TORONTO While there are signs that
construction activity is improving, landing new business
remains a struggle, according to Insteel Industries Inc.
"Its still a real food
fight out there as everyone scrambles for available orders. I
wish I could tell you there has been a significant improvement,
but unfortunately, thats just not the case," Insteel
president and chief executive officer H.O. Woltz III told
analysts during a conference call following the release of
The result has been
"subsistence"-level spreads between wire-rod costs and selling
prices for finished goods made from wire rod, Woltz said.
Mount Airy, N.C.-based Insteel
buys wire rod to makes downstream products such as PC strand
and welded-wire reinforcements.
One silver lining in the current
difficult situation could be the potential for additional
acquisitions, Woltz said, noting that Insteel was "very
capable" of such activity. He stopped short, however, of citing
any specific acquisition targets.
Insteel executives also noted
that construction activity, while improving in some sectors,
was geographically uneven.
Texas has been the strongest
market for Insteel, while the West Coast has been the weakest,
Woltz said. And while activity on the East Coast is better than
that on the West, it remains less robust than activity in the
Lone Star state, he said.
Despite reports of improving
nonresidential construction activity, Insteel expects the
remainder of the year to be challenging.
Unusually mild winter weather,
for example, may have served to move some construction activity
earlier into the year than had initially been planned, Insteel
chief financial officer Michael Gazmarian said, although he
added it was difficult to quantify to what extent that has been
What isnt hard to quantify
is the fact that about 35 percent of Insteels demand
comes from the infrastructure market, which remains uncertain
given the political gridlock in Washington, D.C., surrounding
long-term transportation legislation, Gazmarian said.
Woltz said that situation was
unlikely to change in the near term, given election-year
Even given the current
uncertainty, Insteel appeared to have its eye on a possible
recovery in the construction markets, noting that new
engineered structural mesh equipment slated for commissioning
next year should position the company to meet customer demand
as markets improve.
Insteel also welcomed news of a
new wire-rod rolling mill at Nucor Corp.s Darlington,
S.C., mill, which is expected to be commissioned in the second
half of 2013 (AMM, April 12.) The additional capacity
should relieve concerns about "the potential for inadequate
supplies of domestically produced wire rod when construction
markets begin to recover," Woltz said.
On the pricing front, steel tags
have remained relatively steady following a period of
volatility in ferrous scrap prices in the last few weeks of
December, Woltz said.
He stressed, however, that the
current steadiness was unlikely to become a new normal.
"Were accustomed to rapid changes in the metallics
market, and we have no reason to believe that the recent
stability is indicative of a fundamental change," he said.
As for previously announced
price increases, Insteels success has depended on the
strength in any given product line, Woltz said. On PC strand,
for example, Insteel did not attempt to boost tags because of
"the waste of time it would have represented," he said.
Generally speaking, prices have
remained flat and in some cases fallen, Woltz said.