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Why It’s Important To Understand CMC’s Distribution Business

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CMC’s distribution business

The M&D (marketing and distribution) sector of Commercial Metals Company (CMC) is an integral part of the company’s business, just like steel production is. This sector distributes steel, chemicals, ferroalloys, and other industrial products.

M&D operates a service center in the United Kingdom, a processing center in the US, and trading offices globally. There was also a service center in Australia, but it has closed down and operations have been put under sale.

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CMC’s operations

CMC serves as a global marketing channel for metal producers and fabricators. The chart above shows the company’s M&D business, which serves end users in energy, construction, agriculture, and manufacturing.

Asia acts as a sourcing hub for CMC. As the chart shows, the company sources steel and other raw materials from China and then sells them in Europe and the Americas. CMC markets steel and raw materials in Asia as well.

CMC’s well-connected network

A strategically located and well-connected network helps CMC to act as a nodal point between steel producers and consumers. The company is able to source steel and other raw materials from low-cost destinations like China and sell these products in the US. There is a significant difference between steel prices in China and the US.

Higher levels of steel imports have harmed US steelmakers like ArcelorMittal (MT), AK Steel (AKS), and US Steel Corporation (X). The SPDR S&P Metals and Mining ETF (XME) seeks to build a diversified portfolio of these companies.

One may argue that CMC benefits from importing steel products to the US. However, CMC’s US-based steel mills are at the receiving end of these imports. We will discuss this in detail later, but first, let’s analyze how lower crude oil prices are affecting CMC.

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