Participants

David Lipschitz; Director, Investor Relations; Steel Dynamics, Inc

Mark Millett; Co-founder, Chairman, and Chief Executive Officer; Steel Dynamics, Inc

Theresa Wagler; Executive Vice President and Chief Financial Officer; Steel Dynamics, Inc

Barry Schneider; President and Chief Operating Officer; Steel Dynamics, Inc

Martin Englert; Analyst; Seaport Research Partners

Katja Jancic; Analyst; BMO Capital Markets

Tristan Gresser; Analyst; BNP Paribas Exane

Carlos De Alba; Analyst; Morgan Stanley

Timna Tanners; Analyst; Wolfe Research, LLC

Bill Peterson; Analyst; JPMorgan Chase & Co.

John Tumazos; Analyst; John Tumazos Very Independent Research, LLC

Presentation

Operator

Good day and welcome to the Steel Dynamics third-quarter 2024 earnings conference call. (Operator Instructions) Please be advised that this call is being recorded today, October 17, 2024, and your participation implies consent to our recording of this call. If you do not agree to these terms, please disconnect. At this time, I would like to turn the conference over to David Lipschitz, Director, Investor Relations. Please go ahead.

David Lipschitz

Thank you, Kelly. Good morning, and welcome to Steel Dynamics' third-quarter 2024 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, and Barry Schneider, President and Chief Operating 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 are starting up new assets, the aluminum industry, the use of estimates and assumptions in connection with our anticipated project returns in our steel, metals, recycling and fabrication businesses, as well as the 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 applicable, in any later SEC Form 10-Q. You'll also find it any referenced. Non-GAAP financial measures are reconciled to the most directly comparable GAAP measures in the press release issued yesterday entitled Steel Dynamics Reports third-quarter 2024 result.
Now, I'm pleased to turn the call over to Mark.

Mark Millett

Thank you, David. Good morning, everyone. Thank you for joining our third-quarter of 2024 earnings call. As you have read and seemingly have concluded, our teams executed well through the quarter, achieving another solid financial and operational performance. Most gratifying to us to move in particular was achieving another great quarter for safety.
The ramp-ups of our four new value-add flat roll steel coating lines have been an unqualified success with the expectation of full earnings benefit in 2025. These lines represent an additional 1.1 million tons of high margin product diversification for us. In Texas, despite a couple of challenges during the quarter and '17 gained considerable momentum running out of 72% utilization rate of scheduled runtime in September. We had extended periods in excess of 90% and which were achieved during the quarter. I think it proves the mills Autema capability.
Steel shipments were 3.2 million tons. Third-quarter revenues $4.3 billion. Adjusted EBITDA was $557 million in cash flow from operations and [$60 million] So as I stated, we had a great quarter in terms of safety. Historically or the summer months can be challenging period for the teams reverse that trend this year with an excellent performance. Not only was that trend reversed both our total recordable incident rate and last time rates were the lowest in our history.
Our employee dedication to take control of safety program is extraordinary. Our core safety teams visited 30 facilities and third quarter alone, which is, I think, a clear testament to their commitment to keep each other safe. We continue to build world-class safety culture, and the positive results have been clearly demonstrated. 84% of our locations in the third quarter did not have a recordable injury. That's 104 locations out of our 124, and 94% one of them did not have a lost time incident.
I'm continually inspired by the commitment of our team members have for one another. It really truly consider themselves, family and challenge the status quo every day to do better in every way. That's why we're so focused on providing the very best for the health, safety and welfare. That said, there's still a lot of work to do as we strive toward a zero-incident environment. But with that, I will pause for Theresa and Barry to add color for the quarter.

