Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Schnitzer Steel's Third Quarter 2021 Earnings Release Call and Webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Bennett, Investor Relations. Please go ahead.

Michael Bennett: Thank you, Josh, and good morning.

I'm Michael Bennett, the Company's Vice President of Investor Relations. I am happy to welcome you to Schnitzer Steel's earnings presentation for the third quarter of fiscal year 2021. In addition to today's audio comments, we have issued our press release and posted a set of slides, both of which you can access on our website at schnitzersteel.com or schn.com.

Tamara Lundgren: Thank you, Michael. Good morning, everyone.

I'm pleased to welcome you to our fiscal '21 third quarter earnings call. The operational and financial results that we will discuss today are Schnitzer's best results in over a decade. They would not have been possible without all our employees from our frontline workers to those who have been working remotely, living our core values of safety, sustainability and integrity. I'd like to thank our employees for their extraordinary efforts over the past 15 months. Our success is the direct result of how you have embraced these values and your performance reflects the collaboration, innovation and resilience that define our culture and our company.

So let's turn now to Slide 4 to begin a more detailed quarterly review. Our performance this quarter continued to benefit from efficiencies gained from our One-Schnitzer organization model that we implemented at the beginning of this fiscal year and from growth achieved through the execution of our strategic plan. Our sustainability framework of people, planet and profit is the foundation upon which these results were achieved and I'd like to highlight some examples of the significant progress we've made in each area. On the people front, we continued to improve our safety performance. As many of you know, in each of the last two fiscal years, we've reduced workplace injuries to record lows for our company.

Through the third quarter of this fiscal year, we are on track to extend this trend. We still have work to do, but our team's commitment to safety is clearly showing through.

Richard Peach: Thank you, Tamara, and good morning. I'll begin with an update on our Advanced Metal Recovery Technology Initiative. In early April, we commissioned two major new plants and since then we have been testing performance and ramping up production.

One of the new systems is on the West Coast, a primary non-ferrous recovery system that produces Zorba, Zurik and insulated copper wire, all recovered from our shredding process. The second new system is an advanced aluminum separation system situated in the Southeastern U.S. that is also going through ramp up and which now gives us the capability to convert Zorba into a variety of higher value products, including Twitch, copper, stainless, brass and zinc. During the fourth quarter, we expect these two new systems to reach full production capability. We also expect to achieve $4 of incremental EBITDA for ferrous ton in the fourth quarter, including contributions from these two new systems and from the three advanced copper separation systems that we had previously implemented.

Tamara Lundgren: Thank you, Richard. Our excellent results this quarter were driven by increased volumes, operational efficiencies and positive market conditions. Our strategic initiatives to further increase our volumes and to further expand our margins through investments in technology are on track and are expected to deliver additional material benefits. We have a strong balance sheet with low leverage and interest expense, a track record of delivering positive operating cash flows and ability to invest in the growth and productivity of our company and an uninterrupted record of returning capital to our shareholders through our dividend. With the continued growth in global EAF steel-making capacity, the global focus on decarbonization and the increased metal intensity of low carbon technologies, the future for our business and industry is bright.

In closing, I'd like to thank our employees for their outstanding performance this quarter. They've demonstrated once again why we have continued to be a leader in the recycling industry for over a century. Operator, let's now open up the call for questions.

Operator: Our first question comes from Emily Chang with Goldman Sachs. You may proceed with your question.

Emily Chang: Good morning, Tamara, Richard. Thanks for taking the time today. My first question is just around the ferrous market outlook, and I think over the past couple of quarters, pricing for ferrous scrap exported had typically been a bit more of a premium to domestic ferrous prices than what we saw this quarter. Is there anything that you're seeing there either in the domestic or export markets that what is driven that narrowing of the premium, perhaps in other words, would you categorize it as a stronger domestic market or we get export market, I think in one of your charts there you outlined your export destinations has sort of shift quarter-over-quarter?

Tamara Lundgren: What I would - what we see right now in both the export and domestic markets is strong demand. And as you know, Emily, the domestic markets typically price or the domestic market typically prices at the beginning of every month, and the export market trades on a daily or weekly basis.

What we're seeing with strong demand fundamentally across the globe is that those prices are really converging. And if you look back years ago, you saw a longer and wider premium of export to domestic. But with utilization being as high as it is around the globe, we're seeing strong demand in both markets.

Emily Chang: And then my follow-up is just around sort of what you're seeing around China scrap consumption so far, following sort of the export, sorry, the import ban being lifted earlier this year?

