Schnitzer Steel will continue its global sales diversification and its commercial and cost adjustments to offset the impact of lower process and supply flows in 2020.
Speaking to analysts during the company’s Q3 2020 earnings call, Tamara Lundgren, chief executive officer, Schnitzer, said that the steelmaker was not providing any forward guidance on sales or volumes due to uncertainties arising from the pandemic. However, she noted that the global economy is facing a greater emphasis on recycling, continued growth in EAF steelmaking, increased metal intensity of lower carbon-based economies, and designating recycling as an essential business.
In 2020, the company is addressing its internal structures to improve efficiency, flexibility, productivity, and investment in advanced metal recovery technology, and expand products and services, Lundgren said while reporting earnings for the quarter ended May 31, 2020.
The company plans to add new technology in at least five major facilities with projected total investment of $80-90mn, down 30pc after COVID-19 capex adjustments. Most of the capex is in nonferrous installations between August 2020-August 2021 which targets an increase of 20pc in nonferrous volumes from the shredding process which will provide a benefit of at least $8/nt.
Auto and Metals Recycling
In the company’s Auto and Metals Recycling (AMR) business, ferrous sales fell 17pc to 779,000gt in Q3 2020 compared to 938,000gt in the same quarter last year. Export sales comprised 73pc of sales during the quarter compared to 67pc in Q3 2019 with ferrous scrap’s largest destinations being Bangladesh, Turkey, and Vietnam.
Non-ferrous sales volumes declined by 28pc to 50,348.75mt in Q3 2020 from 69,853.22mt in the same quarter a year ago.
The AMR segment reported operating income of $3mn or $3/nt of ferrous and adjusted operating income of $5mn or $6/nt of ferrous in Q3 2020. The business’s metals sales of ferrous and non-ferrous were shipped to 21 countries despite weaker global markets resulting from COVID-19 pandemic.
Revenues for AMR were down 11pc to $300mn from 338mn in Q2 2020 and fell 30pc against $429mn in the same quarter last year. Ferrous revenues were $190mn in Q3 2020, down 15pc from $222mn in Q2 2020, and down 32pc against $280mn in Q3 2019. Non-ferrous revenues decreased by 10pc to $79mn in Q3 2020 from $88mn in Q2 2020 and were down 30pc compared to $113mn in Q3 2019.
Average net ferrous sales price for Q3 2020 was $232/gt, down 21pc against Q3 2019. Average non-ferrous sales prices for Q3 2020 was 54¢/lb, a decline of 13pc against 62¢/lb in Q3 2019.
The company’s Cascade Steel and Scrap (CSS) segment’s finished steel sales volumes declined by 5pc to 124,000st from 130,000st in Q3 2019. Average finishes steel prices declined by 13pc to $633/st in Q3 2020 from $730/st in the same quarter last year.
In Q3 2020, CSS reported an operating income of $7mn, slightly lower than the $8mn in Q3 2019, on total segment revenue. The lower cost of raw materials, higher utilization, and productivity initiatives allowed CSS to almost double operating income from $4mn in Q2 2020. Rolling mill utilization was 98pc in Q3 2019 but declined to 72pc in Q2 2020 before increasing to 91pc in Q3 2020.
Schnitzer Steel’s total revenue declined by 26pc to $403mn in Q3 2020 from $547mn in the same quarter last year. The company reported an operating loss of $4mn in Q3 2020 compared to a gain of $24mn in Q3 2019.