NEW YORK Schnitzer Steel
Industries Inc.s operating earnings fell 91.9
percent year on year to $1.2 million during its fiscal first
quarter, with the company citing lower scrap prices and
compressed margins, among other factors.
Declining sales prices,
constrained supply and unfavorable timing of shipments
lowered selling volumes and compressed margins in the
companys ferrous scrap business during the three months
ended Nov. 30, Schnitzer said.
"As anticipated, during the
first quarter of fiscal 2013 we continued to face difficult
market conditions for recycled metals, including a sharp drop
in both ferrous sales prices and volumes, due to soft demand
resulting from slowing global growth and the weak domestic
economic environment which continues to impact scrap
generation," president and chief executive officer Tamara
Lundgren said in an earnings report Tuesday.
Export and domestic sales prices
for recycled ferrous metals dropped some $50 per gross ton
during the quarter compared with August levels, driven by
significantly lower domestic utilization rates and weak global
economic conditions that continued to adversely impact overall
steel demand, Schnitzer said.
The Portland, Ore.-based
companys metals recycling business shipped 954,662 tons
of ferrous scrap during the quarter, down 22.5 percent from
more than 1.2 million tons in the same year-ago period.
Exports comprised 70.7 percent
of the companys total quarterly ferrous scrap business,
but the export tally slipped 26 percent to 675,212 tons from
912,939 tons in the corresponding quarter last year. Schnitzer
sold 279,450 tons domestically during the quarter, down 12.5
percent from 319,451 tons a year earlier.
Similarly, average export
selling prices for the quarter dropped more than those
domestically. Average ferrous export selling prices fell 17.4
percent to $360 per ton from $436 per ton in the year-ago
quarter, while those domestically dropped 15.7 percent to $354
per ton from $420 per ton.
Demand from export markets
softened in September and October, driving average net ferrous
selling prices down 5.3 percent from fiscal fourth-quarter
levels, the company said.
Nonferrous scrap sales also
recorded similar declines during the quarter, with volumes
falling 13.3 percent to 118.9 million pounds from 137.2 million
pounds in the same year-ago period. The average selling price
for nonferrous scrap dropped to 95 cents per pound from $1 per
pound in the same comparison.
The companys overall scrap
business took a significant hit during the quarter as a result,
with metals recycling operating income tumbling 56.8 percent to
$5.7 million from $13.1 million a year earlier.
The low U.S. gross domestic
product and high unemployment rates have constrained scrap
flows, Lundgren said during an earnings call Tuesday, adding
that the consequent drop in consumer activity has limited the
supply of obsolete scrap.
The supply of salvaged vehicles,
which form a critical mass of shredder feed, is suffering, as
the average age of cars on the road today has increased 20
percent to nearly 11 years, Lundgren said.
This has caused salvage rates to
decline recently to 4 percent from nearly 6 percent, she
manufacturing business recorded a mixed quarter as total
volumes sold scaled higher but average sales prices dropped
from year-ago levels.
For the quarter ended Nov. 30,
2012, the company sold 129,618 short tons of finished steel, up
21.6 percent from 106,637 tons in the corresponding quarter the
Rebar sales drove that growth,
accounting for 78,159 tons, up 25.1 percent from 62,487 tons in
the year-ago quarter. Meanwhile, coiled products ended the
quarter at 45,533 tons, up 16.4 percent from 39,120 tons in the
However, average net sales
prices for finished steel products fell 5.8 percent year on
year to $680 per ton from $722 per ton.
Steady market conditions,
combined with improved utilization of 70 percent and reduced
raw material costs, resulted in operating income of $3.4
million for the steel manufacturing business during the
quarter, nearly triple the $1.2-million operating profit
recorded by the segment a year earlier.
Overall, Schnitzer posted a $1.7
million net loss on revenue that fell 27 percent to $592.8