Theresa Wagler

Thank you, Mark. Good morning, everyone. We really do appreciate you taking the time to be in the call with us this morning. And I want to add my thanks to our teams for a really solid performance this quarter. As Mark suggested, our third-quarter 2024 net income was $318 million or $2.5 per diluted share, with adjusted EBITDA of $557 million. Third-quarter 2024 revenue of $4.3 billion was below sequential second-quarter results due to lower realized flat-rolled steel pricing tied to lagging contractual volume.
Our third-quarter operating income of $395 million was 29% lower than sequential second-quarter results, driven by steel metal spread contraction as average realized pricing decline more than scrap material costs in the quarter. Our field operations generated operating income of $305 million in the third quarter, lower than sequential results due to an average realized pricing declined $79 to $1,059 per time, w hile total shipments were study has increased lateral volume offset our structural and SBQ value.
For those of you that track our individual flat-rolled shipments quarter-by-quarter, in the third quarter, hot-rolled shipments were 943,000 tons. Cold-rolled shipments were 118,000 tons and coated shipments were 1,335,000 tons. For metals recycling operating income was 12 million lower than sequential second quarter results due to lower realized pricing and volume. In addition, we had an unrealized non-cash copper hedging loss of $10 million in September.
We're the largest non -- or we're the largest North American metals recycling processing and consuming their scrap and non-ferrous aluminum, copper and other metals. And we're growing in support of our increased steel and planned aluminum production investments through new and expanded relationships and through the use of innovative new separation technologies. I'm really proud of the team are also reducing operating costs very effectively.
Our steel fabrication team achieved strong operating income of $166 million in the third quarter, lower than second quarter results as a 5% decrease in realized pricing offset steady shipments. Quarter activity in the third quarter was the strongest we've seen this year, supporting our joist and deck backlog extending through the first quarter 2025. As interest rates decline in public funding begins to be distributed post-election and into 2025, we expect to see increased fixed asset investment and corresponding demand drivers for steel and steel fabrication products next year.
Regarding our aluminum investment. As a reminder, as we construct the aluminum facilities, non-capitalizable expenses are required to close your SG&A and I'll start out as a result, our SG&A will be higher until visibility to this amount provided in our supplemental data schedule. For the third quarter, it was $24 million.
We have expectations for aluminum investments to be EBITDA positive in the second half of 2025 and plan to operate the rolling mill at approximately 75% of its capacity in 2026. Mark's going to provide more details related to our ramp and product mix expectations later on the call as well as just fine or differentiate cost expectations. The construction of the rolling mill and the San Luis Potosi recycles lab center is going extremely well. Approximately $1.9 billion has already been invested through September of 2024, with expectations of funding between $350 million to $400 million in the fourth quarter and the remainder then to be spent in the first half of 2025.
Our cash generation continues to be strong based on our differentiated circular business model and highly variable cost structure. During the third quarter of 2024, we generated cash from operations of $760 million. We ended the quarter with strong liquidity of $3.1 billion, comprised of cash and short-term investments of $1.9 billion and our fully available unsecured revolver and $1.2 billion. For the fourth quarter of '24, w e believe capital investments will be in the range of $500 million to $550 million.
Preliminarily, we believe 2025 capital investments will be in the range of $700 million to $800 million. We repurchased $917 million of our common stock year-to-date 2020 are representing 4.5% of our outstanding shares. And as of September 30, we have $486 million remaining available for share repurchases.
Our capital allocation strategy prioritizes high-return strategic growth with shareholder distributions comprised of a base positive dividend profile that's complemented with a variable share repurchase program. While we remain dedicated to preserving our investment-grade credit designation, our track record is proven achieving five Our after-tax return on invested capital of 24% during a period of transformational growth and strong shareholder returns.
Our free cash flow profile has fundamentally changed over the last five years from an annual average of $540 million to $2.9 billion. Excluding our large strategic standpoint and an aluminum investments in July, we successfully issued $600 million of investment grade notes with a 10-year tenure in anticipation of repaid $400 million of our notes that are due this December.
Before I conclude, I want to thank the decarbonization and bio carbon team. I'm proud of them and excited about the recent announcement concerning our new certified science-based greenhouse gas emissions intensity targets for our steel mills, which are aligned with the 1.5 degree celsius scenarios that are in the Paris Agreement. In fact, our steel mills are already well ahead of that curve, where we recently set both a 2050 emissions intensity target, which is aligned with the International Energy Agency's net zero by 2050 industry gets and an interim 2030 target, which represents a 13% reduction in greenhouse gas intensity. These targets abolition using the global steel climate councils, steel climate standard, of which we are a founding member.
The bio carbon project is also going incredibly well with expectations for our first quarter 2025 start. Sustainability is a significant part of our long term value creation strategy, and we're dedicated to our people, our communities and our environment. We're committed to operating our business with the highest integrity. We uniquely have an actionable path towards carbon neutrality that is more manageable, and we believe considerably less expensive than they were at may lie ahead for many of our industry peers. Our sustainability and carbon reduction strategy is an ongoing journey, and we're moving forward with the intention to make a positive difference. Same. Barry, sorry, my phone.

