Steelmaker CMC reported tepid current rebar demand, as demand supported by federally-funded construction of infrastructure works, data centers and institutional buildings faces easing activity in multifamily residential and commercial construction.
CMC said that construction activity and rebar demand were above historic levels in the latest quarter, but that shipments levelled off as the markets waits for "the next round" of non-residential construction amid an inflationary environment.
The trend is expected to be "transitory," executives said in an earnings report, ahead of CHIPS Act allocations making their way into the market and the expectation of interest rates easing. CMC added that the US is facing a housing shortage of 1.5-3mn units, which will "need to be addressed" and that each unit would require 1-1.5 short tons (st) of rebar.
Federally-funded highways, too, are entering the construction phase, bolstering the long-term outlook for rebar demand. CMC itself had increased ex-mill and fabricated shipments to the highway construction sector in the quarter.
Analysts, however, questioned the forecast strength of the market, with one positing that pricing indicators — rising scrap and long products prices — were not being seen in the current market. Still, bidding activity was reported to be on the upswing, especially in Texas, CMC said. Chief financial officer Paul Lawrence estimated capital expenditures would rise to between $600-650mn in 2025 as a result of ramp ups of new mills and meeting increased demand. Chief executive Peter Matt added that scrap may be nearing a price floor as reduced inflow reflect a willingness to sell.
Demand in the quarter ended 31 May was pressured by "historically high" levels of rain, but had a seasonal uplift as the spring and summer construction seasons started. CMC shipped 520,000st of rebar in the quarter, down from 539,000st in the same quarter last year. Fundamentals were balanced in the quarter as seasonal consumption reduced excess inventory in some regions. Downstream backlog volumes were also steady.
Ramp up of CMC's 500,000st/yr Arizona 2 rebar and merchant bar quality steel (MBQ) mill is ongoing, the company said, and is transitioning into MBQ production. The foundations at CMC's 500,000 st/yr rebar mill in Berkeley County, West Virginia are nearly complete and start up is expected in late 2025.
CMC posted a $119.44mn profit in the quarter, down from $234mn in the same quarter of 2023.
