Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in domestic and global economies, 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. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) the effects of a recurrent recession on industrial demand; (2) changes in economic conditions, either generally or in any of the steel or scrap-consuming sectors which affect demand for our products, including the strength of the non-residential and residential construction, automotive, appliance, and other steel-consuming industries; (3) fluctuations in the cost of key raw materials (including steel scrap, iron units, and energy costs) and our ability to pass-on any cost increases; (4) the impact of domestic and foreign import price competition; (5) risks and uncertainties involving product and/or technology development; and (6) occurrences of unexpected plant outages or equipment failures.

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, 2011, 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 are scrap and scrap substitutes (which represent the most significant single component of our consolidated costs of goods sold), steel, direct and indirect labor and related benefits, alloys, zinc, transportation and freight, repairs and maintenance, utilities (most notably electricity and natural gas), and depreciation.

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 and other assets.

Interest Expense, net of Capitalized Interest. Interest expense consists of interest associated with our senior credit facilities and other debt net of interest costs that are required to be capitalized during the construction period of certain capital investment projects.

Other (Income) Expense, net. Other income consists of interest income earned on our temporary cash deposits and investments; 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 premiums paid for refinancing activities.

Overview

Net income was $44.5 million, or $0.20 per diluted share, during the second quarter of 2012, compared with net income of $98.7 million, or $0.43 per diluted share, during the second quarter of 2011, and net income of $45.7 million, or $0.20 per diluted share, during the first quarter of 2012. Our net sales decreased $169.9 million, or 8%, to $1.9 billion in the second quarter of 2012 versus the second quarter of 2011, while net sales decreased $72.2 million, or 4%, versus the first quarter of 2012. Our gross profit percentage was 10% during the second quarter of 2012 as compared to 13% for the second quarter of 2011, and 10% for the first quarter of 2012.

While second quarter 2012 external steel shipments increased 6% as compared to the second quarter of 2011 (with flat roll shipments increasing 1% and long products shipments increasing 10%) and fabrication volumes increased 63%; metals recycling external ferrous metals shipments decreased 8% while nonferrous shipments were consistent. Despite overall consolidated second quarter 2012 shipping volume increases, consolidated net sales decreased 8% compared to the prior year second quarter due to decreased selling prices in all our operations. Operating income decreased 45% in the second quarter 2012 as compared to the same period in 2011, as gross margins decreased from the historically high margins achieved in the first half of 2011within the Flat Roll Division, as well as in our metals recycling operations. The average external selling price per ton shipped for the company's steel operations decreased $93 per ton in the second quarter of 2012 compared to the prior year second quarter while the average ferrous scrap cost per ton melted decreased only $19 for the same comparative period.

Looking at the second quarter of 2012 as compared to the first quarter of 2012, steel and fabrication external shipments increased 4% and 29%, respectively, while metals recycling external nonferrous shipments decreased 12% and ferrous external shipments remained consistent. Consolidated quarterly operating income decreased 13% sequentially due primarily to weakening metals recycling ferrous and nonferrous metal margins, and decreases in nonferrous selling volumes. The domestic ferrous scrap market became oversupplied during the second quarter due to decreased exports of ferrous scrap as well as declining domestic steel mill utilization rates. The result was weakening ferrous prices throughout the second quarter, and a resulting 10% reduction in ferrous metal margins. Nonferrous metals margins also declined in the second quarter, most notably in copper. These factors caused overall metals recycling metal margins to decrease 21% quarter versus quarter resulting in a $20 million decrease in metals recycling operating income in the second quarter of 2012 as compared to the first quarter in 2012.

