Steel Dynamics (STLD) Q2 2025: Profits Fall on Margin Squeeze & Aluminum Costs

Steel Dynamics, Inc. (STLD), a leading American steel producer and one of the largest metals recyclers in North America, recently released its financial results for the second quarter of 2025. In this post, we'll delve into the company's latest 10-Q filing to understand its performance, breaking down where its revenue comes from and how it translates to the bottom line.

For the quarter ending June 30, 2025, Steel Dynamics reported total net sales of $4.6 billion, a slight decrease from the $4.63 billion recorded in the same period last year. However, the picture changes as we move down the income statement, with net income falling to $301 million from $432 million a year prior, indicating significant pressure on profitability.

To better visualize how the company generated its revenue and incurred costs during the quarter, the following flow diagram illustrates the path from sales to net income across its various operations.

You'll notice an "Unallocated" category in the diagram. The negative figures here, such as -$415 million in revenue and -$421 million in cost of revenue, primarily represent the elimination of sales between the company's own divisions to avoid double-counting in the consolidated total. For example, when the Metals Recycling segment sells scrap to the Steel Operations segment, that transaction is counted within each segment but must be removed from the final company-wide numbers. This category also includes results from minor subsidiary operations not large enough to be reported as separate segments.

Segment Performance Breakdown

The overall performance masks diverging trends within the company's primary business divisions.

Steel Operations, the company's largest segment, demonstrated resilience. It posted revenues of $3.4 billion, a 4% increase year-over-year, driven by a 5% increase in shipments. This suggests continued healthy demand for its steel products, which range from flat-rolled steel used in automotive and construction to structural beams. Despite higher sales, operating income for the segment fell 13% to $381 million, pointing to compressed margins.

The Steel Fabrication segment faced significant headwinds. This division, which creates steel joists and decks for the non-residential construction market, saw revenue fall 28% to $341 million. The impact on profitability was even more severe, with operating income plunging 48% to $93 million. The filing attributes this to a double-whammy of a 15% drop in sales volume and a 15% decrease in average selling prices, which squeezed the "metal spread"—the crucial difference between the cost of raw steel and the price of the final fabricated products.

The Metals Recycling operations remained relatively steady. Revenue grew 5% to $1.16 billion, helped by record quarterly ferrous scrap shipments. However, like the steel segment, it faced margin pressure, with operating income dipping slightly to $21 million.

Finally, the new Aluminum Operations segment is in its infancy and currently represents a strategic investment rather than a profit center. While generating its first sales of $94 million, it recorded an operating loss of $41 million. These losses are expected as the company ramps up its massive new recycled aluminum flat-rolled products mill, a project that signals a major long-term diversification effort.

Conclusion

Steel Dynamics' second-quarter results paint a picture of a company navigating a challenging market. Its core steel operations remain a powerful engine, but profitability is being squeezed by lower prices in its fabrication business and the substantial, planned costs of launching its ambitious aluminum venture. The 24% rise in company-wide Selling, General, and Administrative (SG&A) expenses, largely driven by the aluminum segment's growth, further contributed to the reduced net income.

Investors will be closely watching two key developments: the stabilization of pricing and margins in the steel fabrication market and the timeline for the new aluminum mill to transition from a cost center to a contributor to the bottom line. The company's ability to manage these dynamics while its core steel business weathers the market will be critical to its future performance.