Katja Jancic

Katja Jancic from BMO Capital Markets asked about the impact of rapid price increases in Q4 2025 and potential customer pushback on fully accepting these price adjustments, as well as the company's capital allocation strategy moving forward given market improvements and the expanded portfolio post-merger.

Answer

CEO Eddie Lehner and President and COO Rick Marabito responded that business activity, quoting, and conversion rates have been very positive, the best in a long time, with price increases finally starting to propagate through the market, though unevenly across end markets. They expressed optimism about the market momentum post-merger and the positive impact of past capital investments. Regarding capital allocation, Mr. Lehner and Mr. Marabito emphasized that the immediate priorities are realizing the $120 million in annual run rate synergies, deleveraging the company, and optimizing the asset footprint, while continuing the dividend and focusing on cash flow and debt reduction.

Katja Jancic asked about the near-term impact of rapidly increasing prices in Q4 and if Ryerson is still facing pushback from customers on fully accepting these price increases. She also inquired about the company's capital allocation strategy moving forward, given the improving markets and expanded portfolio post-merger.

Answer

Eddie Lehner (CEO, Ryerson) stated that business activity, quoting, and conversion rates have been very positive, the best in a long time, and pricing is finally starting to happen, though it's still somewhat uneven across end markets. Rick Marabito (President and COO, Olympic Steel) agreed, noting a good start to the year for both volumes and pricing, and expressed optimism about the market momentum post-merger. Lehner emphasized that the primary focus for capital allocation is realizing the $120 million in annual run rate synergies and deleveraging the company. Rick Marabito added that continuing the dividend is important, and the focus is on cash flow and debt reduction, with future specifics on shareholder rewards to be framed later.

Katja Jancic of BMO Capital Markets asked for an update on the current sales mix between transactional and contractual business and the company's forward-looking strategy for that split. She also inquired about Ryerson's exposure to the data center market and whether the lower first-half CapEx spend indicated a potential downward revision to the full-year guidance.

Answer

President, CEO & Director, Edward Lehner, stated the mix is currently 46% transactional and 54% program, with a strategy to win more transactional business through improved service and consistency from recent investments. He noted data centers are a growing subsector but difficult to quantify precisely. He also confirmed the $50 million CapEx target for 2025 remains, attributing the first-half spending pace to the timing of project milestone payments.

Katja Jancic from BMO Capital Markets asked for the current split between transactional and contractual sales and the strategy for this mix. She also inquired about the company's exposure to the data center market and whether the full-year CapEx target of $50 million was still on track given lower spending in the first half.

Answer

President, CEO & Director Edward Lehner stated the sales mix is approximately 46% transactional and 54% program, with a strategy to win more transactional business through improved service consistency. He noted data center exposure is hard to quantify but is a growing subsector. Regarding CapEx, Lehner confirmed the $50 million target remains, attributing the first-half spending pace to the timing of project milestones and payments.

Katja Jancic of BMO Capital Markets asked for an update on the sales mix between transactional and contractual business, whether the 60% transactional target remains, and the company's strategic outlook on its stainless steel portfolio given recent market weakness.

Answer

CFO Jim Claussen stated that transactional sales increased to 47% of the mix in Q1, up from 43% at year-end 2024. President and CEO Eddie Lehner confirmed the 60% transactional sales target is still in place, driven by strategic investments to improve service levels. Regarding stainless steel, Lehner affirmed the company's commitment, noting they have gained market share and are not planning to divest. He highlighted the opportunity is to grow the carbon franchise to complement their existing strength in non-ferrous metals.

Katja Jancic of BMO Capital Markets inquired about Ryerson's potential for further working capital release to generate free cash flow in Q4 and sought confirmation on the company's 2025 capital expenditure forecast.

Answer

President and CEO Edward Lehner confirmed that there is more opportunity for working capital release in the fourth quarter as the company moves through a seasonal and cyclical bottom. He also reaffirmed that the capital expenditure forecast for the next year remains at $50 million.

Katja Jancic inquired about the key milestones for the new Oklahoma smelter project beyond the power contracts and asked about potential government project-level financing options available to Century Aluminum, in addition to the existing DOE grant. She also sought clarification on the assumed margin loss for Iceland in the Q1 guidance.

Answer

Jesse Gary, President and Chief Executive Officer, outlined the next milestones for the Oklahoma smelter, including finalizing the power contract, completing engineering work with Bechtel, finalizing costs and CapEx structure, progressing project financing, and aiming for a final investment decision in Q4 of the current year. He confirmed that Century Aluminum is exploring various financing options, including potential government sources, for the project. Pete Trpkovski, Executive Vice President and Chief Financial Officer, did not provide a specific number for the assumed margin loss in Q1 for Iceland but referenced the $40 million-$50 million lost margin in Q4 and noted that rising prices could impact this. He also reiterated that insurance proceeds are expected to offset the cash margin loss, with reimbursements anticipated on a 1-2 quarter lag.

Katja Jancic asked about the next key milestones for the new Oklahoma smelter project beyond the power contracts, inquired about potential government project-level financing options available for the smelter in addition to the DOE grant, and sought clarification on the assumed margin loss for the Iceland operations included in the Q1 guidance.

Answer

President and CEO Jesse Gary outlined the next milestones for the Oklahoma smelter, including finalizing the power contract, completing Bechtel's engineering work, finalizing costs and CapEx structure, progressing on financing, and aiming for a final investment decision in Q4. He confirmed that Century Aluminum is exploring various financing options, some potentially from the government, to secure the most attractive package. Regarding the Iceland margin loss, Mr. Gary did not provide a specific Q1 number but referenced the $40 million-$50 million loss in Q4, noting that rising prices could impact this figure and that insurance proceeds are expected on a 1-2 quarter lag.

Katja Jancic of BMO Capital Markets inquired about the raw material sourcing for the Mt. Holly restart, the application of 45X tax credits to the new production, the timing of tax credit cash receipts, and the potential Q4 EBITDA outlook given current spot prices.