Segment Operating Results 2012 vs. 2011 (dollars in thousands)



                          Three Months Ended               First      Sequential             Six Months Ended
                               June 30,                   Quarter      Quarter                   June 30,
                                  %                                       %                         %
                     2012       Change       2011          2012         Change         2012       Change       2011

Net sales:
Steel             $ 1,260,223       (5 )% $ 1,329,466   $ 1,234,479            2 %  $ 2,494,702       (3 )% $ 2,576,476
Metals
recycling and
ferrous
resources             920,456      (15 )%   1,077,871     1,111,120          (17 )%   2,031,576       (7 )%   2,186,286
Steel
fabrication            95,767       55 %       61,962        74,896           28 %      170,663       49 %      114,614
Other                  20,390      (29 )%      28,786        24,090          (15 )%      44,480      (22 )%      56,918
                    2,296,836               2,498,085     2,444,585                   4,741,421               4,934,294
Intra-company        (387,033 )              (418,354 )    (462,545 )                  (849,578 )              (838,594 )
   Consolidated   $ 1,909,803       (8 )% $ 2,079,731   $ 1,982,040           (4 )% $ 3,891,843       (5 )% $ 4,095,700

Operating
income (loss):
Steel             $   136,597      (36 )% $   213,968   $   137,308           (1 )% $   273,905      (33 )% $   406,923
Metals
recycling and
ferrous
resources             (19,371 )   (599 )%       3,885         4,163         (565 )%     (15,208 )   (135 )%      43,375
Steel
fabrication               193      112 %       (1,635 )      (2,668 )        107 %       (2,475 )     45 %       (4,518 )
Other                 (14,673 )     42 %      (25,422 )     (16,862 )         13 %      (31,535 )     37 %      (49,678 )
                      102,746      (46 )%     190,796       121,941          (16 )%     224,687      (43 )%     396,102
Eliminations              953                  (2,577 )      (2,125 )                    (1,172 )                (2,557 )
   Consolidated   $   103,699      (45 )% $   188,219   $   119,816          (13 )% $   223,515      (43 )% $   393,545

Steel Operations. Steel operations consist of our five electric-arc furnace mini-mills, producing steel from steel scrap, utilizing continuous casting, automated rolling mills, and various downstream finishing facilities, including The Techs operations. Collectively, our steel operations sell directly to end users and service centers. These products are used in numerous industry sectors, including the automotive, construction, commercial, transportation, agriculture and industrial machinery markets. In the second quarters of 2012 and 2011, our steel operations accounted for 63% and 61%, respectively, of our external net sales. Operating income for the steel segment decreased $77.4 million or 36%, to $136.6 million in the second quarter of 2012 compared to the second quarter of 2011. Gross margin, and correspondingly operating income, compressed due to a $93 decrease in average segment selling prices per ton shipped coupled with only a $19 per ton decrease in average ferrous scrap cost melted in the second quarter of 2012, as compared to the second quarter of 2011. Operating income for the steel segment decreased $133.0 million or 33%, to $273.9 million in the first half of 2012 compared to the first half of 2011. Gross margin, and correspondingly operating income, compressed due to a $53 decrease in average segment selling prices per ton shipped while the average ferrous scrap cost melted in the first half of 2012 virtually unchanged from the first half of 2011.

Steel Operations Shipments (net tons)



                        Three Months Ended                 First                  Six Months Ended
                             June 30,                     Quarter                     June 30,
                     2012               2011               2012               2012               2011

Flat Roll
Division             706,944            680,679            658,505          1,365,449          1,390,293
The Techs            171,437            186,903            144,615            316,052            387,627
  Sheet products     878,381    58 %    867,582    60 %    803,120    55 %  1,681,501    57 %  1,777,920    61 %

Structural and
Rail Division        252,524            213,368            261,006            513,530            404,029
Engineered Bar
Products
Division             166,208            144,280            157,489            323,697            303,295
Roanoke Bar
Division             149,010            152,906            151,296            300,306            274,211
Steel of West
Virginia              74,456             74,882             77,212            151,668            146,938
   Long products     642,198    42 %    585,436    40 %    647,003    45 %  1,289,201    43 %  1,128,473    39 %

