Commercial Metals Company

Commercial Metals Company

7800 Stemmons Freeway
Dallas, Texas 75247
U.S.A.
(214) 689-4300
Fax: (214) 689-4320

Public Company
Incorporated: 1946
Employees: 6,272
Sales: $2.10 billion (1995)
Stock Exchanges: New York
SICs: 3341 Secondary Nonferrous Metals; 3351 Copper Rolling & Drawing; 5093 Scrap & Waste Materials

One of the largest scrap processors in the United States, Commercial Metals Company recycles, manufactures, trades, and markets steel and metal products through more than 90 worldwide locations. During the mid-1990s, Commercial Metals operated more than 30 scrap yards and processing plants in the southern and southwestern United States, where the company began collecting and selling scrap metal in 1915. During the 1960s, Commercial Metals entered the manufacturing side of the scrap metal business, amassing four steel mini-mills by the 1990s. In addition to its domestic processing and manufacturing operations, the company was supported by a network of worldwide trading operations.

The resurgence of the U. S. economy following the conclusion of the Second World War obliterated any lingering affects of the country’s decade-long, financial free fall during the 1930s, invigorating businesses and industries across the nation. For the decades to follow, a general and wide-sweeping era of prosperity reigned, increasing the magnitude of the country’s major industries and engendering the rise of subsidiary, or minor, industries to levels of importance and worth substantially higher than during the first half of the 20th century.

Among other major industries in the United States, the metals industry achieved robust growth during the post-war era, strengthened by an increasing demand for metals as manufacturers labored to produce larger quantities of consumer and industrial products. As the country’s metals needs mounted, the metals industry was propelled forward, recording growth that closely paralleled the growth of the U.S. population following the war, but as the need for metals increased, the primary reserves of metallic ores dwindled, a natural effect of ravenous demand that dramatically altered the stature of the country’s scrap metals industry. For decades, scrap metals companies had represented a largely insignificant segment of the broad-based metals industry, earning little compared to the manufacturers of virgin metal and suffering from the opprobrious image as junkyard peddlers. All this changed when soaring metals demand threatened to deplete ore reserves and technological advancements lowered the processing costs associated with converting scrap metals into “new” metals. Long the shunned stepchildren of the metals industry, scrap metals companies underwent a significant transformation, becoming integral contributors to annual production volume and, along the way, garnering a greater share of the revenues generated by the metals industry as a whole. By purchasing scrap metals from small individual dealers, salvage firms, manufacturing facilities, refineries, automobile wreckers, and other sources, and then processing the materials through giant presses, power shears, or shredders, scrap metal companies became essential suppliers of recycled metals to primary metals processors, carving a lasting position for themselves within the metals industry.

Such was the case for Commercial Metals, a scrap metals company that struggled to survive during its early years, then blossomed into one of the largest companies of its kind during the halcyon years following the Second World War. The company’s historical roots stretch back to 1915, when Moses Feldman started a scrap metals company named American Iron & Metal Company. Feldman, who emigrated from Russia and settled in Houston ten years before he founded American Iron & Metal, superintended his company’s growth during its early years, then was joined by son, Jacob Feldman, who eventually would take control of the company. The younger Feldman joined the family business after he graduated from Southern Methodist University and in 1932, with the help of family members, formed a brokerage house in Dallas named Commercial Metals Company to buttress the family’s scrap operations. In 1946, the two family-owned operations were incorporated, just as the scrap metals industry as a whole began to burgeon, with the combined company’s first acquisition occurring seven years later, when Jacob Feldman negotiated the purchase of the Charles Harley Company, a California-based scrap metals processor founded in 1856.

By the beginning of the 1960s, nearly five decades of operation had built a roughly $50 million company, one that was ready to take on the trappings characterizing Commercial Metals during the 1990s. In 1960, ownership of Commercial Metals changed from private to public hands when the company became the first independent metals firm to be listed on the American Stock Exchange. The switch to public ownership ushered in a period of diversification and expansion, touching off the first definitive surge of growth recorded by the company.

Entering the decade, Commercial Metals’ scrap business was thriving, educing Jacob Feldman to diversify the company’s interests and branch into manufacturing. During the 1960s, Feldman orchestrated the acquisition of a small steel manufacturer, a copper fabricator, and then later he started another steel mini-mill, making Commercial Metals one of the few scrap metals companies to operate its own steel mills. The broadening of the company’s interests began in 1963, when Commercial Metals acquired 74 percent interest in Structural Metals, Inc. Located in Seguin, Texas, near San Antonio, Structural Metals operated an electric furnace steel mill that provided Commercial Metals with a new source of sales and increased the company’s market for its own processed raw materials. The remaining percentage of Structural Metals, which constituted Commercial Metals’ largest operating division during the 1990s, was purchased between 1963 and 1969, pushing the company’s sales upward as more and more of the electric furnace steel mill came under Commercial Metals’ ownership. Annual sales swelled from slightly less than $60 million in 1963 to nearly $150 million four years later, while the company’s net income leaped from just under $600,000 to $1.85 million during the four-year period.

