Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in the steel and recycled metals marketplaces, our revenue, costs of purchased materials, future profitability and earnings, and the operation of new or existing facilities. These statements are intended to be made as "forward-looking," subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Such predictive statements are not guarantees of future performance, and actual results could differ materially from our current expectations. Factors that could cause such predictive statements to turn out other than as anticipated or predicted include, among others: the effects of a prolonged or deepening recession on industrial demand; general or specific sector (i.e., automotive, consumer appliance or construction) economic conditions affecting steel or recycled metals consumption; the impact of price competition, whether domestic or the result of foreign imports; difficulties in integrating acquired businesses; risks and uncertainties involving new products or new technologies; changes in the availability or cost of steel scrap or substitute materials; increases in energy costs; occurrence of unanticipated equipment failures and plant outages; labor unrest; and the effect of the elements on production or consumption.

More specifically, we refer you to the sections titled Special Note Regarding Forward-Looking Statements and Risk Factors in our annual report on Form 10-K for the year ended December 31, 2008, as well as in other reports which we file with the Securities and Exchange Commission, for a more detailed discussion of some of the many factors, variable risks and uncertainties that could cause actual results to differ materially from those we may have expected or anticipated. These reports are available publicly on the SEC web site, www.sec.gov, and on our web site, www.steeldynamics.com. Forward-looking or predictive statements we make are based upon information and assumptions, concerning our businesses and the environments in which they operate, which we consider reasonable as of the date on which these statements are made. Due to the foregoing risks and uncertainties however, as well as, matters beyond our control which can affect forward-looking statements, you are cautioned not to place undue reliance on these predictive statements, which speak only as of the date of this report. We undertake no duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Operating Statement Classifications

Net Sales. Net sales from our operations are a factor of volumes shipped, product mix and related pricing. We charge premium prices for certain grades of steel, product dimensions, certain smaller volumes, and for value-added processing or coating of the steel products. Except for our steel fabrication operations segment, we recognize revenue from sales and the allowance for estimated costs associated with returns from these sales at the time the title of the product is transferred to the customer. Provision is made for estimated product returns and customer claims based on estimates and actual historical experience. Net sales from steel fabrication operations are recognized from construction contracts utilizing a percentage-of-completion method, which is based on the percentage of steel consumed to date as compared to the estimated total steel required for each contract.

Costs of Goods Sold. Our costs of goods sold represent all direct and indirect costs associated with the manufacture of our products. The principal elements of these costs for our steel operations are steel scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), alloys, zinc, natural gas, argon, direct and indirect labor and related benefits, electricity, oxygen, electrodes, depreciation, materials and freight. The principal elements of these costs for our metals recycling and ferrous resources operations are the costs of procuring the unprocessed scrap materials, material transportation costs, and processing expenses, such as direct and indirect labor, depreciation and utilities. The principal elements of these costs for our fabrication operations include purchased steel and direct and indirect labor and related benefit expenses.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of all costs associated with our sales, finance and accounting, and administrative departments. These costs include, among other items, labor and related benefits, professional services, insurance premiums, property taxes, profit sharing, and amortization of intangible assets.

Interest Expense, net Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt (described in the notes to our financial statements included in our 2008 Annual Report on Form 10-K and in Note 5 of this report) net of capitalized interest costs that are related to capital projects during the related construction period.

Other (Income) Expense, net. Other income consists of interest income earned on our temporary cash deposits and any other non-operating income activity, including gains on certain short-term investments and income from non-consolidated investments accounted for under the equity method. Other expense consists of any non-operating costs, including the expense from the termination of an interest rate swap contract related to the term A loan in the second quarter of 2009.

Third Quarter Operating Results 2009 vs. 2008

Outlook. Net income was $69.0 million, or $.30 per diluted share, during the third quarter of 2009, compared with net income of $193.0 million, or $.98 per diluted share, during the third quarter of 2008 and a net loss of $16.0 million, or $.08 per diluted share, during the second quarter of 2009. As is the case throughout the global steel industry, we have been adversely impacted in recent quarters by the overall economic recession. We have, however, experienced positive trends in volumes and order entry activity during the third quarter of 2009 at some of our operations, specifically in our flat-rolled steel and metals recycling operations. While we believe that flat-rolled and recycled metals market conditions from both a pricing and volume perspective could weaken from third quarter levels, we continue to be well positioned to capitalized on order activity with a highly-variable cost structure.

