Publicly traded producers and recyclers of metal have been issuing warnings to investors that the global COVID-19 coronavirus pandemic has undone previously mildly optimistic expectations for the first half of 2020. The picture in the paper and board sector is less clear, however, as a reduction in industrial activity is partially offset by increased demand for tissue products and home deliveries made in paper and board boxes and envelopes.
Australia-based Sims Group, with its sizable Sims Metal Management business unit based in Rye, New York, was among the first companies to withdraw an earlier earnings outlook, as in mid-March it began witnessing the impact of COVID-19 on scrap metal volumes at its United States, United Kingdom and Australian facilities.
The week of March 16-20, steelmakers based in the U.S. began factoring COVID-19 into their earnings forecasts. Charlotte, North Carolina-based Nucor Corp. remarked in its March 19 guidance statement, “Thus far the impacts of COVID-19 on our supply chains and operations has been minimal. However, more severe impacts are probable as economic activity is disrupted by construction sites being shut down in some major cities and other business interruptions.”
The following week, David B. Burritt, the president and CEO of Pittsburgh-based U.S. Steel Corp., stated, “The time has come for us to take aggressive actions to reposition the company” as a response to rapidly changing economic conditions caused by virus-related shelter in place orders.
Those actions included blast furnaces being scheduled for idle status in May in Gary, Indiana, and Granite City, Illinois. The company also has scheduled idling downtime starting in May at steel tube mills in Ohio and Texas.
In the nonferrous sector, Cleveland-based aluminum scrap consumer Aleris noted in its March 18 outlook, “Given the rapidly changing implications of the spread of COVID-19, it is difficult to assess its impact on our 2020 outlook at this time.”
The following day, Europe-based aluminum producer Hydro cited a “fast-deteriorating market situation [that] is affecting both customers’ and Hydro’s operations” in a news release for its investors. The company melts scrap to make extruded aluminum shapes in both Europe and North America.
Added the company, “The impact is currently most visible in the automotive segment and in building and construction, and more broadly in southern Europe. Consequently, Extruded Solutions is reducing and temporarily closing some activities in France, Spain and Italy.“
A late March survey by Fastmarkets AMM of secondary aluminum producers in the U.S. found that several—including Audubon Metals, Real Alloy, Spectro Alloys and Superior Aluminum—had scaled back or even temporarily halted output, citing the idling of the auto sector to which they sell.
While a severe drop in automotive industry activity and the halt of some construction projects has curtailed the demand for metal, the paper and board market has seen demand shift but not necessarily recede overall. One investment analyst even issued an upgrade on the stock of a containerboard producer based on homeowner stockpiling.
The containerboard sector in the U.S. entered March in seemingly strong condition, with the Washington-based American Forest & Paper Association (AF&PA) reporting that total containerboard production in February 2020 increased 10 percent compared with February 2019.
In the first two months of the year, output was up 7 percent compared with the same two months of 2019, with exports up an impressive 46 percent year on year.
The AF&PA has been touting paper, tissue and board’s “essential” role in COVID-19-impacted America. “AF&PA members make essential products, including tissue products, packaging for food and other consumer products, building products and shipping containers,” states AF&PA President and CEO Heidi Brock in a March 18 news release.
Brock adds, “Our members also supply packaging to agricultural producers, food processors, hygiene product manufacturers, grocers and other retailers. Disruptions in the availability of these goods would cause significant hardships to consumers across the country who depend on steady and stable supplies.”
Memphis, Tennessee-based International Paper (IP) echoes that sentiment on its website, stating, “International Paper products are critical components of the supply chains required to produce and deliver food, pharmaceuticals, hygiene products and emergency supplies for consumers around the world. Our mills and converting plants are operated by highly trained employees who are considered ‘essential workers.’ Disruptions in the availability of our products would create significant hardships for consumers across the country and around the world.”