Commercial Metals Bolsters Holdings of a Construction Steel
02 Janeiro 2018 - 6:08PM
Dow Jones News
By Bob Tita
Texas-based Commercial Metals Co. said Tuesday it plans to
acquire assets from a Brazilian rival that would double its share
of a key construction material.
The company plans to pay $600 million in cash for the U.S.
steel-reinforcing-bar assets of Brazil's Gerdau SA, adding four
mills and 33 fabrication plants.
Gerdau's exit from the U.S. rebar market would leave Commercial
Metals and North Carolina-based Nucor Corp. as the two dominant
domestic suppliers of rebar, which is used to strengthen concrete
used for commercial buildings, bridges and road projects.
Analysts said the move could further reduce pricing pressure
from lower-cost imports. Rebar imports were on pace to drop 17% in
2017 compared with a year earlier, according to the Commerce
Department. Tariffs and higher prices for the scrap steel used to
make it discourage foreign producers from selling rebar in the U.S.
at discounted prices.
The proposed deal would increase Commercial Metals' steel-making
capacity by about 60% to 7.2 million tons a year. Its share of
rebar consumed in the U.S. would rise to about 40% a year from
about 21% now, analysts at Jefferies estimated.
"This acquisition represents a unique opportunity to acquire
quality assets," Commercial Metals Chief Executive Barbara Smith
said during a call with analysts. "Having the larger footprint and
a larger geographic presence gives us all sorts of options."
Domestic rebar producers are aiming to add production closer to
where rebar is used to reduce transportation and warehousing
expenses.
Commercial Metals, based in the Dallas suburb of Irving, is
counting on an improving rebar market to support its investment in
the Gerdau plants.
The company and Nucor are both building new mills in
anticipation of rising demand for rebar from expanding construction
activity in the U.S. this year. Analysts said the rebar market
would further benefit from a comprehensive U.S. infrastructure
program being discussed by the Trump administration.
Profits from the rebar have been lackluster in recent years as a
rising volumes of low-cost foreign rebar drove down prices in the
U.S. Ms. Smith said Gerdau's plants have been operating well below
their maximum production rate. "Margins have been quite
compressed," she said.
Commercial Metals shares rose almost 10% in early trading and
were recently up 7.7% at $22.95.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
January 02, 2018 14:53 ET (19:53 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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