Global recycler Sims Metal Management expects its geographic diversity and global trading platform to enable the company to manage "short-term" challenges presented by Turkey and China.
"The recent doubling of tariffs by the US on Turkey's steel and aluminum exports to the US is a manageable, short-term issue," Sims chief executive Alistair Field said today. "Global trade flows for scrap will adjust to the new environment and the expected medium-term impact from this doubling of tariffs is presently not considered material."
The Australia-based company has diversified its exports to include 18 different countries, though Turkey remains the primary destination.
Sims has seen downward pressure on scrap prices as Turkish mills export more steel at lower prices in response to reduced demand in Turkey's domestic market. But "presently I think the international ferrous market is essentially at a bottom; if not we're very close to a bottom," president of global trade William Schmiedel said.
The company struck a bullish tone on China as US exports to the country plummet in response to China imposing 25pc tariffs on most scrap imports from the US and greatly increasing its scrutiny of US shipments.
"While these events created a lot of noise in the market, there was limited impact on our business [in fiscal 2018]," Field said.
Sims sees China's demand for higher-value, smelter-ready non-ferrous metals as a long-term opportunity to leverage its investments in shredder downstream recovery equipment to boost margins while meeting China's enhanced scrap import quality restrictions.
Zorba is expected to drop to 7pc of Sims' non-ferrous shipments in the coming fiscal year from 15pc in fiscal 2018 as the company doubles its production of disaggregated, smelter-ready metals. The remaining zorba is high-quality material produced in Australia that is sold to China, the company said.
The company has also looked to other markets to move US material previously shipped to China, including Malaysia, Thailand, India and Europe. Sims has also grown its position in Japan and South Korea.
"It's just a matter of where it's being shipped, not the ability to sell it," Schmiedel said.
Sims' North American scrap shipments ticked up to 4.9mn t in the 12 months ended in June from 4.3mn t in the same year-earlier period as export sales rose by 35pc. Shipment volumes exclude divested operations and third-party brokerage sales.
Intake volumes at Sims' US yards improved by over 20pc as higher buying prices triggered stronger collection activity.
Higher shipments and selling prices for ferrous and non-ferrous material helped propel North American earnings before interest and taxes (Ebit) up to A$80mn ($62mn) from A$46mn as higher metal prices boosted metal spreads.
The company's US-based SA Recycling joint venture, reported separately, shipped 31pc more scrap at 3.3mn t from its operations in the southeast and on the west coast, boosting Ebit to A$69mn from A$26mn a year earlier. SA's acquisition of Tennessee Valley Recycling in November 2017 helped lift shipments and profit on the year in addition to stronger export demand from Asia.
Shipments from Sims' Australia and New Zealand segment were little changed at 1.7mn t, while European segment shipments ticked up to 1.7mn t from 1.6mn t.
Improved metal margins in Australia and New Zealand lifted Ebit up to A$83mn from A$63mn. But Ebit in Europe fell to A$20mn from A$35mn as strong competition in the UK drove a decline in metal margins, offsetting higher sales volumes.
Still, Field highlighted the company's acquisition of north England-based Morley Waste as a "good acquisition in a good spot for us," calling the shredder "one of the finest [he has] ever seen." Field also said that Sims is interested in exploring one or more of the five sites that fellow UK recycler European Metal Recycling (EMR) will be liquidating on a mandate from the UK Competition and Markets Authority following its 2017 takeover of Metal and Waste Recycling.
Ferrous volumes across the group rose to 7.7mn t, adjusted to exclude divested operations and third-party brokerage sales.
Shred accounted for 35pc of its total shipment volume across the group, with "other" ferrous shipments, including cut grades, prime and other grades, accounted for the largest share of volume at 42pc.
Non-ferrous shipments across the group were unchanged at 430,000t.
Zorba accounted for 15pc of non-ferrous shipments, while twitch made up 9pc. The company in August 2017 commenced operations of its new downstream separation plant at its Jersey City, New Jersey, shredder facility, which allows Sims to produce twitch (shredded aluminum) and heavies packages (shredded copper, brass, stainless and other metals) from a mixed-metals zorba package. The company plans to process 100pc of the zorba it generates in the US by next year after it commences operations at two new plants at its Norfolk, Virginia, and Redwood City, California, shredder facilities.
Copper chops accounted for 4pc of non-ferrous shipments, with insulated copper wire at 6pc. "Other" non-ferrous metals accounted for the largest share of non-ferrous shipments at 66pc.
Brokerage volumes rose to 1.7mn t from 1.2mn t.
Sims' profit across the group rose to A$192mn on sales of A$6.4bn in fiscal year 2018, up from profit of A$120mn on sales of A$5.1bn a year earlier.
