Sims takes bearish stance on immediate prospects

Though longer term market fundamentals remain good, global metal recycler Sims Limited says significant volatility makes the short-term outlook uncertain.

“Aggressive interest rate rises to combat rapidly increasing inflation have reduced the demand for steel, copper and aluminium, and therefore the demand for recycled metal,” the Australia-based company said in commentary accompanying release of its results for the fiscal year ending in June.

“Ferrous prices peaked at around US$700 per tonne in March FY22 but have subsequently fallen to trade between US$320 to US$400 per tonne at the start of FY23.

“China’s manufacturing activity deteriorated in the second half of FY22 after Covid lockdowns were implemented across several cities. Although we saw an improvement in May when the economy partially opened, activity continued to be below FY21 levels, and uncertainty remains as new lockdowns continue to be imposed,” the company added.

“As a result, FY23 has commenced with soft market conditions. Full-year results will depend on how quickly, and to what magnitude, global markets recover from the interest rate hike-induced slowdown.”

As for its reaction to market developments, Sims said: “We are actively seeking medium-term efficiency gains to partially offset inflationary cost pressures, which are likely to remain throughout FY23.”

In fiscal 2022 the Sydney-headquartered company achieved net income of A$599 M (US$422 M, €414 M), more than double the previous 12 months’ A$229 M. Turnover increased 56.6% to A$9.26 M.

Looking beyond the immediate months, Sims said: “We remain very confident in the medium and long-term fundamentals of the business, with the energy transition, growth of electric arc furnaces and the decarbonisation of the steel industry expected to continue to drive demand for recycled metal. We see the softer economic conditions impacting our markets in the short term as temporary headwinds …

“Increased demand for metal-intensive infrastructure spending and the production of post-consumption scrap is positive for metal recycling, both ferrous and non-ferrous.”

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