 Total shipments   1,520,579          1,453,018          1,450,123          2,970,702          2,906,393
 Intra-segment
shipments            (29,560 )  (2 )%   (35,842 )  (2 )%   (28,057 )  (2 )%   (57,617 )  (2 )%   (72,313 )  (3 )%
         Segment
       shipments   1,491,019          1,417,176          1,422,066          2,913,085          2,834,080
 Intra-company
shipments            (77,315 )  (5 )%   (79,568 )  (6 )%   (66,119 )  (5 )%  (143,434 )  (5 )%  (153,070 )  (5 )%
        External
       shipments   1,413,704          1,337,608          1,355,947          2,769,651          2,681,010

Sheet Products. Our Flat Roll Division sells a broad range of sheet steel products, such as hot rolled, cold rolled and coated steel products, including a large variety of specialty products such as light gauge hot rolled, galvanized, Galvalume® and painted products. The Techs operations, comprised of three galvanizing lines, also sells specialized galvanized sheet steels used in non-automotive applications. Sheet products represented 58% of total steel total shipped tons in the second quarter of 2012, as compared to 60% in the second quarter of 2011.

Long Products. Our Structural and Rail Division sells structural steel beams and pilings and is also designed to produce and sell a variety of standard and premium-grade rail for the railroad industry. Our Engineered Bar Products Division primarily sells special bar quality and merchant bar quality rounds and round-cornered squares. Our Roanoke Bar Division sells billets and merchant steel products, including angles, plain rounds, flats and channels. Steel of West Virginia primarily sells merchant beams, channels and specialty structural steel sections.

Net sales for the segment decreased in the second quarter of 2012 by $69.2 million, or 5%, compared to the second quarter of 2011. While total shipments in the second quarter of 2012 were 5% higher than the second quarter of 2011, there was a shift in mix with long products shipments increasing 10%, or 57,000 tons, outpacing the sheet products sales volumes increase of 1%, or 11,000 tons. Rail product shipments continue to show steady improvement, with the second quarter of 2012 shipments increasing 10% over the second quarter of 2011. Our second quarter 2012 average steel operations' segment selling price per ton shipped, decreased $93 compared with the second quarter of 2011, as the high sheet selling prices seen in the second quarter of 2011 were not duplicated in the market in 2012, as increased domestic flat roll capacity and increased imports did not support higher pricing.

Net sales for the segment decreased by $81.8 million, or 3%, in the first six months of 2012 compared to the same period in 2011. While demand for our steel products improved moderately overall in 2012 compared to the first six months of 2011 there was an even more pronounced shift in mix to long products in the first six months of 2012 compared to the same period in 2011, than in the second quarter comparison noted above. Segment shipments for the first six months of 2012 were up 3% overall compared to the same period in 2011, with sheet products decreasing 5%, while long products increased 14%. Our first six months 2012 average steel operations' segment selling price per ton shipped decreased $54 compared with the first six months of 2011, as the high sheet selling prices seen in the first half of 2011 were not duplicated in the market in 2012.

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 $19 in the second quarter 2012 compared with the second quarter of 2011. During the second quarter of 2012 and 2011, respectively, our metallic raw material costs represented 67% and 68% of our steel operations' manufacturing costs, excluding the operations of The Techs, which purchases, rather than produces, the steel it further processes. Our metallic raw material cost per net ton consumed in our steel operations was virtually unchanged for the first six months of 2012 compared with the first six months of 2011, and represented 68% of our steel operations' manufacturing costs in each period, excluding the operations of The Techs.

Metals Recycling and Ferrous Resources Operations. This operating segment includes our metals recycling operations (OmniSource); our liquid pig iron production facility, Iron Dynamics (IDI); and our Minnesota iron operations. Our metals recycling and ferrous resources operations segment accounted for 31% of our external net sales in the second quarter of 2012 and 35% in the second quarter of 2011. Operating income for the metals recycling and ferrous resources operations segment decreased $23.3 million in the second quarter of 2012 to a loss of $19.4 million, compared to the second quarter of 2011, due primarily to decreased metal margins for both ferrous and nonferrous metals in metals recycling, and to a lesser extent a decrease in nonferrous sales volume. Operating income for the metals recycling and ferrous resources operations segment decreased $58.6 million in the first six months of 2012 from $43.4 million to a loss of $15.2 million, compared to the first six months of 2011, due primarily to decreased metal margins for both ferrous and nonferrous metals in metals recycling operations, and to a lesser extent a decrease in nonferrous sales volume.

