Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Sims Metal Management’s group revenues declined 26.1pc from the prior year to A$4.9bn ($3.6bn) in the financial year ending June 30, 2020, according to the company’s results released on August 18.


The company noted that revenues had dropped partly in response to reduced intake volumes due to increased competition for lower ferrous scrap flows and COVID-19 related lockdowns.


Revenues were also negatively affected by the disruption caused by COVID-19 to scrap consumption (sales volume), while lower average ferrous & zorba prices compressed margins.


Global scrap sales volumes declined at a slightly faster pace of 16.8pc to 8.15mn mt compared with intake volumes at 13.9pc to 8.33mn mt, as reduced smelting capacity utilization bit demand.


The company noted that global proprietary intake volumes had recovered from a historic low of circa 300,000mt in April to just under 600,000mt in July, with scrap prices also rebounding.


Unsurprisingly, Sims reflected that the global group, including all its metals divisions, had promisingly returned a profit for the month of July.


To improve operating margins, Sims has continued to implement an extensive commercially driven restructuring and cost reduction programme to reduce fixed costs by A$70mn in 2021.


This has been delivered through an aggressive 29pc and 11pc headcount reduction across North American (-453) and UK (-85), and the closure of 11 sites in the UK and 4 in North America.


While proposing to maintain FY 2019 UK processing capacity, the company plans to affect further cost savings by closing another 7 UK sites and increase total headcount reduction to 150 by FY 2021.


Davis Index has heard unconfirmed rumours that Sims will be shutting its 250,000mt per annum Birmingham, UK, shredder – with no official response from the company at the time of writing.


A UK-based ferrous scrap trader noted that if the rumour were true Sims would be unable to divert all the Birmingham volumes to the company’s next closest site in Nottingham.


Other market participants quipped that should Sims pull out of Birmingham, another major scrap processor would fill the vacuum almost immediately.

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