Barry Schneider

Thank you, Teresa. Our steel fabrication operations performed well in the third quarter, achieving historically strong earnings and steady volume in the quarter. Our steel fabrication order backlog remains at a healthy level, extending through the first quarter 2025. We remain optimistic as it relates to demand for steel, joists and deck markets over the next number of years, based on a moderating interest rate environment, continued manufacturing, onshoring and public funding for infrastructure and other fixed asset investment programs. The uplift from this macro environment could be considerable for this platform as well as our steel operations.
Our steel fabrication platform also provides meaningful volume support for our steel operations, which allows us to constantly operate at a higher through-cycle utilization rate, but also mitigates the financial risk lower steel prices. The Metals Recycling team did a good job navigating a challenging marketing of market environment. And third quarter, there were a number of domestic steel mill outages, which decreased where scrap demand, coupled with pricing, volatility.
For scrap prices have stabilized, we believe should remain relatively stable through the rest of the year, subject to seasonal moves. The North American geographic footprint of our metals recycling platform provides a strategic competitive advantage for our steel mills and for our scrap generating customers, our Mexican recycling locations competitive. We have advantage our Columbus and certain raw material positions.
We also strategically support increased procurement of aluminum scrap for our future flat-rolled aluminum operations, our metals recycling team as part of growing even more closely with both steel and aluminum teams to expand scrap separation capabilities through process and technology solutions. This helps mitigate potential prime for scrap supply issues in the future. It also provides us with a significant advantage to increase the recycled content in our aluminum flat roll products and increase our earnings opportunities. Steel team also had a solid quarter, achieving steady shipments of 3.2 million tons.
During the third quarter 2024, the domestic steel industry operated at an estimated production utilization rate of 78%, while our steel mills operated at a rate of 86%. Excluding our suite of operation, we consistently operate at higher utilization rates due to our value-added steel product diversification, our differentiated customer supply chain solutions and the support of our internal manufacturing business. Higher through-cycle utilization of our CMOs is one of our key competitive advantages, supporting our strong and growing cash generation capability and best in class financial metrics.
Our realized average flat roll steel price decline in the quarter due to contract lags the price prices stabilize and improve in the quarter. Positively value added flat. Roll steel pricing spreads remained resilient, supporting our earnings as we are the largest producer of these products in North America and growing, our activity has solid, adding in the fourth quarter with normal seasonal trends expected general, our flat rolled steel mills lead times are actually at levels higher than we've seen over the last six months.
Underlying steel demand remained steady for the surgeon steel imports put pressure on the supply dynamics in certain product areas, specifically for coated flat roll steel upwards. In response, we leveraged a trade case and we expect to get a preliminary ruling for the ITC. In a few weeks or certain Texas flat roll steel mill team successfully completed the changes early in the quarter to excess 100% of the mills melt capacity. The team experienced some difficulty ramping back up after the outage, however, the reliability and will improve dramatically.
In September, we increased around 75% for the fourth quarter 2024. Also the additional two new value added coating lines were successfully commissioned and have commenced operations, improving the mills value at product mix and through-cycle earnings capability. Regarding the steel mill market environment, North American automotive production estimates for 2024 were recently revised to stay stable production over the next several years. Automotive dealer inventories also continue to remain below historical norms. Non-residential construction remained stable with slowdowns across some industries. However, we believe moderating interest rates will unlock pent-up project work and create new opportunities at 2025.
Traditionally, onshoring and temperature infrastructure spending should provide further support to fixed asset investment and related construction oriented products. As for the energy market, the solar industry continues to grow and be a meaningful part for both our Flat Rolled Products and structural sections. Oil and gas also remained steady. Looking forward, we are optimistic regarding steel demand and pricing dynamics as we end 2024 to get ready to enter 2025. With that said, back to Mark.

