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Ferrous scrap price volatility 'hurts': CMC

Keywords: Tags  ferrous scrap, scrap prices, Commercial Metals Co, CMC, Joe Alvarado, Barbara Smith, Sean Davidson

NEW YORK — Ferrous scrap prices in the United States will fluctuate by between $10 and $20 per gross ton over the next few months, the top executive of Commercial Metals Co. (CMC) forecast.

“These price fluctuations will likely vary by region,” CMC chairman, president and chief executive officer Joseph Alvarado told analysts on a March 28 earnings call, noting that current demand for scrap is steady in the United States but weak internationally.

Scrap prices will remain somewhat volatile over the next few months, which will continue to adversely impact the recycling industry, Alvarado added, calling scrap price volatility the industry’s biggest challenge.

“For me, at least, when I look back over the last few months, the recycling business’ (biggest) issue is one of consistency. The volatility isn’t necessarily good when it’s down or when it’s up and down,” he told analysts.

“I think for the time being, because we’re expecting continued volatility, the recycling business will be challenged. And until global demand improves, including in particular Europe more consistently, it’s going to contribute to that volatility.”

“The volatility is I think what hurts us all the most,” he reiterated.

CMC’s scrap metal recycling business is split evenly between a retail sales operation and scrap for consumption by its own mills, which allows the company to achieve some balance in challenging markets, he said.

For the company’s second fiscal quarter of 2013 ended Feb. 28, CMC’s Americas Recycling segment recorded an adjusted operating profit of $2.2 million, down from an adjusted operating profit of $6.4 million in the corresponding 2012 period.

Ferrous scrap selling prices dropped 7 percent to $336 per ton in the same comparison, while ferrous and nonferrous margins also fell during the quarter.

Alvarado said the recycling segment “remained profitable in the second quarter of 2013 despite weaker demand than anticipated, which created pressure on pricing and margins.”

CMC’s chief financial officer and senior vice president Barbara Smith told analysts CMC shipped a total of 515,000 tons of ferrous scrap during it second quarter, down 6 percent from the previous year’s second quarter.

Average sales prices on nonferrous scrap were $2,815 per short ton during the quarter, which was “comparable” to the same quarter in 2012, Smith said. The company shipped 59,000 tons of nonferrous scrap in the period, which was down 5 percent from last year’s second-quarter shipments.

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