Answer

President & CEO Jesse Gary and EVP & CFO Peter Trpkovski confirmed that alumina for Mt. Holly is covered by the existing 2026 supply book and that the new tonnage will receive 45X credits. Regarding the $195M receivable, Trpkovski stated the FY23 portion is expected "imminently" with the FY24 portion arriving in 6-9 months. He also confirmed that based on current spot prices and contractual lags, Q4 EBITDA could see a significant uplift, aligning with the analyst's estimate of $140M-$150M.

Katja Jancic of BMO Capital Markets inquired about the nature of the Q2 2025 incremental operating expenses, the lack of a benefit from previously cited one-time alumina costs, and the expected timing and amount of cash receipts from the 45X manufacturing tax credit.

Answer

CEO Jesse Gary confirmed the Q2 OpEx increase of $10-$15 million is a one-time event that should reverse in Q3. He explained the alumina cost situation was driven by the timing of vessel sales at different price points. CFO Peter Trpkovski stated the company expects to receive approximately $60 million for its FY'23 tax credit in Q2 2025, with the remainder arriving later. He noted FY'24 credits would likely be received in late 2025 or early 2026.

Katja Jancic inquired about the potential timeline and investment required for a restart of the Mt. Holly smelter and asked for more details on the projected cost to build the new U.S. smelter.

Answer

President and CEO Jesse Gary estimated a potential Mt. Holly restart would have approximately a nine-month timeline but deferred providing a cost estimate until a final decision is made. Regarding the new smelter, he highlighted the finalization of a $500 million Department of Energy grant and completion of engineering work, with site selection and energy contract negotiations expected to conclude by the end of Q2 2025.

Katja Jancic asked about the gross profit margin outlook for the remainder of 2026, specifically if it can improve beyond the lower end of the sustainable range after Q1, and inquired about expectations for volume growth in the second half of the year, considering potential tailwinds like lower interest rates and increased manufacturing activity, with a focus on profitable growth.

Answer

Karla Lewis, President and CEO, explained that 2025 margins faced headwinds from tariff-driven aluminum cost increases and soft demand, but carbon products performed strongly. She anticipates margins will trend up from Q1 2026 as demand improves for both aluminum and carbon. Lewis also expressed a positive outlook for 2026 volume growth, citing strong quoting activity, large project engagement, increased carbon purchases due to low customer inventories and extended mill lead times, and robust relationships with domestic mill partners.

Katja Jancic asked about the expected gross profit margin trend for Q1 2026 and the rest of the year, specifically if it would remain at the lower end of the sustainable range. She also inquired about the outlook for volume growth in the second half of 2026, considering healthy demand and the company's focus on profitable growth.

Answer

CEO Karla Lewis explained that while 2025 saw headwinds, particularly from aluminum tariffs impacting margins, strong performance in carbon products and increasing demand for those products are expected to drive margins up from Q1 2026. She expressed a positive outlook for 2026, citing strong quoting activity, large projects, increased carbon customer buying, and extended mill lead times, supported by strong relationships with domestic mill partners.

Katja Jancic asked about the factors contributing to gross margin compression, specifically if it's linked to the company's focus on growing volumes, and inquired about the recent increase in inventory levels on the balance sheet.

Answer

Karla Lewis, President and CEO, explained that the gross margin compression is primarily due to a uniquely challenging market with tariff-driven pricing strength without underlying demand, and a drag from high-value specialty products in aerospace and semiconductor markets. She clarified that while flat-rolled products (part of volume growth) might have slightly lower margins, the overall growth strategy is profitable and not the main reason for the dip. Regarding inventory, she noted that increases reflect mill price increases and higher tons sold, positioning Reliance to win business and better service customers.

Katja Jancic from BMO Capital Markets inquired if Reliance Inc.'s focus on growing volumes contributed to the recent gross profit margin compression, in addition to market factors. She also asked about the reasons behind the slight increase in inventory levels on the balance sheet.

Answer

Karla Lewis, CEO and President, explained that while volume growth in flat-rolled products might have a minor impact, the primary drivers of margin compression were the unique market environment with tariff-driven pricing without corresponding demand, and underperformance in high-value specialty products for aerospace and semiconductor markets due to excess inventories. She clarified that increased inventory dollars were partly due to mill price increases and higher tonnes to support increased shipments, which is a strategic move to win business.

Katja Jancic of BMO Capital Markets asked about the key drivers behind Reliance's significant market share gains and whether this trend is sustainable. She also questioned if the current market uncertainty is leading to an increase in M&A opportunities and how valuations are being affected.

Answer

President and CEO Karla Lewis attributed the sustainable market share gains to superior customer service, a next-day delivery model, extensive processing capabilities, and a decentralized structure that allows for quick market reaction. She emphasized this is part of a "smart profitable growth" strategy. On M&A, Lewis confirmed a Q2 uptick in deal flow, suggesting some business owners may be exiting due to prolonged uncertainty. She noted that seller valuation expectations are generally aligning more closely with Reliance's views, creating more viable opportunities.

Katja Jancic inquired about the potential for Reliance to expand its services further downstream into more fabricated processing. She also asked for an update on the current M&A environment, including the activity level of the pipeline and the typical size of potential deals.

Answer

Executive Karla Lewis responded that the company selectively evaluates opportunities for more advanced fabrication, particularly when requested by existing customers, but remains cautious to avoid competing with its customer base. Regarding M&A, Lewis noted that the pipeline activity was slower in late 2024 and early 2025, which is typical during periods of market uncertainty, but is now beginning to pick up again, with a focus on small to mid-sized companies.

Katja Jancic of BMO Capital Markets inquired if the 2025 focus on increasing volume would be driven more by organic growth or acquisitions. She also asked whether increasing protectionist policies could spur greater interest in domestic value-added processing.

Answer

Executive Karla Lewis confirmed that volume growth would be driven by both organic efforts and acquisitions, similar to 2024. She explained that demand for value-added processing was already trending up due to customers seeking efficiency and reshoring, and that new trade policies could potentially accelerate this trend. Executive Arthur Ajemyan added that a pickup in the general manufacturing end market would also naturally increase demand for value-added processing services.

Katja Jancic of BMO Capital Markets inquired about the company's confidence that Q4 demand headwinds are temporary and what factors will drive growth into 2025. She also asked about any observed slowdown in the automotive tolling business.