Mark Millett

Super. Thanks, Teresa. Thank you, Barry. Was more than evident that our performance driven employee-centric culture in combination with a proven, highly diversified value added business model drives superior through-cycle financial metrics. Our consistently strong operating and financial performance continues to support our cash generation and growth investment strategies alone. A balanced cash allocation strategy has consistently delivered the best in class shareholder returns.
For instance, our investment strategy to achieve a three year return on invested capital of 32% from '21 through '23 compared to only 12% for the S&P500. And our disciplined high return investment approach continues, as I said before, value added flat. Roll Steel coating lines are increasing volume and performing very well f rom a quality perspective. These types of high-return investments are key to our value added product and supply chain differentiation strategies. As I mentioned a lso sentiment continues to be improve its operational reliability with expectations for strong production capability in 2025.
A recent aluminum growth strategy is especially compelling. The market environment and aluminum is not unlike the steel industry was when we started SDI 30-plus years ago, has older assets, heavy legacy costs. A lot of the facilities are inefficient and the high cost and they've had the industry in general have difficulty and earning the cost of capital. And hence, there's been a little investment in facilities and new technologies in recent years.
But unlike all steel entry, the the one huge positive is that the a significant deficit in aluminum just in North America in general, and that deficit is expected to grow considerably. There's a clear business alignment. We'll leverage our core core competencies, core competency of construction and operational know-how. And one on asked to look at the drone video on our website to see the extraordinary progress the team has made the construct of the new mills. Also we'll leverage our performance driven culture, driving higher efficiency and lower cost operations. It also level Omni's resegment footprint. As Theresa suggested, we're the largest North American aluminum scrap recycling, and we also developing some in-house new technologies to separate the 5,006 thousand series.
Ours is a very, very cost effective and a high return growth opportunities for us. Construction of the expensive rolling mill in Columbus, Mississippi, as I said, is proceeding and an extraordinary pace. And I believe the aluminum industry is now recognizing that we are truly will be a force to be reckoned with future customer base across all sectors is excited to have a new market entrants that has known to be innovative, customer-centric and responsive to their needs. Commercial arrangements are being put in place to match in order book to all ramp-up needs in 2025.
Responses from existing and new customers across the markets remain seems incredible as the first for new supply has incentive and we're developing an on-site industrial policy to locate the aluminum processing and consuming facilities through arrangements are currently being negotiated. That will create approximately 100,000 tons of annual tons of processing capability per year. And as our project has become visible reality and our reputation permeates the aluminum industry, aluminum professionals have been knocking on doors. And we've been building on a phenomenal team when I in-depth knowledge of aluminum operations, commercial markets, process technology and customer service. For those that may not have heard in our last call, the scope of the facility is the state of the up 650,000 metric tonne of aluminum flat rolled facility located in Columbus, Mississippi.
We'll have an optimized mix of 300,000 tons of Comstock, 230,000 tons of auto and 130,000 tons of industrial and construction products. When when we're fully running the actual site and Columbus, Mississippi as America's lab capacity of 600,000 metric tons. And it's going to be supported by two satellite recycled aluminum slab casting centers located in UBC scrap rich regions.
We expanded the project scope to include, as I said, additional scrap processing and segregation technologies to maximize aluminum recycled content. These in-house developed technologies are currently operating successfully separating the time of 6,000 series and movies on a commercial basis every day. The team plans to begin production of slabs in San Luis Potosi, Mexico in the first quarter of 2025. We will commission the Columbus casters in the first quarter of 25 downstream lines to the second quarter with commercial shipments in mid 2025. And that is absolutely on schedule. In 2025, we plan to begin production with the product product mix weighted to industrial and construction products. As we qualify all can sheet and '25 and older products into '26.
We anticipate production to grow to 50% of our annual rate by the end of 2025 and expect 75% capacity in 2026. The project is expected to add $650 million to $700 million of through-cycle annual EBITDA, and we should generate approximately $40 million to $50 million through the recycling platform i n addition to that. Although this computes to a higher EBITDA per ton than the industry has experienced in the past, we're confident in that projection and the most significant savings are in four key areas labor, recycled content, yield and logistics, the labor, we should have a reduced workforce of perhaps seven hundreds of 700,000 people versus perhaps 1,200 or more in a conventional facility of this size, have optimized plant layout and material flow will have a central lines, the automated storage system.
So there'll be no touch supplant. The truck and our proven performance based incentive driven culture will drive high productivity, high efficiency and low cost. And we will have no legacy costs. So for those who do the impact road on the operations over the years, recycled content, again, we will level I level our metals recycling platform to drive higher recycle content. We have the largest non-ferrous operations recycling operations, as has already been stated. And we also have a secondary aluminum facility that has been operating for many years that will be additive relocating satellite facilities close to the UBS's UBC rich areas to the west and in Mexico and again leverage the sorting technologies.
The yield will be improved. We do believe is going to be a new facility, state-of-the-art equipment and technologies. The scoping technology is absolutely state-of-the-art and will minimize material removal. And we are actually processing through the facilities. Supersized coils produce less heads, less tails, less line stops, all adding to a lower yield losses and logistics, again, locating slab centers close to the UBC rich areas will be a huge benefit as well.
So the excitement within our company and particularly at the ADA sites, continues to grow as our teams recognize their ability to help revolutionize the US aluminum industry as they did in steel for the IMpassion by our current and future growth plans as they will continue to drive the high return growth momentum we have consistently demonstrated over the years.
The earnings growth for these new projects is compelling. The capital spending for central the full value add lines and aluminum dynamics is approximately 85% complete with an estimated collective future through-cycle annual EBITDA contribution of over $1.4 billion. As a problem institutional portfolio manager recently pointed out to US Steel Dynamics has grown to an incredibly resilient cash generating business driven by the best teams in the world. He said in the last five years, you've invested billions of dollars in organic strip strategic growth. Given the return on invested capital of 24% compared to the S&P500 at only 12%. You've increased your cash dividend over 90%, repurchased over 30% of your outstanding shares, all the while maintaining best-in-class investment grade credit metrics.
You said, it's better than a textbook capital allocation lessons and obviously somewhat biased by I agree, and I am excited as investors recognize the power and consistency of our through-cycle cash generation, combined with our consistent and high return capital allocation strategy. And it's our belief that the steel industry has undergone a paradigm shift in recent years. A shift that will further support our earnings profile is a pervasive sensing Mercantile ISM, which will provide a level playing field through continued an appropriate trade relief.
Covid-driven supply chain, distilling it dislocations, which have accelerated reshoring of manufacturing decarbonization, should materially Stephen the global cost curve, providing SD&A a huge competitive advantage to gain market share and increased metal spreads as our mills have some of the lowest carbon footprints in the world. AI and cloud computing should support nonresidential construction through data center buildout, and it will be growing fixed asset investment driven by the inflation Reduction Act, CHIPS Act and other public monies. In term. With the interest rates moderating, demand will be strong. We do believe, going into and through 2025.
So in closing, we've been blessed with good fortune and our people, our foundation. I thank each of them for their passion and dedication. We're committed to them. Now remind those listening today that you'll safety for yourselves, your families and each other is our highest priority. Our culture and business model continue to differentiate our performance lead into best in class financial metrics. We're an integrated metals business, providing enhanced lower common supply chain solutions to our customers in turn mitigating volatility in our cash flow generation and provide enhanced shareholder returns value to all participants. We truly look forward to creating new opportunities for everyone today tomorrow and in the years ahead. So with that said, we will open up the call to questions.

Question and Answer Session

Operator

(Operator Instructions) Your first question is coming from Martin Englert with Seaport Research Partners.

Martin Englert

Hello. Good morning, everyone. I'll briefly touch on this in the prepared remarks, but for the greenfield aluminum projects, are there any other key personnel additions that are still needed? And could you just more broadly touch on the general labor market and how you saw in the process of filling the needs there?

Mark Millett

Certainly, I think the there are no key folks all talent needed from us from a skill set or experience that we are pretty pretty well built out. But we will always always talk to anyone who wants to join us for the management team I think is absolutely solid. It's a blend combination of seasoned aluminum folks manages leaders alongside our SDI proven leaders. And so you get the blend of aluminum experience and knowledge base with the cultural performance driven sort of passion that we have within Steel Dynamics.
So I mean, I'm incredibly incredibly impressed by the team. It's actually a much better location finding talent is not an easy thing to note is that compared to the challenges that we experienced in centrum, I think is a much, much better location. Fortunately, we have one of our large flat roll steel facilities right across the road. That's allowing, again, a transfer people it at all levels and they can transfer over without moving their families and dislocating their lives. And so that facility is a huge benefit for us as well. So we're excited by the team there.

