On Thursday, Portland, Oregon-based Schnitzer Steel Industries, Inc. reported a profit of $11.2 million or $0.40 per sharefor fiscal Q3 2012 (ended May 31, 2012). While this reflects a 16 percent increase from $0.35 reported in Q2 2012, it was a 66 percent decline from the $33 million or $1.18 per share in the year-ago quarter.
In its Metals Recycling sector, ferrous scrap sales volumes were 1.4 million tons, approximating Q2 and export customers accounted for 77 percent of Schnitzer's total ferrous sales volumes. The top ferrous export destinations were Turkey, South Korea and China. Average ferrous prices were flat compared to prices in Q2 of fiscal 2012. Since Q3, however, Tamara Lundgren, President and Chief Executive Officer, said export and domestic have declined significantly and Q4 will reflect that drop. Lundgren emphasized during the question and answer portion of the quarterly conference call that recent export scrap prices from the US have exhibited stabilization but scrap purchase prices are currently "more sticky" because of lower US GDP, resulting in less elasticity in prices. The generation of obsolete scrap is especially impacted by the low GDP growth, dampening supply flows, she added.
There has been weakness in both US domestic and export scrap prices for various reasons, but the common theme has been global uncertainty, according to Lundgren. The domestic prices are driven by lower steel production, lower demand and imports affecting domestic steel production. Meanwhile, declines in US domestic prices "haven't gone unnoticed by the export market."
In Schnitzer's Auto Parts Business, revenues increased 6 percent from Q2 due to higher parts sales and admissions, while scrap and core revenues were essentially in line with the previous quarter.
In Q3, the Steel Manufacturing Business achieved break-even operating income. Finished steel sales volumes of 103,000 nt decreased 8 percent from the prior quarter.
Since the end of the third quarter, prices for recycled metals have declined significantly, Schnitzer said in a press release, as average inventory costs typically decline more slowly than the cash purchase costs for raw materials, this may negatively impact Q4 results.