Steel Mills

CMC Posts Strong Quarter Despite Pandemic

June 18, 2020

Commercial Metals Co. navigated through third quarter FY 2020 pandemic challenges with almost no disruption to operations or loss of productivity, achieving net sales of $1.34 billion and earnings of $64.2 million

Barbara Smith, chairman of the board, president and CEO, commented, “While the effects of the COVID-19 crisis impacted our business throughout the third quarter, CMC acted early and swiftly to ensure the safety of our employees, the continuity of our operations, and the uninterrupted service to our customers. Our entire organization can be proud of these efforts and their results. We were able to keep our workforce fully employed and safe. We also avoided any meaningful disruptions to operations and experienced no loss of productivity, while closely following CDC guidelines at all of our locations.”

The Americas Mills segment saw volume decline only 4 percent year-over-year during the pandemic due to continued strength in construction activity. Metal margins contracted by $19 per ton year-over-year as average selling price declined by $64 per ton and was only partially offset by lower scrap costs.

CMC3Q2020

Smith said the company has not seen any construction projects canceled and has had steady orders throughout the pandemic. Current backlogs are at historical norms and there are good projects to bid on along with nice booking rates.

“We expect construction and infrastructure activity to remain resilient during our fiscal fourth quarter,” said Smith. “Our finished product volumes are supported by strong fabrication backlogs, which stood near record-high levels on May 31. Customers’ sentiment about their own summer construction workloads is also encouraging.”

The scrap market was already challenging as it exited the winter months and the pandemic pushed low prices even lower, said Smith. Scrap volume was impacted by idling of industrial operations; however, CMC had no issues acquiring sufficient scrap for its own mills.

The integration of the acquired Gerdau mills exceeded expectations and the larger footprint has allowed CMC to capture more of the market, the company said. The acquisition optimized CMC’s network of operations providing improved low-cost service to customers and logistic savings. Smith noted that some merchant bar capacity has been taken out of the market, which Commercial Metals stepped in to fill.

Smith said CMC will “make room, so to speak” for product entering the market from Nucor’s new mills. Nucor Sedalia will be coming online soon and CMC will be monitoring its progress, as well as the Nucor mill in Frostproof, Fla.

CMC has seen more import offers of rebar and merchant bar, particularly from Mexico and Turkey. The company welcomed the Commerce Department ruling on circumvention of bar products through Mexico. Smith said it is a constant effort to keep other countries honest on trade laws.

An infrastructure bill is likely now that both the Senate and House have proposals on the table, said Smith. In the past the there was unwillingness for both sides to agree on a bill, but the pandemic recovery has created an incentive for legislators to work together. An infrastructure bill is vitally necessary for the U.S to remain competitive over the long term, said Smith. Both proposals have spending levels higher than the Fast Track bill that will expire at the end of September. CMC estimates an infrastructure bill could add 1 million to 1.5 million additional tons of steel demand for the industry. “There is a high probability that [Congress] will get something done,” she added.

Smith also noted the renewed interest in nearshoring and reshoring supply chains. “We learned a lot during the pandemic about how many crucial supplies we no longer make in this country,” said Smith. “I know some of our customers who are already taking steps to move supply chains back.” Shifting of supply chains will support the new infrastructure plans, she noted.