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Bidding uptick seen good sign for steel: CMC

Keywords: Tags  steel, Commercial Metals, CMC, bidding activity, rebar, reinforcing bar, construction, Joseph Alvarado imports

NEW YORK — Stability in the construction markets, marked by stronger bidding activity, might be a positive sign for the steel market, according to Commercial Metals Co.’s (CMC’s) top executive.

"We’re seeing better bidding activity, particularly in the Sun Belt," Joseph Alvarado, chairman, president and chief executive officer of the Irving, Texas-based steelmaker and metals recycler, said during the company’s fiscal first-quarter earnings call Jan. 7.

"When that bidding activity ... materializes into orders being booked, that means more stability," he said, adding that CMC has seen a little less cyclicality and more stability in bidding.

But bidding hasn’t always been uniform, senior vice president and chief financial officer Barbara R. Smith said.

While private bidding has outpaced public bidding, "some public spending is coming back," she told analysts, adding that funds released into certain parts of the country are at higher levels of bidding than CMC has seen in the past few quarters.

However, much of the growth for construction in 2014—particularly in the nonresidential market, where steel is a major factor—will depend on developers’ confidence in the market, particularly if they can get occupancy rates that justify the investment, Alvarado said.

That confidence will depend on the U.S. government, including how taxes, health care and midterm elections will play out in the coming months.

"We have a better sense of projects moving forward. Certainly in Texas and Florida, and even in California now," he said. "Some of that confidence has returned and projects are moving forward a little more aggressively. (But) all the places in between that were a big part of nonresidential demand is fairly tepid. We need the rest of it to strengthen ... we keep monitoring (activity) and it’s reflected in the bid tons. But the bid tons aren’t necessarily ordered."

Imports continue to be a threat to CMC’s markets, the company said. While imports of reinforcing bar fell in December, Alvarado estimated that up to 100,000 tons of the product could hit U.S. shores in January.

"It doesn’t bode well," he said.

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