Answer

President and CEO Karla Lewis explained that near-term uncertainty is largely tied to the presidential election, but long-term confidence is supported by bipartisan backing for manufacturing and eventual interest rate cuts. For the automotive sector, Lewis stated that Reliance has not seen a pullback in its specific platforms, which focus on SUVs and light trucks, and expects stable demand with normal seasonality.

Katja Jancic inquired about the scrap spread benefit embedded in the 2026 guidance and later asked if the 2028 Adjusted EBITDA target of $900 million might be conservative given current scrap spread levels, seeking clarification on the moving parts to reach that target.

Answer

CFO Jack Guo detailed the expected scrap benefits for 2026, noting similar Q4 2025 benefits in Q1 2026, and explained the complexity and historical volatility of recycling economics. CEO Ingrid Joerg clarified that the 2028 target uses conservative metal assumptions due to market volatility, preferring a prudent stance.

Katja Jancic inquired about the scrap spread benefits included in Constellium's 2026 guidance and questioned if the 2028 adjusted EBITDA target of $900 million might be conservative given current favorable scrap spread levels.

Answer

CFO Jack Guo detailed that 2026 expects similar scrap benefits to Q4 2025, noting the complexity and historical volatility of recycling economics. CEO Ingrid Joerg explained that the 2028 target incorporates conservative assumptions for metal prices and scrap spreads due to market fluidity, preferring a prudent stance.

Katja Jancic asked about the impact of scrap spreads, seeking quantification for the current quarter and insights into next year, and also inquired about the potential benefit from the Novelis fire in 2026.

Answer

Jean-Marc Germain (CEO, Constellium) and Jack Guo (CFO, Constellium) explained that scrap spreads, after tightening in 2024, are now widening in 2025. They noted a small Q3 impact, with a larger benefit expected in Q4 and into 2026, potentially trending closer to $20 million per quarter, clarifying that year-to-date, scrap spreads have been a headwind. Regarding the Novelis fire, Jean-Marc Germain stated it's too early to quantify but expects a modest positive impact, more so in 2026 than 2025, continuing through the first half of 2026.

Katja Jancic from BMO Capital Markets inquired about the specific impact of scrap spreads on Constellium's Q3 and Q4 2025 results, and the outlook for 2026, considering current contract negotiations. She also asked for quantification of the potential benefit from a competitor's facility fire in 2026.

Answer

CEO Jean-Marc Germain explained that while scrap spreads historically moved ±$5 million quarterly, 2024 and 2025 saw unprecedented changes. He noted a tailwind from widening spreads in Q4 2025, potentially trending towards the higher end of the $15-$20 million range, with further benefits expected in 2026 if the environment continues. CFO Jack Guo clarified that Q3 saw little benefit, and year-to-date scrap spreads were a headwind. Regarding the competitor's fire, Jean-Marc Germain stated it's enough to discuss but too early to quantify precisely, expecting a modest benefit more in 2026 than 2025, continuing through H1 2026.

Katja Jancic from BMO Capital Markets inquired if the 2025 guidance would be weighted more toward the second half, if the same pattern applies to free cash flow, and about the timing of share buyback acceleration.

Answer

CFO Jack Guo confirmed that Q1 would be weaker due to seasonality and the Valais flood impact, with performance strengthening thereafter as cost initiatives and operational improvements take hold. He noted that while free cash flow is typically negative in Q1, it will be partially offset by prior cash initiatives. CEO Jean-Marc Germain added that potential tariff benefits, not in the guidance, could also materialize in the second half. Guo affirmed the company's commitment to the buyback program throughout the year.

Katja Jancic inquired about the quantifiable impact of non-market-related EBITDA drivers for the upcoming year and asked for clarification on whether the mentioned cost reductions were incremental to the existing Vision '25 program.

Answer

CEO Jean-Marc Germain detailed several self-help drivers expected to contribute over €100 million to EBITDA, including €35-40 million from the new recycling center, over €25 million from the Vision '25 program, benefits from aerospace contract repricing, and operational improvements at Muscle Shoals. CFO Jack Guo confirmed that the company is accelerating cost reduction efforts, and the mentioned savings are incremental to the original Vision '25 targets.

Katja Jancic asked about the potential for the disconnect between high-vol and low-vol coal markets to widen, given the increased high-vol volume entering the market. She also sought clarification on the expected magnitude of the working capital build in the first half of 2026.

Answer

CEO Walt Scheller agreed that the market disconnect would likely persist for a while due to new high-vol tons from various mines needing absorption, indicating a fully supplied market for the time being. He expressed confidence that these tons would eventually be absorbed, leading to a more balanced market. CFO Dale Boyles estimated the working capital build in the first half of 2026 could be upwards of $50 million or more, emphasizing its dependence on pricing, which influences receivables, and the speed of inventory reduction.

Katja Jancic asked about the risk of the disconnect between high-vol and low-vol coal markets widening or persisting, given the increased high-vol supply entering the market. She also inquired about the potential magnitude of the working capital build in the first half of 2026.

Answer

Walt Scheller (CEO, Warrior) agreed that the disconnect would likely persist for a while due to new high-vol tons from Metinvest, Leer South, and Blue Creek needing absorption, but expressed confidence that these tons would eventually be absorbed, leading to a more balanced market. Dale Boyles (CFO, Warrior) estimated the working capital build in the first half could be upwards of $50 million or more, depending on prices and inventory reduction efforts.

Katja Jancic of BMO Capital Markets asked for an updated outlook on Blue Creek's 2026 production volume given the accelerated startup. She also inquired about the pricing basis (CFR vs. FOB) for Blue Creek sales and the potential financial benefit from the new 45X tax credit.

Answer

CEO Walter Scheller estimated that 2026 production volume from Blue Creek could approach 4 million tons. He also confirmed that current sales are primarily on a CFR basis but expects this to evolve with market conditions over the mine's life. CFO Dale Boyles provided a preliminary estimate for the 45X tax credit's impact, suggesting it could be in the $30-40 million per year range, contingent on variable costs and met coal prices.

Katja Jancic of BMO Capital Markets inquired about Warrior's price realization outlook, the sustainability of its low Q1 costs, and potential tariff impacts on imported longwall shields.