The acquisition of Structural Metals provided a significant boost to Commercial Metals’ standing in the scrap metals industry, distinguishing it as a model for other scrap metals companies to emulate as they too diversified into the manufacturing side of the business, but the financial growth recorded during the 1960s was also fueled by the company’s accomplishments overseas. During the years bridging the conclusion of the Second World War and the completion of the Structural Metals acquisition, Commercial Metals had extended its corporate reach overseas, establishing metals trading offices in key foreign markets. By the late 1960s, Commercial Metals ranked as the largest single exporter of ferrous scrap metals in the United States and one of the largest competitors in the metals industry in the world, deriving nearly half of its annual sales from abroad, particularly from Japan and Mexico, the company’s two largest export markets. Its sixth international office was opened at the end of 1967 in Zug, Switzerland, complementing the company’s other trading offices in Amsterdam, Tokyo, Taipei, Montreal, and Mexico City. In total, the growing Commercial Metals empire comprised 32 plants and offices in the United States and abroad by the late 1960s, positioning it as a major competitor in what was becoming an increasingly important and lucrative global industry.

The company continued to expand its international network as it entered the 1970s, recording financial growth as its foreign offices solidified their position in respective overseas markets. In 1970, three years into its program to foster trade in Central and Latin American countries, Commercial Metals generated nearly $290 million in sales and earned nearly $6.5 million in net income, the product of the company’s resolute expansion during the 1960s. As the decade began, Commercial Metals was obtaining half of its annual sales and 40 percent of its profits from direct trading operations, while, comparatively, the company was deriving a third of it sales volume from the processing of secondary metals, nine percent from manufacturing operations, and the balance from the production of semi-finished products and other metals-related businesses.

By virtue of its success as a broker, manufacturer, and processor of scrap metals, Commercial Metals soared to the top of its industry, ranking as one of the largest independent companies on the country, but after the encouraging results of 1970, Jacob Feldman suffered a coronary and the company’s financial health likewise deteriorated. Though Feldman remained titular head of the company following his coronary in 1971, Charlie Merritt, who joined Commercial Metals in 1937 as a stenographer, essentially assumed control of the company, taking responsibility for its day-to-day operation. Under Merritt’s stewardship, Commercial Metals’ financial growth came to an abrupt halt, but the blame did not rest on Merritt’s shoulders. A nationwide recession and laggard demand overseas combined to hamper Commercial Metals’ growth, curtailing production volume at its 22 scrap processing plants and diminishing its scrap metals trading activities. Annual sales declined as a result, plunging from $287 million in 1970 to $207 million in 1971, then slipped again the following year, falling to $200 million.

Despite the retrogressive financial slide, Commercial Metals continued to be regarded as one of the largest independent worldwide processors and brokers of secondary metals, so when national economic conditions rallied and ferrous scrap prices rose to as high as $100 a ton, the company benefitted commensurately. Annual sales eclipsed $320 million in 1973, then nearly doubled the following year, reaching $643 million, while earnings nearly quadrupled, soaring to more than $19 million.

Once the company’s financial health was restored, it diversified into new areas and into new metals. Commercial Metals expanded its vital trading business into commodities such as coal, then bolstered its core businesses when it acquired part interest in two companies in 1976, Corpus Christi, Texas-based General Export Iron and Metals Company and Mobile, Alabama-based Pinto Island Metals Company.

Entering the 1980s, the company was once again subjected to recessionary economic conditions, its financial health drained by the pernicious affects of an anemic economy. Like a decade earlier, however, the passing of time healed all wounds. When the economy recovered, Commercial Metals resumed its strategy of controlled growth and strengthening its core businesses. In 1984, the company acquired Connors Steel Co.’s mini-mill in Birmingham, Alabama. Next, the company acquired Galveston, Texas-based Island City Iron & Supply Inc. in January 1984, then purchased two additional companies, Newell Recycling Co. and Richelson Iron and Metal, later in 1984.

The following year, 1985, marked Commercial Metals’ 70th year of business, a milestone that marked the passing of two world wars and numerous economic hills and valleys since Moses Feldman had arrived in Galveston and founded American Iron & Metals Company. Over the course of seven decades, Commercial Metals had evolved into an internationally recognized firm, involved in three main metals-related businesses through the manufacturing and fabrication of steel products and copper tubing, the recycling of ferrous and non-ferrous scrap metals, and the marketing and trading of metals products and raw materials. As the company moved past its anniversary year, it endeavored to augment its core businesses, acquiring Industrial Salvage in Corpus Christi in 1988, two scrap metal yards in Victoria, Texas in 1989, and the processing operations belonging to three Florida-based and one Tennessee-based companies in 1990.

