Steel Dynamics rating affirmed at BBB+ as Fitch cites low leverage and aluminum expansion

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Steel Dynamics BBB+ rating affirmed

Highlights

Fitch affirms Steel Dynamics' BBB+ rating with Stable Outlook, expecting EBITDA leverage below 1.8x and margins at or above 14%.
Steel Dynamics' $2.9 billion aluminum expansion is credit-neutral near term and may become credit positive after 2026 following ramp-up to 90% capacity.
Consistent free cash flow supports growth, with $568 million in cash and $1.19 billion undrawn on the $1.2 billion revolver as of June 30, 2026.

Rating rationale and operating outlook

As reported by Fitch Ratings, Steel Dynamics' Issuer Default Rating remains at BBB+ with a Stable Outlook, and its senior unsecured revolving credit facility and senior unsecured notes are also affirmed at BBB+. The agency says the rating reflects expectations that EBITDA leverage stays below 1.8x and EBITDA margins remain at or above 14%.

Fitch says the company's $2.9 billion aluminum project is credit-neutral in the near term and could become credit positive after completion, ramp-up and consistent profitable output. The investment includes a 650,000-tonne aluminum flat-rolled mill and two recycled slab centers, with production in the second quarter of 2026 averaging 50% of capability. Management expects monthly production to reach 90% of capability by year-end 2026.

Fitch also highlights Steel Dynamics' low-cost operating model, noting that about 85% of costs are variable, which gives electric arc furnace producers flexibility to adjust production more quickly than blast furnace rivals. The agency says proximity to customers, flexible labor costs and a broad value-added product mix support strong utilization and margins, with about 70% of steel sales classified as value-added.

Financial flexibility and sector positioning

Fitch says Steel Dynamics' consistent free cash flow generation supports growth spending, balance sheet strength and shareholder returns through dividends and share repurchases. Over the past 10 years, the company generated positive Fitch-defined free cash flow after dividends except in 2020 and 2024, when capital spending rose because of the Sinton, Texas mill and the aluminum investment.

The agency forecasts EBITDA leverage remains below 1.8x through 2029. After weaker steel demand and pricing pushed leverage above 1.5x starting in the first quarter of 2025, it declines to 1.6x in the second quarter of 2026 from a peak of 2.1x a year earlier. Fitch says management continues to target net debt to EBITDA below 2.0x through the cycle.

In peer comparisons, Fitch says Steel Dynamics is larger than Commercial Metals in annual shipments but smaller than Nucor and Cleveland-Cliffs. It adds that the company compares favorably with Commercial Metals and Cleveland-Cliffs on margins because of its diversified product mix, vertically integrated model and focus on higher-value steel products. As of June 30, 2026, Steel Dynamics has about $568 million in cash and cash equivalents and $1.19 billion available under its $1.2 billion senior unsecured revolving credit facility due in July 2028.

In our earlier article, Fitch’s BB+ rating on Hillman Group’s planned senior secured term loan outlined how the new financing supports the $315 million Kanebridge acquisition while keeping a Stable Outlook. We noted Fitch’s expectation that Hillman will prioritize deleveraging after the deal, with leverage projected to fall below 3.0x within 18 to 24 months, even as customer concentration remains a key risk factor.

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