By Paul Ploumis
SPOKANE (Scrap Monster): Sims Metal Management Limited- the world’s leading metals and electronics recycler, in its recently published Annual Report 2016, has pointed out that the industry is passing through the toughest market conditions in the past 30 years. According to Galdino Claro, Group CEO and MD, the FY 16 market conditions, especially at the end of first half, have been extremely challenging for the industry.
According to the company, FY 16 presented some unprecedented challenges. During the first quarter of the year, commodity supply and demand dynamics witnessed no major improvement from the conditions that prevailed during the second half of FY 15. The market witnessed sudden plunge during the month of October, from which it has not been able to recover so far, the company noted.
The fall in domestic consumption led to increased exports of cheaper steel products out of China. The increased use of Chinese billet as a substitute resulted in huge demand drop for ferrous scrap metal in steel mills worldwide. Also, excess supply of low-cost iron ore led to recent sharp fall in ferrous scrap prices. The price of ferrous scrap hit the lowest level since 2003, declining by over $30 per tonne during the month alone. As a result, the company’s sales volume dropped significantly by 18% during FY 16.
The company highlighted the series of steps implemented to deal with the tough market conditions. Instead of sitting idle for the moment to pass, the company took rapid action to restructure its operating platform. By mid-August, Sims Metal Management had announced sale of some of its scrap recycling operations in the US Central region to Steel Dynamics, Inc (SDI). Through this deal, the company had select facilities located in Tennessee and Mississippi. Altogether, 42 facilities were targeted for closure or sale. It also implemented strict cost cutting measures in the remaining facilities. These actions led to improved earnings during the second half of FY 16 in comparison with 1H 2016.
The company has fine tuned its cost and operating structure to perform well in difficult markets, and to deliver considerably stronger earnings when conditions improve. The company has reduced its operational volume break-even point to ensure continued profitability at the bottom of the cycle. The strong balance sheet position of the company provides enough strength to weather demanding market conditions and also to invest back into business, noted Galdino Claro.
The Annual Report notes that the company has made investments of around $109 million towards sustaining and growth projects, as part of its 2020 long-term sustainability goals. The company has made significant progress in its journey towards achieving ‘zero harm goal’. Continuous orientation and awareness efforts have helped to reduce safety incidents at its recycling facilities. As per statistics, 84% of its facilities worldwide reported zero recordable injuries, while 94% reported zero lost workday injuries.
About Sims Metal Management
Sims Metal Management is one of the world's largest metal recyclers with over 200 facilities, operations in 20 countries, and over 4,900 employees globally. It is the leading metals and electronics recycling company in the world. The company specializes in ferrous and non-ferrous metals recycling, post-consumer electronic goods recycling, and municipal waste recycling. Its primary operations are located in the United States, Australia, and the UK. SMM's core businesses are metal recycling and electronics recycling, with 55% of its revenue from operations in North America.