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$100m profit from scrap metal's year of swings and roundabouts

By Greg Pitcher

Sims Group this week announced it broke the $100 million profit barrier in the year ending June 2004 highlighting the potential benefits of the recent volatile scrap metal prices.

The global metal recycler made $112.5m last year, 50% more than in the previous 12 months, boosted by a sales revenue up 19% to $1.87 billion.

Recycled metal prices have oscillated wildly since Christmas, with demand from the Far East surging, then abruptly stopping, and supply remaining tight.

A tonne of OA grade steel was worth little more than £50 in December, almost £100 in March and around £65 in June. Prices of most ferrous grades went up between £20 and £30 per tonne again this month.

Scrap metal merchants have been divided over the merits of these volatile prices, with many feeling they only hike up the cost and risk of entering the market.

But others have pointed to the profit that can be made by buying low and selling high and the Sims end-of-year financial report highlights this opportunity.

Sims Group chief executive Jeremy Sutcliffe said: This is a tremendous result for the company and its employees, particularly in the second half when we produced an excellent operational performance, fully exploiting favourable metal prices and market conditions.

The report made special mention of the success of Sims recycling arm. A statement said: Sims Recycling Solutions made considerable progress during the year, not only in fridge recycling but particularly in R&D and business development in electrical and electronic recycling.

The group made strides in tyre recycling through the acquisition of Tyrecycle, Australias large collector and processor of used vehicle tyres, and also through the commissioning of the groups UK plant.

The statement said the 12 months to June 30 represented a year of unprecedented volatility in global ferrous pricing.

Sutcliffe added: We remain quietly confident that steel production and demand in China will remain firm, despite governmental and other constraints such as electricity shortages.

On the back of this, we see continued demand in most major markets, including the US, where high steel prices continue to lead to high steel mill utilisation rates and strong raw material requirements.

Having said that, irregular buying patterns are likely to continue as consumers attempt to second guess market trends this can only add to price volatility.

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