CHICAGO Solid evidence of a pickup in U.S. construction
demand likely wont be seen until February or March, after
typical seasonal doldrums subside, Commercial Metals Co. (CMC)
chairman, president and chief executive officer Joseph Alvarado
The winter months tend to put a damper on construction in much
of North America, Alvarado said in an earnings call Monday. But
continued solid showings from American Institute of
Architects Architecture Billings Index (ABI) give the
Irving, Texas-based steelmaker reason for cautious optimism, he
Also bolstering hopes are on-the-ground talks with customers.
What really is missing in the economy is not projects or
resources, but the confidence to move forward, Alvarado
said. The sense of optimism we have is from customers
that we talk to who see projects moving forward.
He largely brushed aside concerns about negotiations
surrounding the fiscal cliff in the United States,
noting that CMC has continued to see signs of nascent
demand in recent quarters. If it wasnt the
fiscal cliff, it was the elections. And if it wasnt the
elections, it was the stock market. There is always some
bugaboo that investors are concerned about, he said.
The negotiations may not have led to any big boost in
infrastructure spending, but they did see an extension of tax
credits for wind farms, a solid business for CMC because wind
mills use reinforced concrete for their foundations, Alvarado
said. It doesnt fill the mill completely. But it is
a good business to have, he said.
Some 65 to 70 percent of CMCs work is tied to public
projects, with the remaining 30 to 35 percent linked to
privately funded work. While private projects are generally
more profitable, government work provides a good base-load of
business for company mills, Alvarado said.
CMC hasnt seen growing demand from the government in
large part because of state and federal government funding
issues, he said.
Meanwhile, CMC isnt expecting any deterioration or big
pickup in construction activity but rather continued
improvement over the coming year, Alvarado said.
By region, CMC has seen better construction activity in
California and Florida than in recent years. Texas has remained
consistently strong throughout the economic downturn, Alvarado
said. By facility, CMC mills in South Carolina and Alabama both
have availabilities and can take advantage of export
opportunities as they present themselves, he added.
CMCs product mix has shifted more toward lower-margin
concrete rebar and away from higher-value merchant products.
Margins are being pressured. But margins are still better
on the merchant side, Alvarado said.