Structural Metals, Inc. has suffered failure of the primary and principal backup electric arc furnace transformers at its Seguin, Texas, facility (SMI Texas).

SMI Texas has installed a second replacement transformer which is now in service, allowing the meltshop to return to production. However, because of this transformer's lower electrical capacity, meltshop production will likely be reduced 15 to 25% compared to prior production levels. In order to continue SMI Texas' rolling mill production at near existing levels while the replacement transformer is operating, SMI Texas will roll billets from other CMC owned minimills and will also purchase billets from unrelated parties. In addition, finished steel products—principally reinforcing bar—will likely be purchased as needed from unrelated parties to supply SMI Texas' customers.

Company engineers and consultants are continuing to evaluate the cause for the transformer failures. While difficult to predict at this time, it is anticipated that the primary transformer could be repaired and returned to full service in as short a period as one to two months. However, if a complete rebuild of the transformer is required, it could be approximately four to six months before it is returned to service.

CMC Chairman, President and CEO Stanley A. Rabin stated, "We are confident that our team of engineers and operators will be able to return the meltshop to full production within a reasonable time given these difficult circumstances. Nonetheless, the curtailment will reduce operating results for SMI Texas during our fourth quarter and possibly beyond. We will likely not recognize the income from the business interruption insurance recovery until such time as the claim is submitted and reimbursement by the insurance company considered probable. Although it is unfortunate that this outage has occurred during a period of peak demand, customers of SMI Texas should continue to receive adequate and timely deliveries of steel products."

SMI Texas is a Commercial Metals Co. facility. Commercial Metals Co. and subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel minimills, steel fabrication and processing plants, construction-related product warehouses, a copper tube mill, metal recycling facilities and marketing and distribution offices in the United States and in strategic overseas markets.