Commercial Metal Company (CMC) is one of the corporations that engage sin the manufacture, marketing and trading of steel and metal products. The company as swell as its subsidiaries are engage din recycling of steel products with the corporation operating over 150 plants not only in the U.S. bit also in the global context. In addition, the company operates more than 43 scrap metal recycling facilities, five steel mills and one scarp metal shredder facility. The company engages in a lot of activities such as steel fabrication, scrap metal recycling and the manufacture of steel products. Its headquarters are located in Irving in Texas, the US. However, the company operates in Europe, US, Asia and New Zealand among other countries.
In the wake of renewed fears of another economic meltdown, major corporations are experiencing huge loses with respect to the operating capital in comparison with their gross profit. In this view, CMC is not an exemption having reported a net loss of $120.3 million or $1.04 per diluted share on net sales of $2.3 billion for the fourth quarter ended August 31, 2011(SOURCE Commercial Metals Company)
However, the company I looking to initiate developments that could impact on the company’s expectations of the economic recover capability. In addition, emerging trends in the steel and metal industry is impacting heavily on the ability of the company to initiate strategic programs that will hence a positive impact on the company’s financial outlook. One of the most affected segments of the company is the one dealing with fabricated steel. This is going by the fact that the Americas Fabrication segment continues to be affected by an overall difficult market for fabricated steel. The company reported adjusted operation loss of $42.8 million inclusive of restructuring charges.
One of the initiatives being considered by the company is to build huge warehouses near the CMC mills. This is intended to store scarp steel in the sense that the company will be buying the steel when the price is low and selling the same steel when prices go up. Each site will have a capability of storing 500,000 tones of scrap steel. In view of this, the short tem impact of this initiative is that despite the fact that the company will have increased production cost, it will be able to hedge down its restructuring charges that arise from the unpredictable nature of the steel market. This initiative would have a long term effect in the industry in that stable prices would drive up the demand hence contributing to the overall predictability of the company in a global context. In the world today, the emerging trend in the steel industry is that most companies are aiming at recycling the existing products as compared to the continued production of steel and metallic products. The Building of new warehouses that will store scrap steel will enhance the business outlook of the company by strengthening the competitive position of the company. This is the reason why this is the best approach that the company can take in order to stay in line with the highly competitive a relatively unpredictable steel industry.
The other proposal is that the company builds a steel mill in India of the same size that will oversee the scaling down of the current sequin facility in India. The intention of this is that the company will be able to relatively scale down the current sequin facility in its overall strategic plan to scale down all sequin facilities under the company. However, here is inherent risk and uncertainty in any foreign country hence the operating cost of such an initiative would require a lot of technical, legal and economic evaluation. Looking on the bigger picture, delivery of the company’s operations in India may be limited in availability and difficult to purchase at competitive prices.