Insteel reports Q3 loss but sees prices bottoming

US wire producer Insteel Industries reported a net loss for its third fiscal quarter, though president and CEO H.O. Woltz commented that prices for its products “appear to have bottomed out.”

The company's net loss for its third fiscal quarter ended June 27 totaled $1.7 million, compared to a profit of $16.9 million a year ago. Net sales declined by 45 percent in this year's Q3 compared to last year, while shipments fell 29 percent and selling prices dropped 23 percent. The company's overall capacity utilization for the quarter dropped to 42 percent from 67 percent in the same period last year.

Insteel said its financial results for the third quarter were unfavorably impacted by the reductions in shipments and selling prices, the consumption of higher cost inventory purchased prior to the collapse in steel prices during the current fiscal year and the escalation in unit conversion costs resulting from reduced operating schedules. Furthermore, the company said that selling prices and margins for one of its primary products, prestressed concrete strand (PC strand), continued to be adversely affected by “exorbitantly low-priced” imports from China.

Commenting on the outlook for its products and markets going forward, Mr. Woltz said, “Prices for our products as well as for wire rod appear to have bottomed out following the extended downturn that began last September. In view of the recent up-tick in scrap prices and announced closures of two US mills representing over 20 percent of domestic capacity, we expect that wire rod prices will rise in the coming months, although the magnitude of the increase and the impact on the prices for our products are uncertain at this time.”

Speaking specifically to the threat from China to its PC strand business and the US government's ongoing trade investigations of Chinese PC strand, Woltz commented, “The tactics employed by the Chinese to undersell domestic producers have severely impacted Insteel's shipping volumes and selling prices, resulting in significant margin erosion. The trade cases are intended to level the competitive playing field and ensure that all competitors are adhering to US trade laws. We believe that our manufacturing costs for PC strand compare favorably with any other producer, domestic or foreign."

On July 10, 2009, the US International Trade Commission (ITC) reached a preliminary determination that imports of PC strand from China threatened to injure the domestic PC strand industry. The entire investigative process is anticipated to take one year, with the final determinations of injury, dumping and subsidies expected to occur in mid-2010. Insteel says that while PC strand imports as reflected in recent government statistics have declined, the market continues to be adversely affected by unsold quantities of strand that entered the US during the last half of 2008.