大幅改善。

核心要点

• 2026年第三季度营收为65亿美元，净利润为7.56亿美元，稀释后每股收益（EPS）为5.26美元。调整后EBITDA达到12亿美元。
• 钢铁出货量创下380万吨的季度新高。由于平均售价每吨上涨102美元，钢铁业务实现营业利润10亿美元，环比增长43%。
• 斯蒂尔动力的轧钢厂产能利用率为92%，而预计美国国内行业平均水平为80%。
• 铝业务录得2600万美元的营业亏损，环比改善21%。管理层预计出货量、成本和盈利能力将在2026年第四季度及整个2027年有所改善。
• 经营活动现金流总计8.46亿美元。截至季度末的流动性为24亿美元，同时2026年股票回购额达到5.91亿美元。
• 随着首席执行官马克·米莱特（Mark Millett）退休，首席财务官特雷莎·瓦格勒（Theresa Wagler）预定于2026年底接任CEO一职。

核心财务数据

指标

2026年第三季度

变化或背景信息

营业收入

65亿美元

环比增长

净利润

7.56亿美元

—

稀释每股收益

5.26美元

—

调整后EBITDA

12亿美元

—

营业利润

略高于10亿美元

环比增长

经营活动现金流

8.46亿美元

—

钢铁出货量

380万吨

创季度新高

钢铁业务营业利润

10亿美元

环比增长43%

钢铁轧钢厂产能利用率

92%

美国国内行业预计为80%

金属加工业务营业利润

9100万美元

高于2026年第二季度的8500万美元

铝业务营业亏损

2600万美元

环比改善21%

资本投资

1.5亿美元

第四季度预计同样在1.5亿美元左右

季度末流动性

24亿美元

—

2026年股票回购

5.91亿美元

截至9月30日尚有2.6亿美元的授权额度

管理层表示，由于9月下旬近3000万美元的外汇波动以及铝套期保值的未实现市值计价调整，业绩略低于此前预期的指导区间。

业务与运营表现

钢铁业务

钢铁业务是主要的盈利驱动力。创纪录的出货量以及平均售价每吨102美元的上涨，推动该板块营业利润较2026年第二季度增长了43%。

管理层表示，扁平材市场状况依然有利，客户需求强劲，供应链库存偏低且交货期延长。高附加值产品相比卷材的利差恢复至每吨230美元以上。斯蒂尔动力约80%或更多的扁平材产品组合与合同定价挂钩，合同定价通常滞后于市场变化两个月。

第三季度的出货量包括99.2万吨热轧卷板、14.6万吨冷轧产品以及163万吨涂镀扁平材产品。管理层表示，新近投产的涂镀生产线在未来六个月内仍有提高产能利用率的空间。

在非住宅建筑行业的支撑下，型材/长材市场也保持强劲。管理层表示，在手订单排期已延伸至2027年。数据中心约占结构钢需求的15%，占钢桁条和钢承重板业务的约8%，这表明需求基础更为广泛。

在辛顿（Sinton）工厂，月产量约为21万至22万吨。管理层认为有望将其提高至每月25万吨或更多。型材轧机可再增加8万至10万吨的产量。

铝业务

在薄规格产品的轧制速度提高导致表面质量问题和重大成品率损失后，铝出货量和财务表现低于管理层最初的预期。斯蒂尔动力更换了热轧机组的冷却液，管理层表示该问题已彻底解决。

热轧机组在10月前三周的产能利用率为75%。全部三台冷轧机均已投入运营，年产能可达65万公吨。首条汽车用连续退火和固溶热处理线已全面投产，第二条预计将于2027年第一季度开始运营。

