Steel Dynamics Q2 Revenue Falls Short

Key Points

• EPS of $2.01 in Q2 2025 missed analyst expectations by 10.3%, and revenue of $4.60 billion in Q2 2025 fell short of the $4.72 billion estimate.

• Steel operations operating income rose 66% sequentially, but steel fabrication margins compressed, reflecting ongoing cost pressures.

• The first aluminum flat rolled product coils shipped on June 16, 2025; the platform is ramping toward higher utilization in late 2025 and 2026.

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Steel Dynamics (NASDAQ:STLD), a major U.S. steel producer with operations spanning steelmaking, metals recycling, and fabrication, released its second-quarter results on July 21, 2025. The biggest news: the company missed Wall Street estimates, posting GAAP earnings per share (EPS) of $2.01 (versus a $2.24 consensus) and GAAP revenue of $4.60 billion ($4.72 billion was expected) in Q2 2025. Year over year, both revenue and profits declined. Still, the company achieved stronger profits than last quarter, supported by improved steel margins and order backlogs. Sequential gains and the first shipment from its new aluminum platform stood out, even as some pockets—like steel fabrication and startup aluminum costs—reflected continued margin pressure and higher expenses.

Source: Steel Dynamics. Note: Analyst estimates provided by FactSet.

Business Model and Growth Focus

Steel Dynamics is one of North America’s largest domestic steel producers. Its core business is electric-arc furnace (EAF) steelmaking, which uses recycled scrap as its main input. This method reduces environmental impact compared to traditional blast furnace steel and is central to the company’s sustainability strategy. The business also includes steel fabrication, metals recycling, and a new aluminum flat rolled products segment, serving construction, automotive, industrial, and beverage can markets.

Recent priorities include expanding into recycled aluminum products to diversify earnings and end markets. Vertical integration is a key focus, with internal operations—like fabrication shops—using steel and materials produced in-house. Sustainability programs, such as biocarbon and circular manufacturing, help with compliance, cost control, and meeting customer demand for greener supply chains.

Quarter Highlights and Key Segment Trends

For the quarter, consolidated revenue and earnings both fell short of market expectations. Compared to the same period last year, every major earnings measure—revenue, EPS, and operating income—declined, reflecting softer end-market demand, margin compression, and one-off impacts, including a $32 million non-cash asset write-off in steel operations. However, sequential growth was significant: net income rose 37.5% from the previous quarter, and operating income jumped 39.1% from Q1 2025.

In the Steel Operations segment, operating income surged 66% sequentially, driven by improved “metal spreads”—the difference between steel selling prices and the cost of recycled scrap. Realized selling prices increased to $1,134 per ton, while scrap costs rose at a slower pace. Shipments reached 3.35 million tons, surpassing prior-year levels but down slightly from Q1 2025. The Sinton Flat Roll Division faced a supplier-driven oxygen shortage, which lasted more than 65 days and cost around 55,000 tons in lost volume, but production has since normalized.

Steel Fabrication, which produces steel joists, decks, and related building products for construction markets, faced continued margin pressure. Operating income for steel fabrication operations dropped to $93 million compared to both the previous quarter and the same period last year. Average sales prices in this segment declined to $2,517 per ton, reflecting a mix of stable demand and rising input costs. Despite squeezed margins, order activity remained robust; the segment’s backlog is up 15% since January 2025 and now extends into 2026, supporting management’s view that profitability and volume should recover as costs stabilize and new projects move forward.

The Metals Recycling business operates scrap collection and processing facilities, supplying both the company’s steel mills and external buyers. The segment generated $21 million of operating income, down from $26.7 million in Q2 2024, mostly because lower ferrous scrap prices offset record shipment volumes. This part of the business is closely tied to the EAF steel model, supporting cost efficiency and helping to secure critical input supply for both steel and aluminum projects.

The quarter marked a milestone in Aluminum Operations, as the company shipped its first aluminum flat rolled product coils on June 16, 2025. This new platform is aimed at serving the beverage can, automotive, and construction sectors with recycled-content aluminum sheet and coil. The segment posted an operating loss of $40.6 million, reflecting startup and commissioning costs. Management expects the facility to exit 2025 with 40–50% utilization rates and to reach roughly 75% by the end of 2026, pending certifications and full ramp-up. The goal is for aluminum to support the company’s sustainability strategy as the business grows.

Vertical integration and internal consumption continue to play a key role in driving stable volume and supporting earnings. In 2024, the company’s fabrication and processing shops purchased 1.7 million tons of steel from its own mills, about 14% of total steel shipments. Together with its recycling business, this structure helps mitigate volatility in both raw material input costs and finished product pricing. The company also noted recent investments in biocarbon and circular supply chain initiatives, which reduce carbon emissions and support compliance with tightening regulations.

On the capital side, liquidity stood at $1.9 billion on June 30, 2025, after the company repaid $400 million in senior notes. Cash flow from operations totaled $302 million, down from $383 million in the prior-year quarter, with higher capital investments, continued share repurchases, and startup costs for new projects weighing on cash generation. The company repurchased $200 million in shares during Q2 2025, bringing the total to $450 million for the first half of 2025. Capital expenditures reached $288 million.

Outlook and What to Watch

Looking ahead, management expressed cautious optimism, noting that order backlogs and customer demand in key end markets remain healthy. The leadership team expects pent-up demand for steel and aluminum products to strengthen as trade and tax policy uncertainties clear up, especially with trade actions targeting unfairly priced imports. That could benefit the company’s position as the largest U.S. producer of non-automotive coated flat rolled steel and boost contributions from the Sinton Division in late 2025.

For Steel Fabrication, management believes rebuilding profitability should begin in the third quarter as input cost headwinds recede and backlog execution accelerates. The aluminum ramp-up will remain a focal point, with utilization rates and successful product certification critical to future margin growth. The declared quarterly dividend was raised 8.7% year over year to $0.50 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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