Gross Profit. When comparing the third quarter of 2009 with the third quarter of 2008, our net sales decreased $1.4 billion, or 54%, to $1.2 billion. Our gross profit percentage was 18% during the third quarter of 2009 as compared to 17% for the third quarter of 2008, and as compared to 9% on a linked-quarter basis. Our improved gross profit percentage on a linked-quarter basis is primarily the result of increasing volumes and sales prices coupled with production costs being spread across higher volumes during the third quarter as compared to the second quarter.

                                Steel Operations



                            Three Months Ended       Nine Months Ended      First    Second
                               September 30,           September 30,       Quarter   Quarter
                             2009        2008        2009        2008       2009      2009
Shipments (net tons)
Flat Roll Division           656,512     576,059   1,415,195   1,967,660   303,938   454,745
Structural and Rail
Division                     134,390     281,126     360,421     866,963   129,555    96,476
Engineered Bar Products
Division                      80,428     149,708     215,092     442,741    71,540    63,124
Roanoke Bar Division          97,895     148,128     263,617     436,078    76,610    89,112
Steel of West Virginia        57,539      62,849     155,622     218,907    43,124    54,959
The Techs                    220,383     209,191     466,032     734,110   118,359   127,290
Total shipments            1,247,147   1,427,061   2,875,979   4,666,459   743,126   885,706
Intercompany                 (84,396 )  (141,113 )  (183,998 )  (395,926 ) (52,012 ) (47,590 )
External shipments         1,162,751   1,285,948   2,691,981   4,270,533   691,114   838,116

Steel operations accounted for 57% and 53% of our net sales during the third quarter of 2009 and 2008, respectively. Third quarter 2009 shipments were down 13% compared to the same period in 2008, with the exception of our flat-rolled products, where shipments were 14% higher during the third quarter of 2009 versus 2008 and our Flat Roll Division operated at near capacity production levels. Linked-quarter shipments increased at all of our steel divisions, with total steel shipments increasing 41% as compared to the second quarter, driven by increased shipments of 295,000 net tons in flat-rolled products.

Our third quarter 2009 average steel operations' selling price per ton shipped decreased $559 compared with the third quarter of 2008, but increased $33 compared with the second quarter of 2009. We expect continued downward pressure on pricing throughout the fourth quarter, as order entry has declined from peak third quarter levels for our flat-rolled products. Long products will likely lag due to a continued stagnant non-residential construction arena, driven by the weak economy and lack of available financing for construction projects.

Metallic raw materials used in our electric arc furnaces represent our single most significant manufacturing cost. Our metallic raw material cost per net ton consumed in our steel operations decreased $317 compared with the third quarter of 2008, but increased $49 on a linked-quarter basis. During the third quarter of 2009 and 2008, respectively, our metallic raw material costs represented 54% and 39% of our steel operations' manufacturing costs, excluding the operations of The Techs, which purchases, rather than produces, the steel it further processes. We currently anticipate steel scrap prices will decrease during the fourth quarter.

               Metals Recycling and Ferrous Resources Operations



                         Three Months Ended        Nine Months Ended       First      Second
                            September 30,            September 30,        Quarter    Quarter
                          2009        2008         2009         2008        2009       2009

Ferrous metal
shipments (net tons)
Combined                1,293,820   1,755,608    2,863,888    4,654,495    729,869    840,199
Intra-company            (575,840 )  (714,234 ) (1,103,616 ) (1,832,244 ) (214,753 ) (313,023 )
External                  717,980   1,041,374    1,760,272    2,822,251    515,116    527,176

Non-ferrous shipments
(thousands of pounds)     217,068     243,897      577,246      736,833    190,394    169,784