公司已向多家制造商完成了5182和5754汽车用成品材料的认证，并正在对6000系列材料进行测试。管理层预计汽车成品件的出货将在2026年底前开始。

在达到铭牌产能和预期产品结构的情况下，管理层保持了铝平台整个周期内6.5亿至7亿美元的调整后EBITDA目标，外加金属回收业务4000万至5000万美元的目标。

金属加工与回收业务

由于出货量增加和平均价格上涨抵消了大幅上升的钢材投入成本，金属加工业务的营业利润从第二季度的8500万美元增至9100万美元。钢桁条和钢承重板的积压订单同比增加了50%。

管理层表示，进入积压订单并定于2027年初交付的项目价格更高。尽管第四季度的正常季节性因素仍可能影响近期业绩，但管理层预计2027年金属加工业务的定价、出货量和利润率将更为强劲。

由于实现价格下降，金属回收业务收益环比有所下滑。回收团队正在提升废钢/废铝分拣能力，以提高铝产品中再生材料的含量并降低原材料成本。

管理层业绩指导

• 管理层预计更强劲的扁平材定价和更高的附加值利差将支撑2026年第四季度的业绩，并延续至2027年，这反映了合同定价典型的两个月滞后性。
• 预计未来几个月钢铁利润率或价差将保持强劲甚至小幅上升。管理层目前预计废钢成本不会面临重大上涨压力。
• 随着开工成本下降、产能利用率和成品率提高以及再生材料比例上升，预计铝出货量和盈利能力将在2026年第四季度大幅增长，并在整个2027年持续改善。
• 公司仍以到2026年底热轧机组产能利用率达到90%为目标。管理层澄清称，该目标适用于热轧带钢生产，而非成品板材出货量。
• 预计铝成品率将在年底前达到目标水平，并在2027年变得更加稳定。到2027年中期，废铝含量应接近优化的原材料配比。
• 管理层预计铝业务板块将从2027年第一季度开始实现EBIT（息税前利润）盈利。由于认证取决于获得新车型平台的准入，优化的汽车产品结构可能要到2028年左右才能实现。
• 2027年的初步资本支出可能超过6亿美元。斯蒂尔动力计划在2027年上半年的资本市场活动中提供更多细节。

风险与关注点

铝业务的产能爬坡仍是主要的执行问题。尽管热轧机组冷却液问题已得到解决，但由于材料必须经过下游加工和认证，成品出货量将滞后于热轧带钢的产能利用率。

更高比例的再生材料、稳定的成品率以及更丰富的汽车产品组合的实现时间，将决定铝业务利润率改善的节奏。汽车产品结构的优化可能会延续至2028年。

三家扁平材轧钢厂计划在10月和11月期间停产检修。预计大多数停产检修将持续3至3.5天，而布特勒（Butler）工厂由于需要更换大型桥式起重机，可能需要稍长时间的停产。

金属加工业务的利润率承压，因为钢材投入价格的上涨速度快于项目定价的调整速度。管理层表示，更高的定价目前正在进入积压订单，从而缓解了对2027年的这一担忧。

分析师问答环节点评

• 铝业务利润率驱动因素：管理层指出成品率的提升是最大机遇，其次是提高废铝利用率。人工效率已处于有利水平，约有700至750名员工，而竞争对手的运营部门员工超过1000名。
• 铝业务盈利能力：该板块在第三季度实现了EBITDA盈利，但在发生生产问题后，2026年整个下半年不大可能实现EBIT盈利。管理层预计从2027年第一季度起将实现EBIT盈利。
• 钢材定价与废钢：交货期延长、低库存、进口受限以及第四季度轧钢厂停产检修均对钢材价格形成支撑。管理层表示，强劲折旧废钢和加工废钢供应应能限制原材料成本压力。
• 金属加工业务前景：较高的钢材成本暂时压缩了利润率，因为积压订单的价格调整存在滞后。2027年交付的新订单包含了更高的定价，这支撑了管理层对出货量和利润率改善的预期。
• 资本配置：斯蒂尔动力在未来一至三年的时间跨度内将优先考虑有机增长项目。公司预计将在2027年上半年更详细地讨论项目选择和2027年资本支出。
• 收益结构：管理层认为钢铁业务目前在收益中的占比可能已接近高点。随着运营表现的改善，铝和金属加工业务预计将在2026年第四季度及整个2027年贡献更多收益。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

