Steel Dynamics gets BBB+ rating from Fitch for new notes

Investing.com -- Steel Dynamics, Inc. received a ’BBB+’ rating from Fitch Ratings for its new senior unsecured notes, with proceeds aimed at refinancing near-term maturities and general corporate purposes.

The rating reflects Fitch’s expectation that Steel Dynamics will maintain EBITDA leverage below 1.8x and EBITDA margins at or above 14%.

Fitch considers the company’s ongoing aluminum investment as credit-neutral in the short term, with potential positive impact after completion. Steel Dynamics is building a 650,000-tonne aluminum flat-rolled mill and two recycled slab centers at a cost of $2.9 billion. Production has already begun and is expected to reach 75% of capacity by the end of 2026.

The aluminum project leverages the company’s existing nonferrous metals recycling platform and its expertise in constructing and operating rolling mills in North America. This expansion allows Steel Dynamics to diversify into aluminum production and serve its steel customers who also consume aluminum flat rolled products. The company will also be able to supply beverage can sheet customers, a market characterized by stable consumer nondiscretionary demand.

Section 232 steel and aluminum tariffs, which took effect on March 12, 2025, at 25% on imports into the U.S. and increased to 50% for most countries on June 4, 2025, are expected to benefit Steel Dynamics primarily through higher selling prices without materially affecting demand or raw material sourcing.

The company maintains one of the lowest cost structures in North America, with approximately 85% of costs being variable. As an Electric Arc Furnace (EAF) producer, Steel Dynamics can adjust production to demand more quickly than blast furnace competitors. The company’s mills typically source scrap and sell to customers in close proximity, providing freight advantages.

Labor costs remain flexible, with only about 5% of full-time employees covered by collective bargaining agreements in 2024. The company has no defined benefit pension plan, and profit sharing is tied to profitability.

Steel Dynamics achieved an average capacity utilization rate of 81% in 2024, outperforming the estimated domestic industry rate of 77%. The company maintains short lead times and develops strong customer relationships by strategically locating operations near customers.

The company’s product mix is among the most diversified among domestic peers, with both flat-rolled and long product capacity. This broad offering limits exposure to any single product or end market and supports higher capacity utilization. Nearly 67% of Steel Dynamics’ steel sales are considered value-added products, reducing exposure to more commodity-grade products.

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