Tamara Lundgren: So the scrap import policy in China continues to be modified by the Chinese government. And I think the changes are still in the early days.

I think the most important takeaway is they are articulated goals and demand for scrap. And whether they - where they get the scrap, I think is probably less relevant than the fact that their demand for scrap is increasing. We haven't seen a lot of imports from North America into the Chinese market. They've gotten the imports the location to date from Asia, but their transition to utilizing a higher level of scrap in their BOFs and their - articulation of their goal to increase the amount of steel that they produce is just another strong pull on long-term demand for recycled ferrous.

Operator: Our next question comes from Phil Gibbs with KeyBanc Capital Markets.

You may proceed with your question.

Phil Gibbs: Question I had was on the non-ferrous separation investments and just where you are in that process. I know you gave color in terms of where you are in the capital spending, but where are you in terms of the rollout and how much of the - I think what was it about $10 a ton EBITDA benefit, where are you at relative to that right now?

Tamara Lundgren: Sure. Richard, why don't you take that?

Richard Peach: Good morning. So yes, we've just commissioned two major systems, one in the West Coast and one on the Southeastern U.S.

The one on - the one in the West Coast is a non-ferrous recovery and system that extracts Zorba and Zurik from a shredding process and the one in the Southeastern U.S. is another major plant that we can use to convey Zorba into other products such as Twitch. So between the two of them, when they are up to true production capability which we expect in the fourth quarter, will by then be in a position to process more than 50% of our Zorba through a combination of those two systems. So we've been ramping up, and as I said, looking to get through production capability in the fourth quarter. In terms of benefits, we expect in the fourth quarter to achieve incremental EBITDA per ton from these two new systems and the ones we implemented previously of $4 per ton and that's coming from a combination of recovering more non-ferrous from the shredding process, increasing the number of products we produce and benefits from converting Zorba into other products such as Twitch.

Beyond that - and we have two additional systems in construction, another copper separation plant which is on the West Coast and also on East Coast and primary non-ferrous recovery plant, we expect these on construction to be completed by the end of the fourth quarter and the middle of the first quarter of fiscal '22, respectively, and we have five other systems that are in engineering and permitting. So we're making strong progress and beginning to get some of the major systems on lane with more to come.

Phil Gibbs: Okay. So it sounds like by this quarter, you'll be around or including about half the benefits of at least what you would target initially right about halfway through?

Richard Peach: Yes, before dollars, yes. So that's, yes, just short of half of the $10 we had targeted.

Phil Gibbs: I mean, you haven't had any of the benefits before this coming quarter?

Richard Peach: Not significant enough to call out in our results because these are two of the major systems that we are in the process of ramping up during the third quarter and the fourth quarter.

Phil Gibbs: Okay. And then on the guidance commentary, I just wanted to be clear in terms of what you said. So this quarter you did about $80 a ton in EBITDA per ferrous tons shipped. I think you said basically you're ferrous scrap volumes will be about the same as this quarter and you're saying even with a lower inventory accounting benefit, you'd be in and around that level, but then you have to tease out the steel impact separate from that.

Is that what you communicated?

Richard Peach: Yes, that's correct. The core business - the core recycling business is doing very well and we expect performance in Q4 to be as good as Q3. Even notwithstanding that, there will be only half of the benefit from average inventory accounting that was $7 a benefit in Q3 and we expect only half in Q4. The impact of the fire, the repairs are underway, it's obviously temporary in nature and good progress has been made and we do believe that, as we said, insurance is going to cover most of the costs of repairing the damage and in addition most of the lost business income. So we've got strong insurance coverage but it's a timing issue in terms of when these insurance settlements are reached.

So at the moment, there is uncertainty around the extent to which any insurance recoveries or progress there on could be recognizable for accounting purposes in the fourth quarter, which is why we intend to provide a further upbeat and by the end of August or early September.

Phil Gibbs: Okay. That's very helpful. And then lastly, your - commentary on your non-ferrous volumes for the fourth quarter, does that take into account some of the early benefits, you'd be seeing from benefit sharing more non-ferrous from your investments?

Richard Peach: Yes, absolutely. That 10% increased sequentially and our non-ferrous sales volume outlook includes benefits of increased production using the new technologies.

Operator: And I'm not showing any further questions at this time. I would now like to turn the call back over to Tamara Lundgren for any further remarks.

Tamara Lundgren: Thank you. And thank you, everyone, for your time today. We look forward to speaking with you again in October, when we report our fourth quarter results.

In the interim, stay safe and stay well. Thank you.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating.

You may now disconnect.