Steel Mills

CMC Calls for Trade Action on Imports

Written by Tim Triplett

Commercial Metals Co., a Texas-based long products producer and scrap recycler, reported a profitable fiscal 2017 despite imports of rebar and other products that continue to squeeze margins. CMC management is hopeful the company will get an assist from Washington in the coming year.

“The need for infrastructure renewal is overwhelming, but the issue is funding. The president has an agenda he laid out in the campaign. Assuming tax reform is accomplished, we are hopeful [an infrastructure plan] comes to fruition and creates additional demand,” CMC President and CEO Barbara Smith told investors and analysts during the company’s quarterly conference call.

CMC reported earnings from continuing operations of $32.6 million on sales of $4.6 billion in its recently completed fiscal year. For the quarter ended Aug. 31, the steelmaker reported a loss of $32.7 million on sales of $1.3 billion, primarily the result of debt refinancing and its exit from the International Marketing and Distribution segment. CMC completed the sale of its Cometals raw materials trading division to the Traxys Group in August to focus on its core steel manufacturing businesses in the U.S. and Poland.

On the scrap side, CMC’s Americas Recycling business recorded an adjusted operating profit of $2.9 million in the company’s fourth quarter as shipments increased by 37 percent over the same period last year. Flows remained strong as scrap began to move in the coastal areas, and as the company integrated the seven recycling yards it acquired earlier in fiscal 2017. 

The company eventually expects to see additional sales in the South as Texas and Florida recover from the recent hurricanes, but not necessarily soon. “Certainly, there will be some demand created from the rebuilding, but it will be spread out over several years,” Smith said.

CMC’s outlook for demand from the U.S. nonresidential construction market remains positive, despite a lack of movement on infrastructure stimulus.  However, market conditions remain challenging because of raw material price changes and escalating input costs. “Metal margins remain under pressure due to the ongoing influx of dumped and subsidized imports,” Smith said.

CMC is part of an industry coalition that is lobbying hard in Washington for further trade relief. The company supports the pending Section 232 trade action, though it is unclear if it will affect rebar, she said.

“We saw a temporary pause in rebar imports after the announcement of the Section 232 review into the effect of imports on national security.  However, recent data indicates another surge in rebar imports is on its way.  We believe that [a lack of] action by the current administration to address these unfair trade practices is likely to result in imports returning to their previous high levels, negatively impacting the industry’s operating results or potentially even imperiling the long-term viability of the U.S. steel industry,” she said.

In other action, CMC’s Polish operations are taking full advantage of new furnace and caster investments to produce higher-value merchant product. In the U.S., the company plans to commission its new micro mill in Durant, Okla., in early 2018.

“We feel optimistic about the outlook for demand in both the U.S. and Poland.  We are encouraged by the recent focus of the U.S. administration on tax reform and believe this is a first step toward either movement on an infrastructure program or further trade action. While it is too early to tell how or when these policies may be put in place, we believe they should provide support to the continued growth of the U.S. economy,” Smith said.

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