Commercial Metals Company (CMC) expects its finished steel sales volumes in North America and Europe to adhere to seasonal trends in Q2 2021 (ending February 28, 2021), which is the lowest quarter in the year.
Steel product shipments are expected to rise due to the construction backlog in North America. The current demand is also being supported by recent trends in industrial and residential construction, CMC indicated in its Q1 2021 earnings announcement.
In the first quarter of 2021 (ended November 30, 2020), 85.9pc of CMC’s net sales came from the North American market with Europe constituting the remaining 14.1pc. The higher domestic scrap costs in late 2020 and early 2021 may affect the company’s margins in Q2, although it has sought to increase consumer prices on rebar and merchant mill products in tandem to support an adequate earnings margin.
CMC’s steel shipments totaled 1.1mn nt (1mn mt) in Q1 FY2021, up 9.5pc from 1mn nt in the year-ago quarter. Its North America shipments increased by 5.4pc to 750,000nt in Q1 from 711,000nt in the same year-ago quarter. Of the total shipments, rebar made up 64.8pc of steel products and merchant steel goods 35.2pc.
Downstream product shipments declined by 10.2pc to 371,000nt against 413,000nt while raw materials shipments rose by 3.1pc to 330,000nt in the same period. Against Q4 FY2020, steel product shipments in North America increased by 2.5pc but downstream steel products declined by 13.5pc.
In Europe, steel product shipments increased by 17.5pc to 397,000nt in Q1 FY2021 against the year-ago quarter with rebar constituting 32pc of European steel sales shipments and merchant longs 67.7pc.
CMC’s average selling price of raw materials in North America climbed by 15.2pc to $630/nt in Q1 FY2021 on an annual basis, while steel and downstream products slipped by 2.2pc and 4.3pc to $612/nt and $934/nt, respectively.
The cost of raw materials per ton rose by 16.8pc in Q1 FY2021 against the year-ago quarter as the cost of ferrous scrap utilized in production per ton increased by 17.7pc in the same period under comparison. Steel products’ metal margin narrowed by 13.5pc to $346/nt during the same period.
Steel products’ selling price in Europe remained unchanged at $461/nt in Q1 FY21 against the same quarter a year ago. The price for ferrous scrap increased by 7.4pc to $262/nt in Q1 FY2021 against the same year-ago quarter and the steel products metal margin narrowed by 8.3pc to $199/nt during the same timeframe.
In terms of value, CMC’s sales were flat at $1.4bn in Q1 FY2021 from a year ago, while its earnings during the quarter declined by 22.8pc to $63.9mn from $82.8mn during the same period. The company’s EBITDA declined by 10.9pc to $155.6mn after achieving the lowest mill conversion cost per ton in the last two years. The period reflected lower margins over scrap costs for steel products. The added costs were partially offset by cost improvements in all aspects of the vertically integrated value chain, the company noted.