Iron Dynamics
shipments (net tons)
Liquid pig iron            55,007      44,254      140,625      142,039     41,226     44,392
Hot briquetted iron         4,497      17,715       26,306       48,404     20,326      1,483
Other                          36       7,689          739       13,936        674         29
Intra-company              59,540      69,658      167,670      204,379     62,226     45,904

Metals recycling and ferrous resources operations accounted for 40% and 42% of our net sales during the third quarters of 2009 and 2008, respectively. Our metals recycling operations primarily engage in the brokerage, collection and processing of ferrous and non-ferrous metals for resale to steel companies, brokers and other metals processors. During the third quarter of 2009, this segment recorded external shipments of 718,000 tons of ferrous metals and 217.1 million pounds of non-ferrous materials, compared with 1.0 million tons and 243.9 million pounds during the same period in 2008. On a linked-quarter basis, external shipments of ferrous metals increased by 191,000 tons while shipments of non-ferrous metals increased by 47.3 million pounds. External shipments for the quarter fell substantially compared to the same period in 2008 due to the continued weak global economy relative to 2008 which caused reduced manufacturing activity resulting in reduced demand and sources of scrap. During the third quarter of 2009, the metals recycling segment provided approximately 50% of the steel scrap purchased by our steel mills. This represented 31% of the metals recycling segment's net sales for the quarter as compared to 22% during the second quarter of 2009, and 35% during the third quarter of 2008. While electric arc furnace utilization increased during the third quarter, which is a major customer base, we believe utilization rates may ease through the fourth quarter which could result in less comparative demand. The market for non-ferrous materials, particularly aluminum, has shown signs of strengthening, with apparent demand from automotive suppliers appearing to be the primary driver due to automotive restocking.

As selling values possibly decrease in the fourth quarter, margins could be further compressed due to the selling of higher-cost scrap purchased during the third quarter. Flows of scrap have increased markedly in recent months, and anticipated easing of electric arc furnace utilization will likely put downward pressure on pricing.

Steel fabrication operations accounted for 2% and 4% of our net sales during the third quarters of 2009 and 2008, respectively. Our average steel fabrication operations' selling price per ton shipped decreased $460, or 33%, during the third quarter of 2009 when compared with the third quarter of 2008, and decreased $94, or 9%, on a linked-quarter basis. The purchase of various steel products is the largest single cost of production for our steel fabrication operations. During the third quarters of 2009 and 2008, respectively, the cost of steel products purchased represented 65% and 87% of the total cost of manufacturing for our steel fabrication operations. We anticipate non-residential construction activity to remain weak during the fourth quarter and into 2010, resulting in decreased shipping volumes and selling prices for this segment of our operations.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (including profit sharing and amortization of intangible assets) were $68.2 million during the third quarter of 2009, as compared to $114.3 million during the third quarter of 2008, a decrease of $46.0 million, or 40%. Our selling, general and administrative expenses represented 6% and 4% of our total net sales during the third quarters of 2009 and 2008, respectively. The percentage increase is primarily a result of the significant decline in nets sales in the third quarter of 2009 compared with the prior year as measured against certain fixed cost components in selling, general and administrative expenses.

The decrease in our selling, general and administrative expenses was in part due to reduced levels of performance-based compensation accruals and reduced profit sharing expense during the third quarter of 2009 as a result of our year-to-date financial results. We had performance-based compensation accruals of $38.0 million at September 30, 2008, compared to $5.8 million at September 30, 2009. During the third quarter of 2008, we recorded expense of $30.8 million related to our Steel Dynamics performance-based profit sharing plan as compared to $226,000 in the third quarter of 2009. During 2008 our board of directors modified the contribution percentage for this plan to consist of 2% of consolidated pretax earnings plus a unique percentage of each of our operating segments' pretax earnings. The resulting total contribution percentage was 9% of consolidated pretax earnings during the third quarter of 2008.

