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Poor export sales hit Schnitzer results

Keywords: Tags  scrap, Schnitzer, Tamara Lundgren, ferrous, nonferrous, exports, shipments, recycling Sean Davidson

NEW YORK — Schnitzer Steel Industries Inc. saw net income for its fiscal second quarter fall more than 10 percent year over year as a result of weak ferrous and nonferrous scrap sales, as well as restructuring charges.

The Portland, Ore.-based company reported net income of $8.6 million for its second quarter ended Feb. 28, down 10.2 percent from $9.6 million during the same quarter of fiscal 2012. Total revenues for the quarter dropped 25.3 percent to $662.2 million vs. $886.6 million in the same comparison

Ferrous scrap sales plummeted 27.6 percent to $443.4 million in the second quarter, down from $612.6 million a year ago, while nonferrous scrap sales fell 21.2 percent to $125.3 million from $160 million in the same comparison despite an increase in nonferrous prices. As a result, the company’s overall metal recycling business posted total sales of $576.2 million, down 26.3 percent from $781.9 million in the same period a year prior.

Sales in Schnitzer’s auto parts business was flat year over year at $78.1 million, while its steel manufacturing business posted a 15.7-percent year-on-year drop in sales to $71.2 million.

The company’s second-quarter performance took a direct hit from a 20.2-percent decline in ferrous scrap export volumes, which dropped to 842,509 long tons for the quarter from 1.05 million tons in the year-ago period. Domestic ferrous scrap sales volumes slid 12.3 percent to 260,509 tons from 297,142 tons in the same comparison.

The decline in ferrous scrap exports came despite better price performance for export sales when compared to domestic tags. The company reported that average ferrous scrap selling prices were down 14.4 percent for domestic sales at $363 per ton, while average export sales were down 11 percent to $374 per ton from the same quarter a year ago.

Average nonferrous scrap selling prices increased to 97 cents per pound from 91 cents a year ago, but volumes fell 25.5 percent to 125.5 million pounds from 168.5 million pounds in the same comparison.

Exports will continue to prove challenging as the company expects moderate demand in April to follow weaker prices in March.

Chief executive officer and president Tamara Lundgren told analysts during the company’s earnings call April 3 that higher export prices in February held for March shipments.

“We can report that the higher export prices that we saw in February did hold steady for March shipments. Domestic prices increased significantly in March, and recent published reports indicate a potential softening for April domestic prices,” she said. “As a result, we see moderating demand for April export shipments as the export markets watch for the April domestic prices to settle.”

Lundgren said customers worldwide are keeping low scrap stocks, which “still reflects, probably, a relatively weak long-term confidence.”

Capacity utilization and general demand from Asia and Turkey have also softened year over year, Lundgren said.

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