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 said.
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 activity."
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.
Residential 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.