Interest Expense, net Capitalized Interest. During the third quarter of 2009, gross interest expense decreased $1.7 million, or 4%, to $40.5 million, and capitalized interest increased $1.2 million to $6.0 million, when compared to the same period in 2008. The interest capitalization that occurred during these periods resulted from the interest required to be capitalized with respect to construction activities at our various operating segments. Our weighted-average interest rate on our outstanding borrowings was 7.2% and 6.4% at September 30, 2009 and 2008, respectively. We currently anticipate gross interest expense to remain relatively flat during the fourth quarter.

Other Income, net. Other income was $2.2 million during the third quarter of 2009, as compared to $8.3 million during the same period in 2008. During the third quarter of 2008, other income of $8.6 million was attributable to a gain on the sale of marketable securities.

Income Taxes (Benefit). During the third quarter of 2009, our income tax expense was $47.4 million, as compared to $114.1 million during the same period in 2008. Our effective income tax rate was 40.8% and 37.1% during the third quarters of 2009 and 2008, respectively. We estimate that our effective income tax rate will be 41.5% for the remainder of 2009. However, this could change if our actual earnings in the fourth quarter of 2009 are materially different than currently anticipated. We account for income taxes and the related accounts under the liability method. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the basis differences reverse.

Included in the amount of unrecognized tax benefits at September 30, 2009, are potential benefits of $17.5 million that, if recognized, would affect our effective tax rate. We recognize interest and penalties related to our tax contingencies on a net-of-tax basis in income tax expense. During the nine-month period ended September 30, 2009, we recognized interest expense of $1.0 million, net of tax, and benefits from the reduction of penalties of $49,000. At September 30, 2009, we had $8.7 million accrued for the payment of interest and penalties.

We file income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The state of Indiana completed its examination of the calendar years 2000 through 2005 in the third quarter of 2008. We paid additional taxes of $20.7 million as a result of the examinations. This amount was recorded as an unrecognized tax benefit. It is reasonably possible that the amount of unrecognized tax benefits could change in the next twelve months as a result of state income tax audits. Based on current audits in process, the payment of additional taxes could be in an

amount from zero to $2.1 million during 2009, primarily related to state nexus issues. With few exceptions, we are no longer subject to federal, state and local income tax examinations by tax authorities for years ended before 2006.

First Nine Months Operating Results 2009 vs. 2008

Net loss was $34.8 million or $.18 per diluted share during the first nine months of 2009, compared with net income of $546.1 million or $2.75 per diluted share during the first nine months of 2008.

Gross Profit. When comparing the first nine months of 2009 with the same period in 2008, our net sales decreased $4.1 billion, or 60%, to $2.8 billion. Our gross margin percentage was 9% during the first nine months of 2009 as compared to 19% during the first nine months of 2008. Our first nine months 2009 financial results include the operations of Recycle South, versus approximately four months of operations of Recycle South in 2008. The primary driver of the decrease in our year-to-year gross margin percentage was the global economic recession which has had an adverse impact on our shipping volumes and average selling prices in all of our segments.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $203.8 million during the first nine months of 2009, as compared to $330.0 million during the same period in 2008, a decrease of $126.2 million, or 38%. During the first nine months of 2009 and 2008, selling, general and administrative expenses represented approximately 7% and 5% of net sales, respectively. The decrease in selling, general and administrative expenses in the first nine months of 2009 compared to the first nine months of 2008 primarily relates to a sharp reduction in profit sharing expense during 2009. Profit sharing expense was $76.2 million during the first nine months of 2008, compared to $409,000 during the same period of 2009.

Interest Expense, net Capitalized Interest. During the first nine months of 2009, gross interest expense increased $3.4 million, or 3%, to $121.4 million, and capitalized interest decreased $1.7 million, or 11%, to $13.6 million as compared to the same period in 2008. The increase in gross interest expense for the first nine months of 2009 compared to the first nine months of 2008 is a result of increased borrowings for, among other things, capital outlays for our expansion projects. The increase is also due to the prepayment of the term A loan, which resulted in the recording of an additional $2.2 million of interest expense due to the write off of the related capitalized financing costs. The interest capitalization that occurred during these periods primarily resulted from the interest required to be capitalized with respect to construction activities at our Structural and Rail division and our Mesabi Nugget operations.

