NEW YORK Flat
construction markets and import pressure could prevent
Commercial Metals Co. (CMC) from seeing dramatic improvements
in business in the coming months, chairman, president and chief
executive officer Joseph Alvarado said during a June 27
earnings conference call.
Alvarado expects to
see a "sideways market" in the months ahead as demand for rebar
remains spotty and merchant bar imports depress product
margins, even as the company remains profitable (
amm.com, June 27).
"This has remained an
attractive market, including for merchant products coming from
south of the border," Alvarado said. "In particular,
thats where the imports are coming from. The impact has
been on volume but even more significantly on pricing."
CMC saw a 20-percent
increase in merchant and structural product shipments in its
fiscal third quarter ended May 31 compared with the same period
last year. Average mill selling prices across all products
declined to $671 per ton from $715 a year earlier, a decrease
due in part to import pressure, the Irving, Texas-based company
Rebar shipment volumes
improved slightly in the quarter compared with a year ago, but
the construction markets have shown uneven improvement, with
certain segments outperforming others.
"The way we describe
our market base is (that) Texas has always been a stronghold
for us, and it has remained a strong construction market,
albeit (with) more highway work than nonresidential over the
last couple of years. But nonresidential construction continues
to strengthen," Alvarado said. "Between Texas and California or
between Texas and southern Florida or between southern Florida
and the Mid-Atlantica lot of those markets still remain
fairly flat and not nearly as robust in construction
Predictions earlier in
the year that nonresidential construction would begin to pick
up havent yet been realized, despite months of positive
construction data. The Architecture Billings Index (ABI), a
leading indicator of construction activity, dipped below 50 in
April for the first time in eight months, indicating a decline
in construction spending, although the index bounced back to
52.9 in May.
construction is widely seen as a leading indicator of
nonresidential construction. "Until we see broader economic
recovery and broader construction, its hard to surmise
whats going to drive confidence enough to see investors
investing in nonresidential beyond just residential
construction improving," Alvarado said.