Steel Dynamics will build a new recycled aluminum flat-roll plant

Steel Dynamics, Inc. will build and operate a 650,000 ton low carbon recycled aluminum flat rolling mill, with two recycled aluminum slab satellite centers. The investment is estimated at $2.2 billion for the three facilities, and commercial production is expected to begin in the first quarter of 2025. The aluminum flat rolling mill will use a significant amount of aluminum scrap and, as such , is also a complementary extension. of the company’s metal recycling platform. The company estimates that the project will generate between $650 million and $700 million in annual EBITDA over the entire cycle. The project will be financed from available cash and operating cash flow, and the company expects to maintain its policy of strong shareholder distributions and investment-grade credit ratings.

The North American flat-rolled aluminum industry has a large and growing supply shortfall estimated at over 2.0 million tonnes, primarily due to growing demand from the automotive and beverage can industries. durable. The lack of availability of flat rolled aluminum has impacted automakers’ ability to secure their supply. The supply gap is currently filled by imports of higher cost aluminum flat-rolled products, which exceeded 25% of North American consumption in 2021.

Steel Dynamics Aluminum Flat Rolling Mill Project

The planned $1.9 billion flat-rolled aluminum plant will be located in the southeastern United States, with an annual production capacity of 650,000 tons of finished products, serving the packaging industry sectors durable beverages, automotive and common alloys. The product offering will be supported by various value-added finishing lines, including CASH (continuous annealing solution heat treatment) lines, continuous coating, and various slitting and packaging operations. The rolling mill is currently expected to enter service in the first quarter of 2025. The company’s focus on decarbonization will also apply to this aluminum operation, including plans to use a significant amount of pre-scrap aluminum. and post-consumer in its production process, supported by the company’s metal recycling platform. The company will own more than 94% of the rolling mill facilities under a joint venture agreement with Unity Aluminum, Inc.

At full capacity, the aluminum rolling mill will require approximately 900,000 tonnes of annual aluminum slab supply. The rolling mill is expected to have the capacity to supply approximately 50% of its recycled aluminum slab requirements on-site, with the remainder to be supplied by the construction and operation of two additional recycled aluminum slab satellite centers, one one to be located in the southwestern United States and the other in north-central Mexico. The satellite slab centers will benefit from an abundant regional supply of aluminum scrap and profitable operations. The two facilities are expected to cost approximately $350 million in total, with the Mexican facility expected to begin operations in 2024 and the US facility by the end of 2025. The company will own 100% of the satellite facilities.

Steel Dynamics believes this strategic growth investment is differentiated and supported by the following key benefits:

Culture at Steel Dynamics

  • This investment will benefit from Steel Dynamics’ commitment to the safety, health, welfare and development of its people.
  • The Steel Dynamics culture is manifested in a low-cost operating framework and its incentive systems based on entrepreneurial performance.

A market lacking alternatives

  • No new aluminum flat rolling mills have been built in North America for over 40 years. Steel Dynamics plans to bring the “mini-factory” culture and related operational efficiencies to the flat-rolled aluminum industry.

Successful experience in organic growth

  • Steel Dynamics teams and management have extensive experience building and operating large, capital-intensive operations, including flat-rolled steel mills and value-added downstream finishing lines.
  • Steel Dynamics recently successfully completed construction of a new $2.0 billion flat-roll steel mill with two high-quality finishing lines in Sinton, Texas, on budget.

Customer Supply Chain Solutions

  • This investment allows Steel Dynamics to grow with its customers in meeting their sustainable metal needs. A significant number of Steel Dynamics’ existing carbon steel customers also consume or process aluminum flat-rolled products for automotive, appliance, construction and other applications.
  • This investment provides these customers with a new domestic supply chain of high-quality, low-carbon aluminum, while providing Steel Dynamics with protection against substitution of carbon steel materials.
  • This investment diversifies Steel Dynamics’ end-market exposure by serving the growing North American sustainable beverage can industry with its countercyclical characteristics.
  • Similar to Steel Dynamics’ vision at its steel mill in Sinton, Texas, the company plans to invite customers to locate on-site facilities with the rolling mill to further improve customer profitability, providing an opportunity for steel coil supply. scrap aluminum. .

A focus on sustainability

  • Steel Dynamics’ metal recycling platform, OmniSource, has extensive processing capabilities and is ready to access new and existing aluminum scrap generators and suppliers.
  • Recycled aluminum scrap will be the main raw material for the aluminum rolling mill and the recycled aluminum slab centers. The company’s metal recycling platform is expected to supply 100% of the aluminum scrap for these operations.
  • Consistent with Steel Dynamics’ existing mills, this new smelter is planned to provide an energy efficient, low environmental impact product alternative to the world’s average flat-rolled aluminum production facilities.

The financial strength of the project

  • Steel Dynamics has more than doubled its free cash flow generation capacity since acquiring the Columbus Flat Roll Steel division with an average annual adjusted free cash flow of $1.5 billion from 2017 to 2021.
  • The company will fund this project with available liquidity and operating cash flow while maintaining its strong shareholder distributions and investment grade credit profile.

During Sinton’s construction from 2019 to 2021, the company improved its credit profile, while financing the $2.0 billion steel plant with free cash flow, increasing its cash dividend by 39% and buying $1.5 billion, or 14%, of its common stock.