Metals Recycling and Ferrous Resources Operations Shipments



                                   Three Months Ended        First          Six Months Ended
                                        June 30,            Quarter              June,
                                   2012         2011         2012          2012          2011
Ferrous metal (gross tons)
Total                            1,486,222    1,553,828    1,582,840     3,069,062     3,082,019
Intra-segment                       (2,007 )     (5,192 )     (1,787 )      (2,920 )      (5,192 )
            Segment shipments    1,484,215    1,548,636    1,581,053     3,066,142     3,076,827
 Intra-company                    (664,661 )   (655,496 )   (761,980 )  (1,427,515 )  (1,325,124 )
           External shipments      819,554      893,140      819,073     1,638,627     1,751,703
Nonferrous metals (thousands
of pounds)
Total                              258,932      255,113      291,636       550,568       541,758
Intra-segment                       (1,707 )          -            -        (1,707 )           -
            Segment shipments      257,225      255,113      291,636       548,861       541,758
 Intra-company                      (2,891 )     (1,978 )     (1,958 )      (4,849 )      (4,239 )
           External shipments      254,334      253,135      289,678       544,012       537,519

Mesabi Nugget (metric tons) -
intra-company                       33,840       38,265       46,230        80,070        74,032

Iron Dynamics (metric tons) -
intra-company                       59,103       59,854       56,628       115,731       120,997

Metals Recycling. Our metals recycling operations, OmniSource, represent our metals sourcing and processing operations and are the most significant source of net sales in this segment. These operations sell ferrous metals to steel mills and foundries, and nonferrous metals, such as copper, brass, aluminum and stainless steel to, among others, ingot manufacturers, copper refineries and mills, smelters, and specialty mills. Our metals recycling operations represented 95% of this segment's net sales during the second quarters of 2012 and 2011.

During the second quarter of 2012, metals recycling recorded sales of $876.7 million on shipments of 1.5 million gross tons of ferrous metals and 257.2 million pounds of nonferrous metals, compared with sales of $1.0 billion on shipments of 1.5 million gross tons of ferrous and 255.1 million pounds of nonferrous metals during the same period in 2011. During the second quarter of 2012 and 2011, the metals recycling operations provided approximately 52% and 54%, respectively, of the steel scrap purchased by our steel mills. This represented 45% and 42% of the metals recycling operations' ferrous shipments for the second quarter of 2012 and 2011, respectively. Sales prices of ferrous metals decreased 11% in the second quarter of 2012 versus the same period in 2011, while sales prices of nonferrous metals decreased 17% between the same periods. Specifically, copper commodity (Comex) and aluminum commodity (LME) pricing was 18% and 26% lower, respectively, at the end of the second quarter 2012 than at the end of the comparable prior year period. During the first six months of 2012, metals recycling recorded sales of $1.9 billion on shipments of 3.1 million gross tons of ferrous metals and 548.9 million pounds of nonferrous metals, compared with sales of $2.1 billion on shipments of 3.1 million gross tons of ferrous and 541.8 million pounds of nonferrous metals during the same period in 2011. Sales prices of ferrous metals decreased 5% in first six months of 2012 versus the same period in 2011, while sales prices of nonferrous metals decreased 13% between the same periods.

