Global metals recycler Sims Metal Management expects to realize a marginal dip in profitability in the second half of its fiscal year, which ends 30 June, amid ongoing supply difficulties in the US, lower domestic demand in Australia/New Zealand and challenging export markets.
Negative sentiment surrounding global steel markets and challenging export scrap metal markets influenced by Chinese steel exports have resulted in lower prices and demand for scrap so far this year, the company said in a trading update today.
The Australian-based company anticipates that its earnings before interest and taxes (ebit) for the six month period ending 30 June will be marginally lower than the first half but cited both upside and downside risks depending on the timing of shipments, freight costs and competitiveness of scrap metal purchases over the next two months.
Sims' metals business is comprised of the North America Metal (NAM), Australia and New Zealand Metal and (ANZ) UK Metal divisions.
The company expects its ANZ and SA Recycling divisions to experience a sequential drop in ebit during the second half, while its NAM and UK segments are expected to improve.
Stiff competition for scrap intake, particularly shredder feed in the US, has weighed on SA Recycling — a 50-50 joint venture between Sims and Adams Steel — which experienced deterioration in ferrous intake volumes and margins through March and April.
Sims' noted that its NAM operations realized stronger US domestic sales volumes and increased consumption of unprepared scrap, while its ANZ division faced challenges with lower domestic and export demand.
The company highlighted the strategic review of its UK division, which has attracted "significant interest" with all options under review ranging from a total sale through to retention of the business.
Operational changes including closure of non-strategic loss-making yards lowered costs for the division and improved margins so far this year.
Sims posted a A$66mn ($43mn) profit in the second half of 2023, down 35pc compared with the same period in 2022.
