On Tuesday, Schnitzer Steel Industries, Inc. announced its market outlook for fiscal Q4 2012, explaining that in early June, export sales prices for ferrous metals, net of freight, dropped approximately $70-$80 per ton from May levels, largely driven by slower global growth rates, economic uncertainty, and the stronger US dollar. Export sales prices remained relatively flat for the remainder of June and July before increasing slightly in August for September shipments. During the quarter, the supply of scrap continued to be constrained by low US GDP growth, and was further impacted in Q4 by a lower price environment and unusually hot weather.
In the Metals Recycling Business, ferrous average net selling prices are expected to decline 10 to 15 percent from fiscal Q3. Ferrous sales volumes are also expected to decline 10 to 15 percent due to reduced flows of raw materials. Operating income per ferrous ton is expected to be $8-$9, approximately 35 percent lower than Q3 of fiscal 2012.
In the Auto Parts Business, the sharp drop in commodity prices is expected to result in a decline of 15 to 20 percent in revenues from Q3. Operating margins in Q4 are expected to approximate break-even, with over half of the decline from the third quarter due to the significant negative impact from average inventory accounting.
In the Steel Manufacturing Business, volume increases of approximately 15 percent are expected to be more than offset by a decline in average selling prices of slightly more than 5 percent from Q3.
Schnitzer also new initiatives to help improve earnings and lower annual operating costs by $25 million and be substantially complete by the end of Q1 of fiscal 2013. Schnitzer anticipates about $12 million in restructuring charges, which primarily will represent costs associated with the elimination of 300 positions, or 7 percent of the current workforce.