Stronger ferrous export demand boosts Schnitzer

Stronger bulk export market demand for ferrous scrap boosted US metals recycler Schnitzer Steel in its fiscal third quarter, while non-ferrous volume ticked down and finished steel shipments were little changed from the prior year.

The Portland, Oregon-based company shipped 983,342gt (999,123 metric tonnes) of ferrous scrap in its fiscal third quarter ended 31 May, up from 825,391gt in the same quarter a year earlier.

The 19pc increase was driven by stronger export demand. Exports accounted for 70pc of Schnitzer's ferrous shipments on the quarter at 690,019gt, compared with 65pc of ferrous shipments at 534,164gt in the prior year.

Schnitzer chief executive Tamara Lundgren cited "steady demand in west coast markets" as supportive of stronger export volume. Bangladesh, Turkey and Thailand were the top export destinations for the company's ferrous shipments.

Domestic ferrous scrap volume was little changed at 293,323gt.

Ferrous selling prices averaged $337/gt fob, up from $258/gt fob in the same prior-year period. Export selling prices rose by $92/gt to $347/gt fob, while domestic ferrous selling prices rose by $51/gt to $314/gt fob.

But non-ferrous shipments ticked down to 146mn lbs from 150mn lbs, which the company attributed to sales to China that were impacted by the later timing of the Chinese new year in 2018.

Average selling prices for non-ferrous metals rose to 74¢/lb on the quarter from 65¢/lb a year earlier. But prices for the shredded mixed metals product zorba softened "significantly" in May and continue to weaken in June following China's month-long suspension of the US arm of its scrap cargo pre-inspection and certification agency CCIC. China is the world's largest offshore consumer of US zorba.

Shipments to China remain impeded by enhanced inspections of US containers and higher import quality restrictions globally. Schnitzer is responding by looking to alternative markets and developing processing technologies to produce smelter-ready material that does not have to be further refined in China or elsewhere, Lundgren said.

The volume of cars Schnitzer purchased for its Pick-n-Pull automobile recycling subsidiary was little changed at 109,000 units in the quarter.

Higher prices across ferrous and non-ferrous shipments helped boost operating profit in Schnitzer's auto and metals recycling segment by 83pc to $55mn. This represents $56/ gt ferrous shipped, up from $36/gt ferrous shipped in the prior year and the highest level since the company's 2011 fiscal year.

Shipments in Schnitzer's finished steel segment were little changed at 140,000st as higher rebar shipments offset a drop in coiled products.

Average selling prices for rebar and other finished steel products ticked up to $703/st fob from $545/st fob on higher raw materials prices and as import pressure waned amid the US imposition of a 25pc tariff on imported steel.

Capacity utilization at the company's Oregon rolling mill rose to 95pc from 85pc in the same year-earlier quarter.

Operating profit from finished steel sales rose to $11mn from $1mn as rebar price increases exceeded those of scrap, boosting metal margins.

Schnitzer's group profit rose by more than doubled year on year to $38mn on revenue of $652mn, up from a $17mn profit on revenue of $477mn in the prior year.