Operating income for metals recycling decreased $12.3 million in the second quarter of 2012 to a loss of $1.1 million, compared to the second quarter of 2011, due primarily to decreased metals spreads for both ferrous (10%) and nonferrous (3%) metals, along with a 4% volume decrease in our ferrous metals products. Decreased exports of ferrous scrap, along with moderating domestic steel mill utilization rates, resulted in oversupply and therefore selling prices declined more rapidly than inputs and margin compressed during the quarter, negatively impacting operating income. Operating income for metals recycling decreased $35.6 million in the first six months of 2012 to $17.6 million, compared to the first six months of 2011, due primarily to decreased metals spreads for both ferrous (9%) and nonferrous (16%) metals.

Ferrous Resources. Our ferrous resource operations consist of our two ironmaking initiatives: Iron Dynamics (IDI), a liquid pig iron production facility, and our Minnesota iron operations, consisting of an iron nugget production facility and planned operations to supply the nugget facility with its primary raw material, iron concentrate. IDI primarily produces liquid pig iron, which is used as a scrap substitute raw material input exclusively at our Flat Roll Division. Our Minnesota iron operations consists of Mesabi Nugget, (owned 81% by us); our planned future iron mining operations which is currently in the permitting process, Mesabi Mining; and, our planned iron tailings operations, Mining Resources (owned 80% by us). The construction of the Mesabi Nugget facility was completed in 2009, and initial production of iron nuggets commenced January 2010. Since then, we have continued to refine this pioneering production process and changed equipment configurations to increase production and plant availability. During a planned five week outage in April and May 2012, we made numerous equipment modifications to improve the percentage of time the plant is available to operate each month. After restarting, availability for the month of June increased to just over 80 percent-a significant improvement. This improvement supports the attainability of the target rate for plant availability of over 90 percent. Operating rates, or productivity, also showed improvement post outage. Operating at these higher rates for longer periods of time allowed us to identify a number of key process optimization opportunities that are necessary for further improvement in both productivity and product quality. The company has identified several possible solutions which it is currently evaluating and intends to implement within the next twelve months, based on equipment delivery lead times and subsequent installation and startup. In the second quarter of 2012 and 2011, Mesabi Nugget produced 34,000 and 38,000 metric tons of iron-nuggets, respectively, for use by our own steel mills. We are currently constructing the iron tailings operation, which is expected to start up in the third quarter of 2012. This operation is planned to provide iron ore tailings to be concentrated for use by Mesabi Nugget as a low-cost iron concentrate to the nugget production process, replacing higher-priced concentrate from external sources. Losses from our Minnesota iron operations reduced our net income in the second quarter of 2012 by approximately $11 million, $3 million more than in the second quarter of 2011. The increase in losses was due primarily to a planned outage to address normal and certain other mechanical and operational issues during April/May of 2012. In the first six months of 2012 and 2011, Mesabi Nugget produced 80,000 and 74,000 metric tons of iron-nuggets, respectively, for use by our own steel mills. Losses from our Minnesota iron operations reduced our net income in the first six months of 2012 by approximately $20 million, $5 million more than in the first six months of 2011.

Our steel fabrication operations represent the company's New Millennium Building Systems' plants located throughout the United States and Northern Mexico. Revenues from these plants are generated from the fabrication of trusses, girders, steel joists and steel decking used within the non-residential construction industry. Steel fabrication operations accounted for 5% and 3% of our external net sales during the second quarter of 2012 and 2011, respectively. The segment achieved operating income of $193,000 in the second quarter of 2012, compared to a $1.6 million loss in the second quarter of 2011. Selling price decreases were mitigated by higher selling volumes and improved margins with the increased production in the second quarter of 2012 compared to the same period in 2011. The segment had an operating loss of $2.5 million in the first six months of 2012, compared to a $4.5 million loss in the first six months of 2011. Selling price decreases were mitigated by higher selling volumes and improved margins with the increased production for the first half of 2012 compared to the same period in 2011.

Net sales for the segment increased by $33.8 million, or 55%, in the second quarter of 2012 compared to the second quarter of 2011, as volumes increased 63% in the second quarter of 2012 when compared with the same period in 2011. However, our average steel fabrication operations' selling price per ton shipped . . .