Sims pivots shredded scrap sales to US market

: Metals
25/08/20

Metals recycler Sims Metal shifted a higher portion of ferrous scrap shipments to US steel mills and less to the seaborne market to take advantage of premium North American prices in its fiscal year ended in June.

Diverting scrap to the US domestic market and buying more unprocessed scrap from dealers to widen its margins are major parts of Sims' North American strategy, the company told analysts on its earnings call 19 August.

Its North American business sold about 40pc of its volumes into the domestic market in the year ended 30 June, up from about 30pc in the prior year. Sims is a major ferrous scrap exporter on the US east and west coasts. Still, export volumes industry-wide have been falling this year because of higher US prices.

Tariffs have supported the US market while elevated volumes of Chinese steel in the global market have kept a lid on scrap prices in the seaborne market.

Sims, based in Australia, has invested in rail and barge transport at its US operations to boost its ability to pivot to the US domestic market if scrap premiums continue to grow compared to Turkey and other major markets. The company is also exploring acquisitions in the US to build out its feeder yard system.

"Frankly, you've got a number of grandparents who have set up very good businesses, probably left school when they were 14 or 15," Mikkelsen said. "They're now in their 70s. Maybe the next generation isn't overly interested in taking it over."

Sims' trading margin in the US rose to 21pc in the year ended 30 June, up from 18pc the previous year. It attributed the uptick to buying more unprocessed scrap relative to processed material.

Sims' North America business sourced about 70pc of its volumes as unprocessed scrap in the year ended 30 June, up from around 60pc the previous year.

The company's total North American intake volumes fell by 6pc to 4.7mn metric tonnes (t) in the latest year. A harsh winter reduced flows in January and February, and Sims' emphasis on widening margins also reduced total volumes.

The North America unit's sales volumes fell by 5pc to 4.8mn t, while its revenue was flat at about A$4.5bn ($2.9bn). Sims' average ferrous sales price globally fell by 5.2pc to A$565/t.

Sims credited strong nonferrous markets for increasing its trading margin. Its nonferrous sales volumes rose by 12pc globally to 463,000t. Sims average nonferrous sales price rose by 3pc in the fiscal year to A$4,514/t compared to the previous 12 months.

Overall, Sims made a A$2.4mn profit in the year ended 30 June, up from A$1.8mn a year earlier.

SA Recycling

Sims' 50-50 joint venture, SA Recycling, also sold a higher portion of scrap to the US domestic market.

SA Recycling, which operates a bulk export dock in Long Beach, California, sold 5.4mn t of scrap in the fiscal year, up by 7pc from a year earlier. It shipped 75pc of volumes domestically, up from about 70pc the previous year.

Like Sims, nonferrous sales were a key driver of revenue in the fiscal year. Sims did not share SA Recycling's profit or loss figures. SA Recycling reported A$260mn in earnings before interest and tax, a 19pc increase from the previous fiscal year.

By James Marshall

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25/12/19

Chile to audit SQM-Codelco lithium deal

Sao Paulo, 19 December (Argus) — Chile's comptroller general office (CGR) will audit "certain operations associated with" the SQM-Codelco agreement to form a lithium production joint venture, following complaints by some of the country's parliamentarians and indigenous communities, further delaying the deal. CGR on 18 December said its scope is limited to verifying whether government actions follow the law and to audit public spending. The agency said that it is forbidden from judging whether a policy or administrative decision is a good idea or convenient. CGR does not have the power to veto the deal, because the main legal challenges to the agreement are either in court, where the watchdog has been ordered not to comment, have already been resolved by judges, or involve policy judgments that Chilean law does not allow CGR to review. As a result, its role is limited to reviewing the agreement for potential irregularities. It can flag legal inconsistencies and delay the deal's effective date until any identified issues are rectified. CGR's audit will focus on the state-owned company Codelco's financial advisory contract with investment bank Morgan Stanley, as well as Codelco's operations, to determine whether public resources are being used appropriately. The audit will also examine claims from a congressional investigative commission regarding the transparency of the negotiation process, SQM's tax situation, and a clause that relates to Codelco's obligation to sell 100pc of extracted potassium to SQM under the partnership. The Atacama desert's brines, from which the joint venture will produce lithium, contain potassium that is precipitated and extracted alongside lithium. Additionally, CGR will review whether the companies' directors acted lawfully and examine Chile's economic development agency Corfo's approval of the contracts that underpin the partnership. These include Corfo's contracts with SQM, which allow lithium extraction in the Atacama salt flats through December 31, 2030, and its contracts with Codelco's lithium subsidiary Minera Tarar, which enables operations at the site from 2031 to 2060. Corfo's mining lease and project contracts are a key legal step in allowing Codelco to partner with a private company — SQM, in this case — to mine lithium in that area under the national lithium strategy of President Gabriel Boric, who leaves office in March. Although the SQM-Codelco agreement , which was struck in May 2024 and would extend SQM's authorization to continue extracting lithium in the Atacama salt flats from January 2031 to 31 December 2060, does not have a hard deadline to close, it is still running against the clock. If the deal is not sealed by 31 December 2025, a contract clause in the partnership agreement allows any party to void the deal if they so choose. If this deadline is not met, Chile would also reduce SQM's lithium extraction quota by 300,000 metric tonnes of lithium carbonate equivalent for the remaining period until 31 December 2030, when the company's current mining permit ends. The joint-venture also faces opposition from Chile's newly elected president Jose Antonio Kast . The far-right politician said he would honor the deal if it is sealed before he takes office, but risk of an overturn would grow if that condition is not met before he is sworn in on 11 March 2026. By Pedro Consoli Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Mexico central bank cuts target rate to 7pc

25/12/19

Mexico central bank cuts target rate to 7pc

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Viewpoint: Al industry faces structural Europe decline

25/12/19

Viewpoint: Al industry faces structural Europe decline

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Viewpoint: Indonesia’s MHP surge to hit nickel prices

25/12/19

Viewpoint: Indonesia’s MHP surge to hit nickel prices

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US inflation slows to 2.7pc in November

25/12/18

US inflation slows to 2.7pc in November

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