Martin Englert

Excellent affected one last one in steel fabrication with more recent sales that you've had that have been added in the backlog over the past month or two. Are you seeing any pockets of pricing strength relative to where you had been?

Theresa Wagler

Martin, I would suggest that and heading into the fourth quarter, we're going to see that normal seasonality and that you typically see in anything that's tied to construction. But as we look at 2025, we definitely think that there's opportunity for gen. We've talked about interest rate changes and additional demand coming from public funding, et cetera. So we're feeling really good with that study aspect of what we've seen in the last six to nine months. And now I will just get you that the fourth quarter seasonality and then head towards what we think is going to be a really robust 2025.

Martin Englert

Okay. Appreciate that. Congratulations, unresolved. Thank you.

Operator

Your next question is coming from Acadia Gentech with BMO Capital Markets.

Katja Jancic

Hi. Thank you for taking my question. Right now, 80% of your businesses contractually based, does that change you with further Sinton ramp-up? Or could we can continue to see about 80% contractual.

Barry Schneider

Katja, this Barry Schneider contractual relationships are a big part of our value added supply chain solutions. So as we've increased our paint lines that are coating lines, it keeps that contract concentration about in that 70% to 80% range. We anticipated this growth with our new line. So I would see as being in the same kind of market, perhaps a little bit less in the future once we get the established customer bases and work out the supply chains in each region. Thank you.

Mark Millett

Maybe just I guess just to clarify, I think you recognize that the 80% contractual is on the flat roll side of business. We obviously have a whole bunch of other stuff being a very diversified provider, which is more in this kind of the small spot day-to-day.

Katja Jancic

So I guess maybe just one quick one. A very I think you mentioned that segment and had a bit of a challenge starting up after maintenance, if I'm not mistaken. What was the issue there?

Barry Schneider

I just -- whatever we work with high voltage systems, you have kind of a normal, making sure everything safe as you ramp up. So having the teams, the outage was about four days. It was just a little bit slow to get back up to regular running rates. So that unheard of in our industry, it's just worth noting because we did so much work. The team was really, really resolve some of those high-power problems we've had from the beginning, and we safely were able to do that. So all in all, I consider that a good outage team did very well, but it wasn't it wasn't like turning a light on and off, it's just a little bit more complicated with that high-voltage.

Katja Jancic

Perfect. Thank you.

Operator

Your next question is coming from Tristan Gerra with BNP Paribas.

Tristan Gresser

Hi. Thank you for taking my question. First one is just on the increase in spreads in metal spread for you long portfolio, where do you see more strength than maybe you can discuss a little bit differentiated outlook for either the structural or shape or array of whatever drove that strength? That would be appreciated to get your perspective on our on your own product business.

Barry Schneider

Yeah. This is Barry the scrap that we're able to move to our mills from the metals recycling platform is really beneficial because we find the best value and the timeliness of our supply chain allows us to really optimize that. So having the right material at the right time is assay central for that business to really to get the value from it.
As we look specifically at Long Products are structural and heavy section mill at Columbia City is not just a heavy section. Those also railroad of the largest railroad producers in the country. So we have a nice balance of where we tend to move our products. So as the markets tend to change over time, we're always able to optimize into the right product mix for the opportunity and make sure that we keep our regular customers invested and they understand what we're doing.
So having that diversification of product across all of our business is essential. What we're looking at our moderate in Q2 quarter with the normal flow of business. So long products remains very resilient. We're excited on the opportunities that we see coming, particularly with the investment and reshoring opportunities.

Tristan Gresser

All right. That's helpful. And maybe a follow-up just on the hot-dip galvanized trade case you mentioned, and then the potential impact of that. I understand Vietnam being a part of the investigation, but I think there's been a push to include a certain countries like Canada and also Mexico. And given your exposure to Mexico, can you explain a little bit the rationale behind including those countries the investigation.

Barry Schneider

Yes, sir. there was actually 10 countries involved in the investigation and each of those countries, there is very demonstrative increases in the actual tons that have surged through those various countries into American markets. And the necessity of including Canada and Mexico was because of the volume of tons that are coming through those countries.
The USMCA is a great side treaties that we all enjoy. We do good business based on that in that treat in that agreement. There is provisions to do just what we what we did, which is engage the ITC for anti-dumping and countervailing duty cases. The numbers are staggering.
And in many cases, these tons are not melted report in those countries, but they're flowing from some of the other countries listed. So as there's problems in Asia, that puts pressure on that part of the world and they all want to flow to our shores. So this mechanism is expensive and lengthy, but it's necessary to make sure that the competitive markets that we have in the United States are truly fair trade.
So I think the process will render out what the appropriate duties are in each country. And if they're truly was a less damage from some of those countries, the final tariff amounts will reflect that. So it is something that was absolutely necessary. And as we watch, we don't ask for handouts or protection, we just asked for a fair field to play the game on. And this is all part of that. That process.

Tristan Gresser

All right. Thank you very much.

Operator

Your next question is coming from Carlos De Alba with Morgan Stanley. Please pose your question. Your line is live.

Carlos De Alba

Yes, thank you very much. Maybe continuing with the conversation on their own the anti-dumping case payments somewhat related, the spread between galvanized steel and Corus coil has been the price. You have low levels, probably not economical and even the anti-dumping investigation doesn't go your way and or even if it does, I see a big improvement, if it does, what what is the dynamics as a leader in this sector are prepared to do to maybe enhance those spreads.

