Healthy construction, fewer imports boost CMC

Long products producer Commercial Metals (CMC) remains bullish on US construction demand after growing steel shipments by 15pc in its fourth quarter.

"Our outlook for the coming months remains very positive as we believe the current demand for construction steel will be sustained," CMC chief executive Barbara Smith said in the earnings release.

CMC is also benefiting from reduced competition from foreign producers in the wake of the 25pc tariff on imported steel imposed by the Trump administration in March. US rebar imports fell by 18pc through August to 956,808st.

The Irving, Texas company, which operates mills in the US and Poland, shipped 841,000st of steel from its US mills in its fourth quarter ended 31 August, up from 710,000st in the same quarter a year earlier. Rebar shipments rose by 8pc to 482,000st, while shipments of merchant bar and other products rose by 35pc to 359,000st.

The increase on the year was partially driven by the ramp-up of CMC's Durant, Oklahoma, micro mill, which began producing rebar in the spring.

The average selling price across all of its Americas steel products rose by $137/st to $674/st on the quarter. The scrap-based producer's average ferrous scrap input cost rose by $69/st by comparison, pushing metal margin up by $68/st from the prior year to $348/st.

Higher metal margins helped more than double earnings in CMC's Americas mills to $107mn from the same quarter a year earlier.

Strong finished steel demand also boosted ferrous volume and prices in CMC's US recycling segment. Shipments of ferrous scrap rose to 644,000st at $298/st from 583,000st at $255/st. Non-ferrous shipments were little changed at 138mn lbs as selling prices ticked up to $2,155/st from $2,134/st.

Americas recycling segment earnings rose to $17mn from $9mn.

The company's international mill segment in Poland also benefited from healthy long products demand. Fourth-quarter rebar shipments rose to 145,000st from 129,000st in the prior-year period, while shipments of merchant bar and other products increased to 289,000st from 266,000st.

The average selling price across CMC's steel products in Poland rose by $79/st to $555/st, while ferrous scrap input costs rose by $36/st to $305/st. This pushed metal margin up by $43/st to $250/st, which helped drive international mill segment earnings up to $37mn from $22mn.

Fabrication segment volume also rose along with selling prices. The segment shipped 307,000st at $843/st, up from 286,000st at $773/st. But higher steel costs drove a loss of $25mn in the segment from a $1mn profit a year earlier.

Across all segments, CMC swung to a profit of $52mn on sales of $1.3bn in the quarter, up from a loss of $30mn on sales of $1.1bn in the same period a year earlier.

The company in the full fiscal year recorded its best results since the great recession. Profit rose to $139mn on sales of $4.6bn in fiscal 2018, up from profit of $46mn on sales of $3.8bn in the prior year.

Steel mill shipments in the US rose by 11pc to 3mn st for the year on higher shipments across its long product offerings. Ferrous scrap shipments in the US were up by 22pc at 2.4mn, while non-ferrous scrap shipments rose by 12pc to 526mn lbs.