Answer

CEO Walter Scheller confirmed that a price realization of 80% to 85% is a reasonable expectation. CFO Dale Boyles added that Q1's cost levels are sustainable in the near term if met coal prices remain low, as costs are highly variable. Boyles also stated that the company will not incur any tariff impacts on its imported longwall shields.

Katja Jancic from BMO Capital Markets asked if sales shipments would be weighted towards the second half of the year, whether the 85-90% price realization guidance remains valid with new high-vol A production from Blue Creek, and for a breakdown of sales to China within the Asian market.

Answer

CFO Dale Boyles confirmed that shipments will be more weighted to the second half of 2025 due to the timing of Blue Creek's 1 million tons of production. He affirmed the 85-90% price realization guidance still stands but noted that recent market dynamics could place results at the lower end of that range. For competitive reasons, Boyles declined to specify the sales volume to China but assured that the company is not overcommitted and can reorient volumes if necessary.

Katja Jancic inquired about the progress of commercial discussions for the future Blue Creek volume, asking if it would be sold via contract or spot. She also asked about hiring plans for the next year and the potential impact on costs.

Answer

CEO Walter Scheller confirmed that conversations with customers about Blue Creek volume are underway and that the initial sales will likely be contracted trial cargoes for customers to test in their coke ovens. Regarding hiring, he estimated around 100 new hires for Blue Creek next year, though the budget is not finalized. CFO Dale Boyles clarified that these hiring costs would be capitalized as mine development and would not impact the cost of sales until the coal is sold.

Katja Jancic from BMO Capital Markets inquired about Peabody Energy's 2026 cost guidance for Australian operations, specifically the assumed Australian dollar exchange rate and metallurgical coal benchmark pricing. She also asked for an update on the remaining capital expenditure for the Centurion Mine's northern development.

Answer

Mark Spurbeck, Peabody's Chief Financial Officer, stated that the cost guidance assumes an Australian dollar exchange rate of $0.70 and a metallurgical coal benchmark price of $225 per metric ton. Regarding Centurion's northern development, Mr. Spurbeck outlined an estimated $100 million per year in development capital for the next three years, in addition to approximately $25 million per year for sustaining capital in the southern operations.

Katja Jancic inquired about Peabody's 2026 cost guidance for Australian operations, specifically the assumed Australian dollar exchange rate and metallurgical coal pricing, and also asked for an update on the remaining capital expenditure for the Centurion Mine's northern development.

Answer

Mark Spurbeck, Chief Financial Officer, stated that the cost guidance assumes an Australian dollar exchange rate of $0.70 and a metallurgical coal benchmark price of $225 per metric ton. He further clarified that approximately $100 million per year is allocated for northern development at Centurion for the next three years, in addition to $25 million per year for sustaining capital in the south.

Katja Jancic from BMO Capital Markets inquired how the accelerated development at the Centurion mine might affect future sales targets. She also sought confirmation that the revised Powder River Basin (PRB) cost guidance includes the new lower federal royalty rate and asked about the potential for further benefits from this change in future years.

Answer

EVP & CFO Mark Spurbeck confirmed the Centurion longwall start-up was pulled forward but stated the 2026 production target of 3.5 million tons remains unchanged for now. He also confirmed the lower royalty rate is included in the updated PRB guidance, resulting in a net benefit of about $0.40 per ton for Peabody. He noted future benefits will depend on new contract negotiations.

Katja Jancic from BMO Capital Markets asked how the accelerated development at the Centurion project might affect future sales targets. She also sought confirmation that the updated PRB cost guidance includes the new lower royalty rate and inquired about the potential for additional benefits from this change.

Answer

EVP & CFO Mark Spurbeck confirmed the accelerated timeline but stated the 2026 production target of 3.5 million tons remains unchanged for now. He affirmed the new PRB cost guidance includes the royalty reduction, which provides a net benefit of about $0.40 per ton, or $15-20 million in 2025. Future benefits will depend on new contract pricing.

Katja Jancic from BMO Capital Markets inquired about the impact of Centurion's accelerated development on future sales targets. She also sought confirmation that the updated Powder River Basin (PRB) cost guidance includes the new lower royalty rate and asked about the potential for further benefits.

Answer

EVP & CFO Mark Spurbeck confirmed the Centurion longwall start-up has been pulled forward but stated the company is not yet changing the 3.5 million ton production target for 2026. He verified that the new PRB cost guidance incorporates the royalty rate reduction from 12.5% to 7%, resulting in a net benefit of approximately $0.40 per ton for Peabody, or $15-20 million in 2025. He added that future benefits will depend on new contract negotiations.

Katja Jancic from BMO Capital Markets asked how the accelerated development at the Centurion project could affect its sales targets. She also sought confirmation that the updated PRB cost guidance includes the new, lower federal royalty rate and inquired about the potential for further benefits in subsequent years.

Answer

EVP & CFO Mark Spurbeck explained that while Centurion's longwall production is being pulled forward into Q1 2026, the company is not yet changing its 2025 production guidance of 3.5 million tons. He confirmed the new royalty rate is included in the PRB cost guidance, providing a net benefit of about $0.40 per ton, and noted that future benefits would depend on new contract negotiations.

Katja Jancic from BMO Capital Markets asked if the hold on financing for the Anglo American deal also affects the potential sale of a minority interest in the Centurion mine. She also inquired about the drivers of the strong Q1 cost performance and the reasons for the higher cost guidance in Q2.

Answer

President and CEO Jim Grech stated there is "no correlation" between the Anglo deal financing and the separate process of exploring a partial sale of the Centurion mine. CFO Mark Spurbeck explained that Q1's outstanding cost performance was due to productivity gains and reduced overtime. He attributed the higher Q2 cost guidance to lower volumes and specific operational work at the Coppabella mine, but noted the company is trending toward the low end of full-year guidance.

Katja Jancic sought more detail on the 2025 metallurgical coal cost guidance, questioning why costs were not trending lower given higher production and asking about the specific negative impact from the Coppabella mine. She also inquired if recent adverse weather in Australia was affecting production or port operations.