Barry Schneider

Carlos, this is Barry again. We do anticipate a great success with these trade cases, especially with certain certain of these countries that were the most egregious vendors. But we routinely evaluate how we move our flat rolled products through our process lines. So we routinely move hot, roll all the way through the process in the game, urbanize and painted. We make those decisions about where the margins are. So we've been having very good success in dealing with these pressures over the last 12 months.
And you can see from our earnings, it has to do with we have so much diversity in our product mix that we respond to where we can go and be safe. So I believe the ITC will come back favorable, particularly as some of the more egregious vendors. And that does create an opportunity for us to go back to do or more product mix. That is where perhaps friendly to those times.

Carlos De Alba

Thanks, Barry --

Mark Millett

If I may squeeze another one, if I could just add them. You've heard us say before we don't manage to hope nor do we manage and make strategic decisions based on. We think trade or policy of any nature is going to go one way or the other. You have to take control of your own destiny. And I think the teams year over year, I do have absolutely phenomenal job further diversifying our product mix. I think I don't know what the recent numbers, 65%, 70% of our flat roll product mix is 65% is value add. And when we say value add, I'm talking about really evaluate when you get into prepayment and you get into the coating developments that the teams have achieved.
And most recent only that they've got into this digital prints that literally is absolutely phenomenal, would grains for the Guard or folks and architectural, you just have to have innovation and creativity continuing to drive up the product mix. So now that no matter what happens, we will succeed and no matter where the trade goes t o be honest.

Theresa Wagler

Mark and Barry talked about, but without saying the exact words, the supply chain differentiation that we have with all the products that you just spoke about. And so that's the key for us.

Carlos De Alba

All right, thanks. And just maybe if I may squeeze another one on the steel fabrication business. And any further details on pricing, I think, Barry, I mean, I'm amazed these, but I think Barry talked about a stable pricing from current levels from what you saw in the third quarter. And but any for the call over to their or volumes, how do you expect that going forward?

Theresa Wagler

Carlos, I think the question, but again, we're pretty consistently won't talk about pricing and commercial things as it relates to that. The commercial team, what they would be outside my dollar may be ready to do bad things. And so we can't do that from a volume perspective. We do expect regular seasonality here and there fourth quarter as it relates to the construction related businesses, which steel fabrication is one that we do expect to see a much stronger volumes next year, which could support should support pricing as well.

Carlos De Alba

Thanks, Theresa.

Operator

Your next question is coming from Lawson Winder with Bank of America. Please pose your question. Your line is live.

Fantastic. Thank you, operator, and good morning, Mark through some very nice to hear from you, Bob, and thanks for the update today. I'm very maybe I think this question would be best directed to you. Could you just walk us through the path from 72% utilization at since September to your optimal utilization? What is that all small fully ramped utilization? And what are the rate remaining ball of action steps to resolve that? And if possible highlighted to you that number? Thanks.

Barry Schneider

Yes, Lawson traded. I've tried to articulate why we have confidence in what this team is doing. And the first major thing is reducing the unplanned downtime. So when things happen, as the team size not only develop themselves as teammates, but also as competency develops, they're able to address issues as they occur. So we've been making significant strides in reducing the unplanned downtime necessary to make that happen is improving the reliability of the equipment.
The plant you wait made though our flat-rolled steel mills are actually coupled units where we go from the furnished to the hot rolling mill has one coupled unit. And to make that happen as various parts of the system have a normal issues, it can impact the other units. So what we're seeing now, and we've seen days we've seen weeks now, we've seen months of continuous reduction of unplanned downtime, better reliability of the equipment. And also just as important, making sure that all the products that are actually being produced are able to get to higher value destinations through the mill, whether it's selling it as hot-rolled cold-rolled or coated products.
So as we see each of the units of the mill respond, we see the uptown uptime increasing. We see the yields getting better and better. And as we start controlling the cost situation, we see a very good path towards this facility running well. We have had weeks that we're nearly at capacity and that again is more reasons. We have confidence in what we see. So we see kind of the watershed moment happening under our feet. We anticipate fourth quarter to finish strong high and it really sets the stage for 2025 to really allow this facility to show the stakeholders what they've been doing and how well they've been earning it down there. Hope that helps.

Yes. The colors is definitely helpful. And then maybe if I could just in follow-up to that, I think that's probably directed toward Teresa mean when you think of centers now, okay, kind of being there are close to being where you need to be and you look at the same yet the dividend consideration for February, could we anticipate that that dividend increase in February, they might be more material than we've seen more recently that held the aluminum Dynetics as startup factor into that decision?

Theresa Wagler

So that is in very good question, Lawson. It is a tricky question. So and the Board is a to determine what the dividend will be in. You're correct. We like to keep a positive dividend profile, and it generally happens in the first quarter of each here. And I wouldn't -- I would anticipate the same absent any extraneous is occurring this year as well. And we do expect to have certainly a significant EBITDA contributor next year, which it hasn't been up to this point. So that's a significant change in earnings profile that being said, and we'd like to see how is that and operates in 2025, I would expect to see a positive dividend move.
But I can't really speak to the magnitude of that at this point in time. As it relates to the aluminum assets starting in 2025 via very excited about that. I mentioned in my prepared notes, we do expect those investments to be EBITDA positive in the second half of 2025, which is pretty extraordinary. So we're really starting to see that benefit 2026. So I would think that would generally be kind of a timeframe to think about how that contributes statistical cash flow and passionate possible dividend news.

