Schnitzer Steel Industries Inc. says it experienced softer markets for its products through the fourth quarter of its fiscal year. The company, based in Portland, Ore., says export sale prices in early June for ferrous metals, net of freight, dropped by $70 to 80 per ton from May prices, largely driven by slower global growth rates, economic uncertainty and the stronger U.S. dollar.
The company, in a late August news release, adds that export sales prices remained relatively flat for the remainder of June and July before increasing slightly in August for September shipments. The company’s 2012 fiscal year ends Aug. 31, 2012.
During the recently completed quarter, the supply of scrap continued to be constrained by low U.S. gross domestic product (GDP) growth and was further affected in the company’s fourth quarter by lower prices and unusually hot weather. As a result of these conditions, average inventory costs were not able to decline as quickly as cash purchase costs for raw materials, according to Schnitzer. The company says it expects average inventory costs to adversely affect consolidated operating income by about $25 million compared with the third quarter, with around two-thirds of this impact affecting the company’s Metals Recycling Business.
In its Metals Recycling Business, Schnitzer says its ferrous average net selling prices are expected to decline 10 to 15 percent from the third quarter of fiscal 2012. Ferrous sales volumes are also expected to decline 10 to15 percent because of reduced flows of raw materials.
With this tempered outlook, Schnitzer has announced initiatives designed to allow it to strengthen the investments and acquisitions it made last year as well as realign its organization to support future growth. The initiatives are expected to yield higher earnings and increase shareholder returns by further integrating the Schnitzer Metals Recycling and Auto Parts Businesses, the company says, thus streamlining corporate functions and reducing organizational layers.
Along with the initiatives,Scnitzer will undertake a restructuring that will result in the elimination of around 7 percent of the current workforce.