Scrap Prices North America

Optimistic Outlook at Schnitzer Steel

October 22, 2020

Schnitzer Steel, a metals recycler and steel manufacturer, maintained operations throughout the pandemic, navigating though low scrap supply and falling demand and emerging optimistic about the year ahead.

“These past seven months have been challenging for all of us,” said Chairman and CEO Tamara Lundgren of Schnitzer Steel. “We have been confronted with cascading crises, including a global pandemic the likes of which the world has not seen in over a century, a historically significant global recession and natural disasters. We pivoted quickly to accommodate the operating changes that were necessary in order for us to continue operating safely and effectively in a very volatile market.”

Schnitzer reported higher earnings in fiscal fourth quarter 2020. Revenue totaled $465 million, compared to $403 million in Q3, and operating income surged to $11 million from a loss of $4 million.

The Auto and Metals Recycling segment reported operating income of $15 million or $17 per ferrous ton in the fourth quarter compared to $3 million or $3 per ferrous ton in Q3. Improving market conditions and commercial initiatives resulted in improved scrap flow and demand, boosting recycled metal prices to pre-COVID levels. Sales of ferrous scrap improved sequentially by 17 percent, while nonferrous volumes jumped 28 percent.

Schnitzer exported 72 percent of its ferrous sales volume during the quarter with Turkey, Vietnam and Bangladesh the top export destinations.

A number of projects that will enhance the extraction of recyclable materials from scrap are in the works and on schedule for completion in spring 2021. Schnitzer’s investment in advanced metal recovery technology will have substantial benefits through lower operating costs, improved volumes and revenue, and an expanded market, the company said.

Steel manufacturing at Cascade Steel and Scrap benefited from construction demand in West Coast markets. Operating income rose $1 million from the third quarter to $8 million. Finished steel sales volumes increased 12 percent to 139 million tons. Fourth-quarter steel revenue was $91 million compared to $83 million in Q3. The average net sales price slipped to $618 per ton from $633 per ton. Rolling mill utilization rose sequentially to 96 percent from 91 percent. Recycling revenue at Cascade Steel and Scrap was $20 million for the quarter.

Lundgren said that, while contingent on the strength and trajectory of the economy reopening, the outlook looks steady and strong. “Supply continue to be one of the most sensitive levers in our outlook going forward,” she said. Scrap supply has improved but not to pre-pandemic levels yet, partly due to lower volume of autos coming through scrap yards. The COVID crisis slowed consumer habits with less miles driven in the past year. West Coast construction remains strong and is expected to remain so in the next quarter.

Schnitzer expects companywide ferrous volumes to increase 5-10 percent in the coming quarter, nonferrous to remain stable and finished steel volumes to increase 15 percent.