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

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

David Lipschitz

Thank you, Sylvie. Good morning, and welcome to Steel Dynamics' Third Quarter 2026 Earnings Conference Call. As a reminder, today's call is being recorded and will be available on our website for replay later today. Leading today's call are Mark Millett, Chairman and Chief Executive Officer of Steel Dynamics; and Theresa Wagler, Executive Vice President and Chief Financial Officer. The other members of our senior leadership team are joining us on the call individually.

Some of today's statements, which speak only as of this date, may be forward-looking and predictive, typically preceded by believe, expect, anticipate or words of similar meaning. They are intended to be protected by the Private Securities Litigation Reform Act of 1995 should actual results turn out differently. Such statements involve risks and uncertainties related to integrating or starting up new assets, the aluminum industry, the use of estimates and assumptions in connection with anticipated project returns and our steel metals recycling fabrication and aluminum businesses as well as to general business and economic conditions. Examples of these are described in the related press release as well as in our annually filed SEC Form 10-K under the headings Forward-Looking Statements and Risk Factors found on the Internet at www.sec.gov and if affable in any later SEC Form 10-Q. You will also find any referenced non-GAAP financial measures reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports Third Quarter 2026 results.

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

Mark Millett

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

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

So that said, and congratulations, Theresa?

Theresa Wagler

Thank you very much, Mr. Mark.

Mark Millett

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

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

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

Theresa Wagler

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

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

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

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

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

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

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

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

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

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

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

Mark Millett

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

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

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

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

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

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

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

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

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

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

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

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

So with that, we will take questions, please.

Operator

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

分析师问答

Nicklaus Cash

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

Mark Millett

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

Nicklaus Cash

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

Theresa Wagler

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

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

Operator

Next question comes from Alex Hacking at Citi.

Alexander Hacking

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

Theresa Wagler

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

Operator

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

Katja Jancic

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

Theresa Wagler

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

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

Katja Jancic

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

Theresa Wagler

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

Operator

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

Carlos de Alba

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

Mark Millett

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

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

Operator

Question comes from Lawson Winder at Bank of America .

Lawson Winder

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

Theresa Wagler

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

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

Lawson Winder

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

Mark Millett

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

Theresa Wagler

And those outages are October, November, Lawson.

Operator

Next question will be from Albert Realini at Jefferies.

Albert Realini

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

Theresa Wagler

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

Mark Millett

Yes.

Operator

Questions will be from Tristan Gresser at BNP Paribas.

Tristan Gresser

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

Mark Millett

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

Tristan Gresser

EBIT, sorry.

Mark Millett

I'm sorry. EBIT.

Theresa Wagler

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

Tristan Gresser

Sorry.

Theresa Wagler

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

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

Mark Millett

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

Tristan Gresser

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

Theresa Wagler

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

Mark Millett

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

Operator

Next question comes from Tim Tanners at Wells Fargo.

Timna Tanners

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

Mark Millett

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

Theresa Wagler

80,000 to 100,000.

Mark Millett

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

Timna Tanners

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

Mark Millett

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

Operator

Next question comes from Samuel McKinney at KeyBanc.

Samuel McKinney

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

Theresa Wagler

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

Mark Millett

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

Operator

Next question comes from Bill Peterson at JPMorgan.

William Peterson

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

Theresa Wagler

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

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

Mark Millett

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

William Peterson

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

Theresa Wagler

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

Operator

Next question comes from John Tumazos, Very Independent Research.

John Tumazos

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

Theresa Wagler

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

Mark Millett

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

John Tumazos

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

Theresa Wagler

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

John Tumazos

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

Operator

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

Mark Millett

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

Operator

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

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