Answer

CFO Mark Spurbeck clarified that while production is up, the 2025 cost guidance of $120-$130/tonne is consistent with 2024's actual costs of $123/tonne. He attributed this to the need to move an additional 6 million BCMs of waste at Coppabella and the impact of a weaker Australian dollar in 2024. CMO Malcolm Roberts confirmed that recent monsoonal rains caused a short-term, approximately 7-day interruption at the port but had no remarkable impact on mine production.

Katja Jancic from BMO Capital Markets sought clarification on the impact of the Wambo underground mine's earlier closure on 2025 seaborne thermal volumes and product mix. She also asked about the expected Q4 shipment volume for Shoal Creek, its target markets, and the rationale for selling into a subdued spot market.

Answer

CEO Jim Grech clarified that Wambo underground's production will decrease by approximately 400,000 tonnes in 2025 to 800,000 tonnes, confirming it is Newcastle-grade coal and that a negative mix shift is possible. CMO Malcolm Roberts projected Shoal Creek's Q4 shipments to be 600,000-700,000 tonnes, targeting China and Southeast Asia. He explained that selling on a CFR basis into Asia is necessary to meet growing demand, despite lower FOB benchmark prices.

Katja Jancic from BMO Capital Markets asked for more color on Nucor's potential annual growth CapEx in a normalized environment, beyond current major projects, given the shift towards less capital-intensive growth. Jancic also sought further details on Nucor's M&A strategy, specifically regarding product types or businesses for adjacencies.

Answer

Chair and CEO Leon Topalian stated Nucor's commitment to an investment-grade credit rating and returning at least 40% of net earnings to shareholders, with the remaining 60% dedicated to growth. He suggested thinking about growth CapEx in relation to a through-cycle EBITDA of $7 billion. For M&A, Leon Topalian explained Nucor's focus on steel-centric adjacencies with synergy potential, citing examples like CHI and Rytec, and targeting mega-trends such as energy, energy infrastructure, data centers, and tower structures.

Katja Jancic asked about Nucor's potential annual growth CapEx in a more normalized environment without major projects, given the focus on less capital-intensive growth, and sought more color on the M&A strategy, specifically regarding product types or businesses for adjacencies.

Answer

Chair and CEO Leon Topalian stated Nucor's commitment to an investment-grade credit rating and returning at least 40% of net earnings to shareholders, with the remaining 60% allocated for growth. He referred to the 2022 Investor Day's through-cycle EBITDA of $7 billion, implying that the portion not returned to shareholders would fund growth. He expects a shift from heavy core investments to 'expand beyond' adjacencies. For M&A, he looks for steel-centric businesses with synergies, citing CHI/Rytec as an example, focusing on mega-trends like energy, energy infrastructure, data centers, and tower structures.

Katja Jancic asked about the expected trend of startup costs for the next few quarters and the reasons for margin compression in the mill segment related to slab purchases for CSI operations.

Answer

Steve Laxton (Executive Vice President and CFO) projected startup costs to remain in the range of $100 million to $110 million per quarter for the next couple of quarters. Noah Hanners (EVP, Sheet Group) explained that while CSI mostly sourced slabs from Brazil, the decision between internal substrate and purchased slabs is based on economic sense, and Nucor has leaned into more internal substrate over the year.

Katja Jancic of BMO Capital Markets questioned the specific drivers of the expected Q3 margin compression in the steel mill segment, given stable volume and pricing commentary. She also sought to confirm if potential Brazilian tariffs were factored into the guidance.

Answer

President and CEO Leon Topalian confirmed the Q3 forecast includes the potential impact of tariffs on raw materials from Brazil, which is the primary driver of the expected nominal margin compression. EVP Allen Behr detailed Nucor's mitigation strategy, emphasizing its raw material flexibility, including shifting global sourcing for DRI pellets and pivoting away from Brazilian pig iron by using internal DRI and low-copper shred.

Katja Jancic from BMO Capital Markets questioned the drivers behind the expected Q3 margin compression in the steel mills segment, particularly concerning raw material costs and potential tariff impacts.

Answer

CEO Leon Topalian pointed to potential tariff impacts on raw materials from Brazil and a pricing lag effect. EVP Allen Behr detailed Nucor's mitigation strategies, emphasizing their flexible sourcing capabilities for DRI and pig iron, which reduces reliance on any single country. Topalian confirmed their guidance accounts for these potential risks.

Katja Jancic from BMO Capital Markets asked if the CapEx forecast accounts for tariffs, inquired about the origin of imported equipment, and requested the Q1 production tonnage for the Brandenburg mill.

Answer

CFO Stephen Laxton confirmed the CapEx budget does not include speculation for tariffs. CEO Leon Topalian specified that equipment is sourced primarily from Europe (Italy and Germany). He also stated that the Brandenburg mill is on a pace of 150,000 to 160,000 tons for the quarter, with production expected to ramp up.

Katja Jancic sought confirmation on tariff inclusion in CapEx and inquired about equipment import origins and Brandenburg's production.

Answer

CEO Leon Topalian confirmed no tariff speculation in CapEx. EVP Brad Ford identified Europe as the primary import origin. Production volume was also discussed.

Katja Jancic asked whether stronger-than-expected Q4 shipments were driven by real demand or pre-buying ahead of potential tariffs. She also inquired about Nucor's view on inventory levels across the supply chain.

Answer

CFO Steve Laxton attributed the strong Q4 shipments to both stable underlying demand and lower-than-expected disruption from the holidays, allowing for more shipping days. CEO Leon Topalian expressed optimism for 2025, expecting pro-growth policies and reshoring to drive demand, suggesting a healthy demand pull-through rather than just inventory effects.

Katja Jancic asked for confirmation on whether 2025 capital expenditures would remain above $3 billion and inquired about potential opportunities to optimize Nucor's manufacturing footprint by reducing older capacity as new projects come online.

Answer

CFO Steve Laxton indicated that due to large, multi-year growth projects, CapEx is expected to remain around the $3 billion level in 2025, with formal guidance to come. CEO Leon Topalian explained that while Nucor continuously rationalizes its production footprint for efficiency, the company's growth strategy is focused on adding differentiated capabilities, not on building new plants to replace old ones.

