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CMC gets permits for Ariz. capacity increase

Keywords: Tags  CMC, Carey Dubois, Arizona, rebar, micro mill, Dahlman Rose, Joseph Alvarado, Thorsten Schier


NEW YORK — Commercial Metals Co. (CMC) has received permitting to increase capacity at its Arizona rebar micro-mill, according to a top executive.

“We did recently get the permits to expand that (mill),” Carey Dubois, vice president and treasurer, told participants at Dahlman Rose & Co.’s third annual Global Metals, Mining and Materials Conference in New York.

The company will not be installing new equipment, a company source told AMM, but it will be increasing productivity beyond the level initially permitted.

The Mesa, Ariz., mill has a nameplate capacity of about 300,000 tons, although it managed to produce 306,000 tons in fiscal 2012, Dubois said, declining to comment further on the higher productivity levels being targeted following the receipt of permits.

President and chief executive officer Joseph Alvarado had said in October that CMC was seeking permitting to grow capacity at the mill, noting at the time that the company felt it had “taken full advantage of everything that (mill) was designed into it, and then some” (amm.com, Oct. 25).

The Irving, Texas-based steelmaker’s plans in Arizona come at a time when the company is expecting an uptick in its key end market—non-residential construction.

“We have begun seeing a positive trend in the residential sector. We believe that the sector is a strong leading indicator for the non-residential sector. As we start up that up-cycle, there should be an upwards trajectory,” Dubois said, adding that while demand is still somewhat subdued after the last downturn, past recessions have historically been followed by a five- to seven-year bull market for steel.

CMC is also looking to make some changes in its scrap business as it moves to become more integrated.

“We’ve made some changes there and you should expect to continue to see some changes there, probably more in supporting our mills and probably less on the retail side,” Dubois said, noting in a presentation that about 40 percent of CMC’s scrap goes to its own mills currently.

Meanwhile, the company expects scrap prices to continue to rebound as China, a significant buyer pre-recession, comes back into the market.

“I think we’ll continue over time exporting there, and I think it will get the scrap prices back up to normalized levels,” Dubois said, adding that, nonetheless, prices are unlikely to return to heights seen before the downturn.

“I don’t think we’ll see the margins that we’ve seen in the past. Everything was going right and, obviously, there was a huge demand for steel,” he said, pegging margins in a $20- to $40-per-ton range going forward compared with pre-recession levels of as high as $100 per ton.

The company still believes its focus on the long products market, in general, is a strategic advantage, as the sector has seen higher profitability compared with the flat-rolled sector over the past years, he said.

“There’s been more pricing discipline and we’ve been able to benefit from that,” Dubois said.
CMC produces angles, channels, flats, rounds, squares, rebar, post and special shapes, according to its website.

Responding to an audience question about product diversification, Dubois said the company was unlikely to move into other product segments like special bar quality (SBQ) or flat-rolled steel anytime soon.

“I’m not sure that we’re ever going to get there in a big way. We like the space we’re in; we understand it,” he said.

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