Other Income, net. Other income was $2.1 million during the first nine months of 2009, as compared to $33.0 million during the same period in 2008. During the second quarter of 2009, the company recorded an expense of $1.3 million from the termination of an interest rate swap contract related to the term A loan. During 2008, other income of $21.0 million was attributable to earnings from investments in scrap procurement and processing entities which were accounted for under the equity method of accounting. As of the date of its acquisition, Recycle South, which was $20.4 million of other income during the first nine months of 2008, is no longer included in other income, as its results are consolidated in our financial statements after acquisition. Also during 2008, we recorded $8.6 million of other income on the sale of marketable securities.

Income Taxes. During the first nine months of 2009, our income tax provision was a benefit of $27.0 million, as compared to expense of $330.5 million during the same period in 2008. During the first nine months of 2009 and 2008, our effective income tax rates were 41.8% and 37.7%, respectively. We estimate that our effective income tax rate will be 41.5% for the remainder of 2009. However, this could change if our actual earnings in the fourth quarter of 2009 are materially different than currently anticipated.

Liquidity and Capital Resources

Our business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in our steelmaking and finishing operations and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from capital expenditures, working capital requirements and principal and interest payments related to our outstanding indebtedness. We have met these liquidity requirements with cash provided by operations, issuances of common stock, long-term borrowings, state and local grants and capital cost reimbursements.

Working Capital. During the first nine months of 2009, our operational working capital position, representing our cash invested in trade receivables and inventories less trade payables and accruals decreased $223.7 million to $762.7 million compared to December 31, 2008. Trade receivables decreased $22.5 million, or 4%, during the first nine months of 2009 to $480.4 million, of which over 95% were current or less than 60 days past due. Our largest customer is an affiliated company, Heidtman Steel, which represented 6% and 10% of our outstanding trade receivables at September 30, 2009 and December 31, 2008, respectively. Trade receivables declined during the first nine months of 2009 due to decreased product prices as compared to the second half of 2008. The dollar value of our raw materials, primarily steel scrap inventories, decreased by approximately $158.8 million during the first nine months of 2009. Steel scrap inventory volumes, including both steel operations and metals recycling and ferrous resources, decreased by 349,000 gross tons during the first nine months of 2009. The dollar value of total inventories decreased $188.2 million, or 18%, to $835.1 million during the first nine months of 2009, with volumes of work-in-process and finished goods inventories decreasing 52,000 net tons, or 15%. Our trade payables and general accruals increased $13.0 million, or 2%, during the first nine months of 2009. This is a reflection of increased production activities and commodity raw material purchasing during the third quarter of 2009 compared to the fourth quarter of 2008.

Capital Expenditures. During the first nine months of 2009, we invested $243.2 million in property, plant and equipment, of which $23.2 million related primarily to the addition of a second rolling mill and caster at our Structural and Rail Division, $23.6 million related to metals recycling operations and $162.3 million related to the construction of Mesabi Nugget, our planned iron-nugget manufacturing facility and

related mining operations. The other capital expenditures of $34.1 million primarily represented expansion and maintenance projects at our other facilities. We believe these capital investments will benefit our net sales and related cash flows as each project reaches completion.

Capital Resources and Long-term Debt. During the first nine months of 2009, our total outstanding debt decreased $513.2 million to $2.1 billion, primarily because we prepaid our term A loan of $552.0 million in June 2009 through the net proceeds from the issuance of common stock. Our total long-term debt to capitalization ratio, representing our long-term debt, including current maturities divided by the sum of our long-term debt and our total stockholders' equity, was 52% and 62% at September 30, 2009 and December 31, 2008, respectively. At September 30, 2009, there were outstanding borrowings of $85.0 million under our $874.0 million senior secured revolver, which is subject to a monthly borrowing base.

Our senior secured credit agreement contains financial covenants and other covenants that limit or restrict our ability to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions and enter into other specified transactions and activities. Our ability to borrow funds within the terms of the revolver is dependent upon our continued compliance with our financial covenants, and other covenants contained in the senior secured credit agreement.

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