Katja Jancic inquired about the aluminum rolling mill's expected 90% utilization by the end of 2026, asking for confirmation and details on the profitability outlook for the next few quarters, especially given its EBITDA positive status in December and the current Midwest premium environment.

Answer

Mark Millett, Chairman and CEO, confirmed the 90% utilization target, noting it's sooner than previously expected due to strong team performance and equipment capabilities. Theresa Wagler, EVP and CFO, added that positive EBITDA is anticipated to continue and improve throughout the first half of the year, with the second half focusing on product mix optimization, despite ongoing commissioning and construction of downstream facilities.

Katja Jancic inquired about Steel Dynamics' aluminum rolling mill, specifically its expected 90% utilization by the end of 2026 and the anticipated profitability trajectory for the next few quarters, given its EBITDA positive status in December and the current market environment.

Answer

Mark Millett, Chairman and CEO, confirmed the 90% utilization target by year-end 2026, noting it's sooner than previously expected due to team performance and equipment. Theresa Wagler, EVP and CFO, added that positive EBITDA is expected to continue and improve through the first half of the year, with the second half focusing on product mix optimization, despite ongoing commissioning and construction.

Katja Jancic from BMO Capital Markets asked for the specific EBITDA contribution from the Sinton mill in Q2 and questioned if the mill is positioned to reach its $500 million annualized EBITDA run-rate in the second half of 2025.

Answer

CFO Theresa Wagler declined to provide specific financial metrics for Sinton but confirmed its performance was significantly better than Q1. She clarified that achieving the full through-cycle run rate is more likely a 2026 event, as the mill continues to ramp up its value-added product mix, including automotive and API grades.

Katja Jancic of BMO Capital Markets asked for the specific EBITDA contribution from the Sinton mill in Q2 and questioned if the facility is now positioned to reach its projected $500 million annualized run rate in the second half of 2025.

Answer

EVP & CFO Theresa Wagler explained that the company no longer discloses specific financial metrics for Sinton but confirmed its performance was significantly better than Q1. She clarified that reaching the full through-cycle run rate of around $500 million is more likely a 2026 event, as the mill still needs time to optimize its value-added product mix.

Katja Jancic from BMO Capital Markets asked for the specific Q2 EBITDA contribution from the Sinton mill and questioned if the facility is positioned to reach its $500 million annualized EBITDA run-rate in the second half of 2025.

Answer

EVP & CFO Theresa Wagler explained that Steel Dynamics no longer discloses specific financial metrics for Sinton but confirmed its Q2 performance was significantly improved. She clarified that achieving the full through-cycle run rate is more likely a 2026 event, as the remainder of 2025 will focus on optimizing the value-added product mix.

Katja Jancic from BMO Capital Markets asked for the specific EBITDA contribution from the Sinton mill in Q2 and questioned if the mill could reach its projected $500 million annualized run rate in the second half of 2025.

Answer

EVP & CFO Theresa Wagler declined to provide a specific EBITDA figure for Sinton but noted it was significantly improved from Q1. She clarified that achieving the full through-cycle run rate is more likely a 2026 event, as the mill continues to ramp up its value-added product mix.

Katja Jancic from BMO Capital Markets asked for the specific Q2 EBITDA contribution from the Sinton mill and questioned if the facility is on track to reach its $500 million annualized EBITDA run-rate in the second half of 2025.

Answer

EVP & CFO Theresa Wagler declined to provide specific financial metrics for Sinton but confirmed its performance was significantly better than Q1. She clarified that reaching the full through-cycle run rate of around $500 million is more likely in 2026, as the mill still needs time to optimize its value-added product mix.

Katja Jancic from BMO Capital Markets asked if the 80% contractual base for flat-rolled steel would change with the Sinton ramp-up and questioned the specific cause of the startup challenges at Sinton after its recent maintenance.

Answer

COO Barry Schneider explained that the contractual concentration will remain in the 70-80% range as new value-add lines support this model. CEO Mark Millett clarified the 80% figure is specific to flat-rolled products. Regarding Sinton, Mr. Schneider attributed the slow restart to safety protocols required when working with high-voltage systems after an outage, noting it was not an unusual event.

Katja Jancic asked for an update on the current status of the Alumar Smelter and whether the San Ciprián smelter would be EBITDA positive at full capacity, given the current alumina and aluminum market environment.

Answer

William Oplinger, Alcoa Corporation President and Chief Executive Officer, reported a setback at the Alumar Smelter in Q4 due to power interruptions, expecting Q1 production to be similar to Q4. Molly Beerman, Executive Vice President and Chief Financial Officer, added that the Alumar smelter reached profitability in the second half of 2025. For San Ciprián, she stated the smelter will reach profitability after its restart in mid-2026, but the combined complex is expected to have an EBITDA loss of $75 million-$100 million in 2026, primarily from the refinery, with cash neutrality targeted by the second half of 2027.

Katja Jancic asked for an update on the current status and operational performance of the Alumar Smelter. She also inquired whether the San Ciprián smelter would be profitable at full capacity given the prevailing alumina and aluminum market conditions.

Answer

William Oplinger, President and CEO, reported a Q4 setback at Alumar due to power interruptions, expecting Q1 production to be similar. Molly Beerman, EVP and CFO, added that Alumar reached profitability in H2 2025. For San Ciprián, Molly Beerman stated the smelter will be profitable after its restart (mid-2026) due to favorable pricing, but the combined complex is projected for an EBITDA loss of $75M-$100M in 2026, with cash neutrality targeted for H2 2027.

Katja Jancic inquired about the potential impact on Alcoa if proposed U.S. tariffs on Brazil were to include alumina, and also asked for details on the contingency plans and cost implications of the delayed mine approvals in Western Australia.

Answer

EVP & CFO Molly Beerman explained that while tariffs on Brazilian alumina would affect U.S. smelter sourcing, Alcoa could redirect supply from Western Australia, albeit at a higher shipping cost. President, CEO & Director William Oplinger added that no cost impacts from the Western Australia mine delay are expected in 2025 or 2026, as contingency plans are in place to manage the new timeline.

