NEW YORK Commercial Metals Co. (CMC) expects to see a
profitable fiscal third quarter as the domestic construction
market picks up and demand for rebar and structural products
improves, president and chief executive officer Joseph Alvarado
said on a company earnings call.
Our domestic mills should experience improved volumes
entering the construction season, Alvarado told
investors. We remain encouraged about construction
Certain regional markets have already begun to pick up,
Alvarado said, with rebar shipments improving over the last
year due in part to new building in California, Florida and
Texas. Another auspicious sign is that the Architecture
Billings Index (ABI), a leading indicator of residential
construction, was positive for the seventh consecutive month in
February. Our rebar shipments continue to gain momentum
when compared with the prior year, signaling an emerging
construction recovery, Alvarado said.
The Irving, Texas-based company also reported a growing number
of bids from private construction contractors, a reflection of
improving sentiment in the residential construction market,
Whats normal has been about a 70-30 public versus
private (bidding ratio), and our bidding is moving toward
60-40, Alvarado said. Thats a significant
improvement and divergence from what weve been seeing in
the past. I think it points to the confidence were seeing
in construction markets.
But even though the company anticipates a profitable third
quarter, it faces several challenges, including imports, anemic
margins and economic weakness caused by the sequester.
We are concerned about the strength of the near-term
construction market as a result of the sequester budget,
Alvarado said. Well have seasonal strength this
quarter as we always do. ... While were anticipating
that, its hard to project exactly when nonresidential
(construction) will come back stronger.
Imports also have threatened margins. While CMC, like other
mills, has raised prices, the hikes still dont cover the
full costs of raw material. The recently announced $25-per-ton
price increases in rebar and structural products have taken
hold, although import pressure has prevented a greater
increase, Alvarado said.
The residual impact of imports has really been that some
of the announced increases have not covered the cost of
scrap, Alvarado said, citing an increase in Turkish
shipments of rebar and Mexican shipments of both merchant
products and rebar.
The earnings call followed a punishing second quarter for the
company, in which profits fell 84.1 percent (
amm.com, March 28