Great. Thank you all very much.

Operator

Your next question is coming from Timna Tanners with Wolfe Research. Your line is live.

Timna Tanners

Yes, good morning. I wanted to probe a bit more than status as the value-add line rents that are ramping up the four line between pay and coded golf and what I'm just looking at the volumes, it wasn't clear to me like what utilization you have, those lines that and what we might have yet to see play out as they ramp up?

Barry Schneider

Tim, it is very at the operating at somewhere around 65% to 75%. As we discussed with the trade cases, we've seen some pressure in certain coated products, particularly Galvalume. So we are trying to make sure we're efficiently running those lines and making sure we don't waste money by operating at levels that perhaps we could do with the existing lines. So a when we look at is the ability to really allow each line to do the proper product mix to be very efficient and to be very good yields. So we're really excited with what we've seen.
The Terra Haute operations are definitely improving the opportunity for that facility to reach more markets, diversifying that product mix there by adding a second coating opportunity with Galvalume and with the prepaid opportunity has really opened up relationships with new customers as well as existing customers who needed those products in that region. And certain the additional lines really allow us to have a more efficient operation between our galvanized coatings and our balloon coatings.
So might be a bit technical, but we're really excited otherwise perform the quality itself has been a very good and that is difficult with these type products. These are a lot of this new capacity is prepaid markets, which have very demanding customer base. So we've been really excited to see how the teams have responded. And the sales team continues to bring new opportunities to the Millstone.

Theresa Wagler

As it relates to their contribution to earnings, I would say that that really hasn't been significantly impactful at this point. So as a reminder, the former lines were about a $600 million investment. And generally, on the patent galvanizing line for us, given our supply chain differentiation have a payback period anywhere between 2 and 3 or 2.5 years. So pretty significant, you're going to start to really see their impact in 2025. I think as everything gets ramped up.

Mark Millett

And just one last follow-up call symptom, obviously, the volume throughput on those lines, is that a little inhibited right now because of the hot side not being at full capacity? So as the or as we increase the throughput on the outside the volumes, really those two lines, then we'll decrease in tandem.

Timna Tanners

Okay. That's really helpful. For modeling purposes, if we looked at that was 1.3 million-plus tons in the quarter of galvanized that represents about are dominating coated. That represents about 65% of the new capacity ramping up. So we have yet to see that remaining third or so flow through. And we would expect that conditional to and that impacts coming off of that. Is that fair?

Theresa Wagler

So in that coded number, and it's not just airlines that you're seeing, and I know it wouldn't show like shipments of that at that rate because you also have our and our United Steel Supply and you have other processing facility is rolling through that and that aren't included in a lot of that. The benefit of the additional volumes in the third quarter actually came around to different avenues. So there's I think I would suggest there's more volume that still the benefits, not just the third.

Timna Tanners

Okay, thanks. And maybe I've outlined proceeded.

Operator

Your next question is coming from Bill Peterson with JPMorgan. Please pose your question. Your line is live.

Bill Peterson

Yes, hi. Good morning and thanks for taking the questions. Maybe following up some of the questions around utilization and also running the last question too. Can you help us understand if since profitability meaningfully improved in the third quarter? I think it was around breakeven in the second quarter and this number for new co lives. Are these profitable yet? Yes, certainly obviously related to some of the trade questions you're answering earlier, but if they're not, when do you expect them to be profitable?

Theresa Wagler

So from perspective of Sinton and no in the third quarter because we had additional outage time that Barry actually mentioned and because we had additional maintenance costs related to that, and Sinton wasn't EBITDA positive in the third quarter. But we have full expectations that it will be in the fourth quarter and certainly next year. And as it relates to the line there really integral into the operations of the steel mills themselves. So to answer that question is a little bit difficult.
Again, I would tell you, as Mark mentioned earlier, and Barry and now I will for their time, and we expect the value-add lines to really benefit 2025. So as you think about your modeling and I would add that as an additional benefit for us, that's outside of just normal market dynamics.

Bill Peterson

Great. Thanks for that. And on sort of a lower carbon items and thanks for providing the color there. It looks like on the bio carbon, particularly, it looks like it's going to be a few quarters before operation, but also needs to be done before operational start. And then I guess, when do you plan to introduce internally produced by our carbon and your steel production flows? Do you have guys are I mean, is there a need for customer commitments for the products with this Pyro Carbon? Or do you expect a premium for products coming using that product?

Theresa Wagler

That's a good question. I would hope to have a premium that there is laughing at me. And so the bio current Italy, the team's doing a great job and it's still under construction. And again, everything is pointing toward as first quarter 2025 start, and we will have that product. It's already been fully tested and at each of the steel mills that will be receiving it. We don't have enough product design despite of the carbon needs at our steel mills, but a majority of it. So we'll start using that and easing that into the and product mix for the steel mills as we enter the first half of next year.
As far as whether or not there's premium charge for that product, that's just going to be part of our DRP innovation journey. So it's going to be used as a matter of whether it's not for a specific customer necessarily. He'll be just part of the normal operating on mechanisms for each of the steel mills as a different lower-carbon raw materials that substituting for anthracite.