The new decade brought the familiar refrain of economic malaise in the United States, but Commercial Metals emerged from the recessive early 1990s with dynamic vigor, its recovery engendered by the gradual recovery of the economy and the strides gained by steel mini-mills. Mini-mills such as Nucor Corporation and Birmingham Steel Corporation relied heavily on scrap steel to feed their manufacturing facilities, a dependence that buoyed the price of scrap and fueled Commercial Metals’ resurgence. During the 1980s, mini-mills began to wrest away market share from large steel corporations, increasing their share of total steel production in the country from 25 percent to 35 percent. As mini-mills grew in stature, producing increasingly greater amounts of the nation’s steel output, the price of scrap rose as demand increased, providing Commercial Metals with a much needed boost to its business. Once economic conditions regained their pre-recessionary vitality, Commercial Metals began to realize the financial benefits accrued from the burgeoning mini-mill industry. During the first nine months of 1993, the company’s revenues increased 44 percent, while its profits exploded exponentially, jumping a prodigious 135 percent.

With scrap prices remaining at enviable levels, Commercial Metals moved to expand its operations in 1994. In August, the company acquired Jacksonville, Florida-based Tri-State Recycling Corporation, then at the end of the year completed its acquisition of Columbia, South Carolina-based Owen Steel Co. Inc. for $50 million. The addition of Owen Steel, which was renamed SMI-Owen Steel Co. Inc. and absorbed by Commercial Metals’ largest manufacturing division, Commercial Metals Steel Group, increased annual steel production capacity to more than 1.7 million tons and raised steel fabrication capacity to more than 500,000 tons.

As Commercial Metals entered the mid-1990s and prepared for the remainder of the 1990s, its expectations for future growth were optimistic, predicated on the anticipated increasing demand for scrap metals and its own stalwart position within the industry as a diversified secondary metals processor, broker, and manufacturer. Lending credence to the company’s confidence in achieving sustained growth, sales increased strongly in 1995, climbing from $1.65 billion to $2.10 billion. More encouraging, the company’s earnings ballooned between 1994 and 1995, soaring 44 percent to $38.2 million. As these financial records were being achieved, the company strengthened its processing capabilities further, acquiring the assets of three Texas scrap processing facilities, Atlas Iron & Metal, Federal Iron & Metal, and Laredo Scrap Metals, in September 1995, then began charting plans for the future, intent on building the business first developed by Moses Feldman in 1915.

Principal Operating Units

CMC Steel Group; Steel Fabrication and Warehousing; Concrete Related Products Warehousing; Industrial Products; Scrap Processing; Copper Tube Manufacturing; Secondary Metals Processing; Railroad Salvage

Principal Subsidiaries

CMC (Australia) Pty. Ltd.; CMC Commercio de Metias, Ltda. (Brazil); CMC Concrete Accessories, Inc. (90%); CMC Fareast Ltd. (Hong Kong); CMC Finanz A.G. (Switzerland); CMC Information Systems, Inc.; CMC International (S.E. Asia) Pte. Ltd. (Singapore); CMC Oil Co.; CMC Process Products. Inc.; CMC Steel Holding Co.; CMC Steel Fabricators, Inc.; CMC Trading AG (Switzerland); CSC Engineering, Inc.; Cometáis (Canada), Ltee.; Cometáis China, Inc.; Cometáis Far East, Inc.; Cometáis, Inc.; Cometáis International, S.A. (Belgium); Commercial Metals - Austin Inc.; Commercial Metals Company, Holding A.G. (Switzerland); Commercial Metals Overseas Export Co.; Commercial Metals Overseas Export (FSC) Corp.; Commercial Metals Railroad Salvage Co.; Commercial Metals SF/JV Co.; Commonwealth Metal Corp.; Daltrading Ltd. (Switzerland); Enterprise Metal Corp.; Howell Metal Co.; Mini-Mill Consultants, Inc.; Regency Advertising Agency, Inc.; SMI Steel Inc.; Structural Metals, Inc.; Zenith Finance & Construction Co.

Further Reading

“Commercial Metals Sees Sales Increase as Economy Improves,” American Metal Market, June 30, 1993, p. 3.

“Commercial, Owen Deal Complete,” American Metal Market, December 2, 1994, p. 3.

Goodfriend, Martin I., “Commercial Metals Co.,” Wall Street Transcript, December 18, 1972, p. 31,190.

Goodwin, Morgan E., “CMC Acquires Three Scrap Yards in Texas,” American Metal Market, September 4, 1995, p. 8.

Haflich, Frank, “CMC Expands Global Market,” American Metal Market, August 30, 1990, p. 2.

Lawton, Clark, “Commercial Metals Expands and Diversifies to Process Scrap Metals for World Markets,” Investment Dealers’ Digest, August 5, 1968, p. 51.

Lubove, Seth, “Golden Grunge,” Forbes, August 2, 1993, p. 103.

Rabin, Stanley, “Commercial Metals Looks Ahead,” American Metal Market, May 18, 1988, p. 19.

“Scrap Is Beautiful,” Forbes, May 1, 1975, p.26.

Sherman, Joseph V., “Sophisticated Scrap,” Barron’s, December 4, 1967, p. 3.

Willat, Norris, “More Than Warehouses,” Barron’s, April 27, 1964, p. 5.

Worden, Edward, “CMC Zeroing in on Steel Market,” American Metal Market, April 15, 1988, p. 4.

—Jeffrey L. Covell