Katja Jancic asked for the specific Midwest premium assumption used in the company's tariff impact calculation, what the 'correct' premium should be, and the current status of the permitting process in Western Australia.

Answer

President and CEO William Oplinger and EVP and CFO Molly Beerman confirmed the current calculation uses a $0.39/lb Midwest premium. Oplinger stated that an equilibrium premium, based on a 25% tariff, would be in the $880 to $990 per ton range. He also confirmed that the permitting process in Western Australia is progressing as expected.

Katja Jancic of BMO Capital Markets inquired about the potential impact of a 25% tariff on Canadian aluminum, asking how high the Midwest premium could go and if the increase would be sufficient to offset the negative effects for Alcoa.

Answer

President and CEO William Oplinger responded that the Midwest premium would likely rise "substantially" to attract metal from other regions, creating inefficient trade flows. He clarified that due to Alcoa's larger production in Canada (900,000 tonnes) versus the U.S. (300,000 tonnes), the premium increase would not fully offset the tariff's negative financial impact on the company.

Katja Jancic inquired about Alcoa's capital allocation priorities, specifically the potential for increased shareholder returns, and asked if there were opportunities to increase alumina production to capitalize on high prices.

Answer

CFO Molly Beerman and CEO William Oplinger both emphasized that deleveraging is the top priority for early 2025. On production, CEO William Oplinger stated there are no large, quick projects to increase alumina output, though smaller debottlenecking and creep projects are ongoing.

Katja Jancic asked for more details on the unfavorable $10 million impact from bauxite grade in Australia and whether this cost pressure is expected to continue.

Answer

EVP and CFO Molly Beerman explained that the cost is related to increased maintenance needed to operate with lower quality bauxite. She noted that while the company had previously operated favorably against estimates, it is now facing maintenance needs and the teams are working to determine the appropriate future spending levels.

Katja Jancic inquired about the rising unit cash costs in South America and the expected trend for these costs over the next few years.

Answer

Kathleen Quirk, President and CEO, explained that South America's net cash costs are forecast at $2.58 per pound for 2026, similar to Q4 2025's $2.57 per pound. The increase from 2025 is primarily attributed to higher labor, energy, and power costs, alongside a weaker dollar.

Katja Jancic asked for an explanation regarding the rising unit cash costs in South America and the expected trend for these costs over the next few years.

Answer

Kathleen Quirk, President and CEO, stated that net cash costs in South America are forecasted to average around $2.58 per pound for 2026, similar to the $2.57 per pound experienced in Q4 2025. She attributed the increase primarily to higher labor, energy, and power costs, as well as a weaker U.S. dollar.

Katja Jancic from BMO Capital Markets inquired about the potential impact of incremental mitigating factors and steps on the production cost profile at Grasberg over the next few years.

Answer

Kathleen Quirk, President and CEO, affirmed that Grasberg will maintain a very attractive cash cost profile due to its high copper and gold grades. She explained that during the ramp-up, some fixed costs for idle facilities would be expensed directly, impacting reported costs in the near term, but she does not anticipate any long-term adverse effects on the overall cost structure.

Katja Jancic asked how the incremental mitigating factors and steps might impact the production cost profile at Grasberg over the next few years.

Answer

Kathleen Quirk (President and CEO) stated that Grasberg will maintain an attractive cash cost due to high copper and gold grades. She explained that some fixed costs from idle facilities would be expensed directly during the ramp-up, impacting consolidated average costs temporarily, but no long-term impacts on costs are expected.

Katja Jancic from BMO Capital Markets asked how potential U.S. tariffs could impact the company's outlook for declining costs in its North American operations.

Answer

President & CEO Kathleen Quirk acknowledged a potential 5% cost impact from tariffs but emphasized that significant cost savings are expected from efficiency improvements, innovation, reduced contractor reliance, and the low-cost pounds from the Leach initiative. She highlighted that the U.S. copper premium and existing Net Operating Losses (NOLs) will significantly benefit margins and cash flows.

Katja Jancic of BMO Capital Markets asked how potential U.S. tariffs could affect the company's outlook for declining costs in its North American operations.

Answer

President & CEO Kathleen Quirk stated that while they are monitoring a potential 5% cost impact from tariffs passed through by suppliers, the primary drivers of cost reduction remain operational. She highlighted efficiency gains, innovation, contractor rationalization, and low-cost pounds from the leach initiative as key factors. Quirk also noted the significant financial benefit from the U.S. copper premium offsets these pressures.

Inquired about the potential 10% tax credit for copper as a critical mineral in the U.S., asking about the legislative steps and timeline.

Answer

It is a matter of legislation that has passed the House but needs to proceed through the rest of the U.S. legislative process. While possible in 2025, the timing is unpredictable. The potential benefit is significant, estimated around $500 million.

Katja Jancic asked for an update on the legislative steps and potential timeline for copper to qualify for the 10% U.S. tax credit, and whether it's still possible in 2025.

Answer

President and CEO Kathleen Quirk explained that it requires further legislation following a bill that passed the House. While she could not predict the timing of U.S. legislative processes, she noted the issue has bipartisan support and that its enactment would be significant, representing a potential benefit of around $500 million.

Katja Jancic asked for clarification on the target EBITDA for the precast business, specifically if 'several hundred million dollars' was the correct figure. She also inquired if the growth strategy for this business would primarily be through M&A, as previously indicated.

Answer

President and CEO Peter Matt confirmed the target is 'several hundred million dollars' for the precast business, noting that the two acquisitions already bring it to $250 million, providing a strong start. He reiterated that while there are organic growth projects within both Foley and CPMP, achieving the desired scale will likely involve M&A, with bolt-on acquisitions being particularly appealing due to synergies. SVP and CFO Paul Lawrence supplemented that the 'step change' in growth comes from inorganic growth, driven by above-average adoption and penetration of precast products that solve labor shortages and stormwater management issues, especially in attractive construction geographies.

Katja Jancic from BMO Capital Markets inquired about the potential valuation multiples for inorganic growth targets in the $500-$750 million range, the current M&A pipeline, and any potential timeline for a transaction.

