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Sims warning over China slowdown

Chief executive of Sims Metal Management, Galdino Claro, has warned that economic problems in China will add more pressure on export markets.

Commenting on the recent devaluation of the Chinese yuan as part of Sims’ annual results, Claro said that market conditions remained difficult: “We are pleased with the progress we achieved in FY15. However, external market conditions for metals recycling remain as difficult as we have experienced in many years.

“Slowing internal demand in China has pushed exported steel into the markets of many of our traditional customers. China’s recent currency devaluation seems likely to only add more pressure on export markets.”

The slowdown in the world’s second biggest economy has led to a sell-off on stock markets across the globe in recent days as uncertainty hits financial markets. China’s central bank devalued the yuan three times in a move which could force exporters to lower their prices.

Sims announced a 10% fall in sales revenue for the full year to A$6.30bn (£2.95bn) from A$7.02bn in 2014. But earnings before tax rose 19% to A$265.5m from A$322m the previous year.

Sales volumes decreased by 11% to 10.5 million tonnes in the 2015 financial year versus 11.8 million tonnes in 2014 due to lower secondary metal collection levels in North America, Europe and Australia.

“Improved earnings despite the external challenges presented by falling commodity prices, poor weather, and lower volumes, validates our ability to execute our internal initiatives,” said Claro.

“Low ferrous scrap metal prices have diminished the economic appeal for collection of more marginal material by our suppliers. As a consequence, we have witnessed deterioration in intake volumes, particularly in North America.

“Moreover, the level of competition among metals recyclers in North America remains high. At current ferrous scrap prices, we presently anticipate intake volumes in FY16 will be similar or slightly lower than in FY15.”

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