Metalico reports loss for first quarter of 2015

Metalico Inc. has reported a net loss of $10.9 million for the first quarter of 2015 compared with a net loss of $3.9 million for the same time last year and a loss of $6 million for the prior year. Metalico also has reported sales of $75.9 million compared with $118.5 million for the first quarter of 2014.

The company says its results were affected by a sharp decline in ferrous scrap prices, which reduced inventory valuations and virtually eliminated margins on ferrous sales for the quarter. In addition, Metalico points to lower inflows and outbound volumes and lower average nonferrous commodity selling prices for the loss.

Nonferrous pricing was affected by the continued strength of the U.S. dollar and weakening demand from Asia, which translated into a rise in finished metals products imported into the United States.

The company also says the average ferrous metal selling prices for the quarter fell sequentially by $42 per gross ton, while nonferrous selling prices fell 12 cents per pound in the quarter.

“Bad winter weather and the large drop in ferrous pricing, coupled with weak inflows and poor mill demand, combined into a perfect storm adversely impacting results,” says Carlos Agüero, Metalico president and CEO.

He continues, “The market is finding stability and flows into yards are gradually increasing, but it will continue to be a very challenging year for the company and our industry.”

Metalico says domestic steel production appears to have bottomed at 67.7 percent of capacity utilization for the week ending April 4, 2015, rebounding to 72.1 percent for the week ending May 16, 2015. Steel prices experienced a significant decline during the quarter, possibly tied to oversupply from foreign state-owned steel manufacturing facilities, particularly in tube steel, which supplies oil and gas customers.

The strong U.S. dollar has paved the way for a flood of finished and semifinished steel imports impacting demand for scrap by domestic producers. Overseas buyers of scrap have sought cheaper material from locations outside the United States, causing scrap traditionally destined for export to be offered instead to domestic consumers, keeping supply elevated and prices pressured.

Prices for aluminum, copper and other nonferrous metals have trended lower from the start of the year, Metalico says, though they have not experienced the degree of decline ferrous prices have seen. A recent change to Chinese export taxes has resulted in more finished and semi-finished aluminum exported into the United States. These imports will likely keep supply ample, offsetting demand from scrap from the automotive sector and driving prices lower, according to Metalico.

Despite the challenging environment, the company says it sees some positive developments. Demand for steel is growing in nonresidential and infrastructure construction, a segment that has been depressed since the 2008-2009 financial crisis. Although the increase has been modest, the uptick in activity is beginning to offset the weakness in the energy segment resulting from the collapse in energy prices that has slowed domestic exploration and production, according to Metalico.