Answer

President & CEO Peter Matt stated that target multiples are higher than CMC's but are justified by higher margins and better cash flow characteristics. He stressed that CMC will be disciplined, aiming to lower the effective multiple paid to CMC's level over 3-4 years through synergies and growth. He described the M&A pipeline as 'good' but noted processes are moving slower due to market uncertainty, making a specific timeline difficult to predict.

Katja Jancic from BMO Capital Markets asked about the potential valuation multiples for inorganic growth targets within the $500-$750 million range and inquired about the current M&A pipeline and any potential timeline for a deal.

Answer

President & CEO Peter Matt explained that while target multiples are higher than CMC's, they are justified by higher margins and better cash flow characteristics. He emphasized a disciplined approach, aiming to lower the effective multiple paid to CMC's level over 3-4 years through synergies and growth. He described the M&A pipeline as 'good' but noted processes are moving slower due to market uncertainty, stating the company is ready to proceed when terms are right.

Katja Jancic from BMO Capital Markets questioned the company's inorganic growth strategy, specifically asking about the valuation multiples for potential acquisitions and the current status of the M&A pipeline.

Answer

President & CEO Peter Matt stated that target multiples are higher than CMC's because the businesses are higher-margin with better cash flow. He emphasized a disciplined approach, aiming to lower the effective multiple paid to CMC's level over 3-4 years via synergies and growth. He described the M&A pipeline as 'good' with several processes underway, though progress is slowed by market uncertainty.

Katja Jancic asked about the timing of benefits from the TAG operational excellence initiative and questioned the sustainability of the current share buyback pace given increasing capital expenditures.

Answer

Executive Peter Matt stated that while the mentioned TAG initiatives have a run-rate benefit of $10-15 million, the company is not yet quantifying the total impact for fiscal 2025, emphasizing the program's long-term goal of elevating margins. On capital allocation, he affirmed that the quarterly share repurchase level is considered sustainable and that the company intends to consistently execute its buyback program as part of its balanced strategy.

Katja Jancic from BMO Capital Markets sought clarification on how the TAG initiative's goal of 'higher through-the-cycle margins' compares to current margin levels and asked for more detail on the value of the current backlog versus the prior quarter.

Answer

Executive Peter Matt explained that the TAG initiative aims to provide incremental margin improvement on top of what are already structurally higher levels, helping to defend margins in a downturn or enhance them in a stable environment. Paul Lawrence, Senior Vice President and Chief Financial Officer, added that while backlog volumes remain comparable, the value has decreased due to more competitive pricing on new projects.

Katja Jancic of BMO Capital Markets inquired about the current state of the Canadian plate market, its pricing compared to the U.S., the remaining capital expenditure for the Electric Arc Furnace (EAF) project, and the broader CapEx outlook amid a weak market environment.

Answer

CEO Michael Garcia characterized the Canadian plate market as stable and well-balanced, noting Algoma has increased its market share to over 40%. However, he stated that Canadian plate pricing is approximately 40% lower than in the U.S. market. Garcia also reaffirmed prior guidance on the EAF project budget, highlighting that the project has been de-risked. CFO Rajat Marwah added that maintenance CapEx would likely be at the lower end of the $80M-$120M range, while the remaining EAF project spending would proceed as planned.

Inquired about potential cost mitigation strategies in response to tariffs, sought clarification on HRC costs, asked for details on an expected insurance payout and working capital release, and questioned the full-year production volume outlook.

Answer

Cost reduction is an ongoing focus, with the EAF being the primary driver for lower costs. The all-in cost for HRC is around $650/ton. The company expects a ~$100M insurance payout this year (with a ~$20-25M advance soon) and a $100M working capital release this quarter, which is unaffected by tariffs. Total shipments for the year are projected at 2.1-2.2 million tons, with a significant ramp-up in plate production.

Katja Jancic from BMO Capital Markets asked about potential tariff mitigation strategies beyond the EAF transition, the timing and amount of an expected insurance payout, and the status of the company's working capital release plan. She also sought clarification on the full-year production volume outlook and the expected split between plate and HRC.

Answer

CEO Michael Garcia confirmed that an aggressive cost reduction plan has been underway for months, independent of tariff concerns. CFO Rajat Marwah detailed an expected $100 million insurance payout, with a $20-25 million advance coming soon. He also reaffirmed the plan to release $100 million in working capital by March 2025, which is unaffected by tariffs. For the full year, he guided for 2.1 to 2.2 million tons of shipments, with plate volumes averaging around 35,000 tons per month.

Katja Jancic of BMO Capital Markets inquired about Algoma's working capital, asking for clarification on why the inventory build for the current quarter would be lower than usual despite the upcoming EAF start-up. She also asked for specifics on the expected working capital build for the EAF and the drivers behind the anticipated sequential increase in shipment volumes for the December quarter.

Answer

CFO Rajat Marwah explained that the significant EAF-related inventory build is not expected until calendar 2025. The current quarter's build will be lower than the typical $150 million, with an eventual working capital release of at least $100 million expected by March 2025. He noted a potential temporary build of $30-$50 million for scrap inventory during the transition. CEO Michael Garcia added that the expected volume increase is driven by the operational schedule, which has no planned outages, rather than a significant rise in market demand.

Asked about the status of the challenging geology at the Leer mine, the normalized production level for Leer, and whether Leer South's move into District 2 would result in production of over 4 million tons per year.

Answer

The challenging geology at both Leer and Leer South is now behind them, with the longwalls expected to start up again shortly. The new panels look good. A normalized production level for Leer has been about 1 million tons per quarter. Leer South is still ramping up but has potential to grow. They declined to give explicit production guidance for Leer South (like 4M tons/year) but confirmed they expect higher productivity and lower costs from both mines in 2025 due to better conditions.

Asked for details on the Q2 met coal sales guidance range, contingency plans for extended Baltimore port delays, and sought confirmation on the Q2 met cost forecast and the full-year production target for the Leer South mine.

Answer

The Q2 met sales range depends on vessel timing and the Baltimore port reopening date, which is expected in late May. If delays persist, the company will utilize its DTA terminal and other alternatives like midstreaming. Q2 met costs are expected to be in the mid-to-high $80s range. The company confirmed the 3 million ton production target for Leer South for 2024, with higher output expected in Q4 and into 2025.