Barry Schneider

Yeah. And Theresa, I would just add and exit the -- we don't need customer approvals for this product. It's so early in the process that that the use of what kind of carbon doesn't factor into what the final steel product will actually how it will perform. And I would think of it is not a binary decision or is one of the other. So the path towards introducing this to the mills will really flow based on how the startup goes in the proximity in other teams respond to it. The trials that have been done have been very successful through the AMI and a pilot facility. So we have a good working knowledge going into this. And the melt shop teams are regularly meeting with the bio carbon team, and we're excited about it. It's a beautiful plant down in Mississippi.

Bill Peterson

Thanks, Barry and Theresa. Appreciate it.

Operator

Your next question is coming from Andrew Jones with UBS. Please pose your question. Your line is live.

Hi, Tim, thanks for the opportunity at just on the market between '25 and then we have the comments we've made on the positive outlook potential for demand to become. But just in a more pessimistic scenario where that doesn't happen, I think we've had two styles a couple of through add.
Maybe you don't think I mean, what would you consider doing within your portfolio to kind of do your best to help to balance the market? May? Would it change your production plans in any way? Or would you be an active participant in trying to, but the market or do you see as I was just a low-cost producer and you can essentially take share and they expect us to potentially drawn out at the higher end of the art, do you look at 2025 more pessimistic scenario?

Mark Millett

Firstly, we're not pessimistic were very, very constructive on the future market. And the 2025. There are too many things the that what will drive that our customer base in general, our customer base is very, very positive for '25. You should have a lower interest rate environment that will kick-start nonresidential and residential construction. New millennium right now, the order book, the order, the engineering, the whole flow of things strong. It just needs a slightly lower interest rate environment for those developers to push bonds and move forward.
So again, just want to emphasize, we're constructive on the marketplace just in general and is not a matter of 2025 or it's just a matter of any market cycle we will produce to what our customer base requires quite simply. Okay. But I'm sorry if I can just the economics. We recognize the markets are cyclical in our business. So over the over the years since the very beginning because I do have markets that it allows you huge, huge, huge flexibility as markets ebb and flow a very, very strong part of our strategy is always also been the pull-through volume.
So if you look today, New Millennium, they consume about 600,000 tons, I think or thereabouts last year, maybe a little bit more of the products that we make. The conversion facilities at Heartland. They've got a roughly 800,000 tests. They had 800,000-ton capability. So in all internal sort of substrate requirements as well over 2 million tons.
We supply some of that internally, but Barry and his team also procure is a lot in the marketplace. So we're actually one of the strangely, a lot of people don't recognize that. We're one of the largest buyers of sheet products in the US today that pull-through volume and conflicts.
So if you look at our utilization rates through cycle, the utilization rates are always superior to any of our peers because of the value-add diverse product mix and also the pull through volume. But we have in internally. So even if it does come off a little bit, you will see that we retain our strong cash through-cycle cash generation capability without that.

Fair enough. But no major closures of higher cost lines along the lines of any sodas, the action to kind of volumes, especially displacing volumes wells in the portfolio. That's not on the agenda.

Mark Millett

But I didn't hear that.

Theresa Wagler

That's okay. You would say, no.

No. Okay.

Operator

Next question is coming from John Tumazos with John Tumazos Independent Research. Please pose your question. Your line is live.

John Tumazos

Thank you for taking my question. Looking out a couple years, which sectors do you think are most fertile for the next big investment this year? US aluminum demand is trending up 5%. Steel has been the South in apparent demand five, six years now, lots of companies have built a lot of steel capacity. Could we expect the aluminum or recycling or some other new area because the candidate for the next big project in 2026 or seven or eight?

Mark Millett

Firstly, John, we will always take your questions, sir. The as I look across the portfolio were not strong from on the recycle markets, just in general, whether a regional focus opportunities to vulcanized supply chains, we certainly will anticipate they'll look at that. But I think we have a good recycle sort of platform. You will see us grow here in the to expand our aluminum supply chain.
But US, it won't be meaningful dollars to do that. On the steel side, I think you're correct in I don't see the opportunity necessarily for another 3 million tons to you. A greenfield site we're not as you know, we're not in business just to grow big for the sake of it. We want to differentiate our value chain. We want to always always sort of diversify.
The team has identified several value-add opportunities, products that we don't make today. And those are sort of percolating in the background and you'll see over time continuing to deliver those those higher-value products. Aluminum is obviously new to us.
We want to walk before we run get the first mill up, but there's no doubt that volume growth in aluminum going forward will be a much stronger than the steel and it gives rise to the opportunity there, as you've seen our strategy in the past in and steal the move down downstream again into value, add products in aluminum, capitalize on our prepayment expertise. I think you will see that also.

John Tumazos

Thank you.

Operator

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

Mark Millett

Super. Well for any of our employees and our teams out there that are still on the call. Thank you. Thank you. Thank you for what you do. You're an incredible, incredible team doing incredible things we can do what we do without a loyal customer base and the pigs. Thank you. Thank you. Thank you for your support over the years. We will continue to try and bring value, create value for you shareholders that. But on the line that bonus, thank you.
Those investors that don't own us. All I can say is you should so from SDI and every employee, thank you for all those that support us aggregate. Great day and be safe.

Operator

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