Market conditions for commodities and metals recycling in 2016 have been the toughest for 30 years, according to Sims Metal Management chief executive Galdino Claro.
At the company’s annual address to shareholders, Claro said Sims had responded to the tough conditions by reducing overheads, selling or mothballing facilities and accelerating the implementation of other initiatives.
“The market conditions in 16, particularly at the end of the first half, were not only the most difficult during my time at Sims Metal Management, but perhaps the toughest the industry has seen in 30 years,” he said.
“Facing these challenges, we did not sit idle waiting for the moment to pass. The accomplishments of this difficult work during the past financial year have meaningfully and sustainably improved our business.”
It was in November 2015 that Sims announced new plans to boost the books.
“The scope of the resetting work was extensive,” Claro said. “Twenty-nine loss-making or non-core facilities were sold or idled, overhead costs were lowered and employee headcount was reduced by 12%.
”In total, through these initiatives, controllable costs were lowered by a further $137m (£110m) over the prior year.”
Claro said Sims had retained sufficient capacity to sell 12 million tonnes a year of recyclable material when industry volumes recover.
His comments were backed by chairman Geoffrey Brunsdon, who said that, when the company launched its five-year strategic plan four years ago, commodities and metals recycling markets appeared to have reached cyclical lows.
“However, what has in fact occurred since then is that the external environment has become significantly more demanding. This has been driven by a 40% ferrous scrap price reduction and a consequent 33% contraction in our sales volumes, similar to the volume decline across our key markets.“
Claro said investment had continued, with $109m going into sustaining and growth projects. He was also proud of the company’s drive towards a ”zero harm goal”.
In 2016, 84% of Sims facilities worldwide had zero recordable injuries and 94% had zero lost workday injuries.
“Metal recycling involves large machinery and heavy equipment in close proximity of workers. As a result, it can be very dangerous. We believe every accident is preventable and therefore our goal is simple: zero harm – no one gets hurt, either at work or at home.
“While some may be sceptical about a zero injury goal, the company’s most recent safety performance shows this goal is now closer.”
Sims is one of the world’s largest metal recyclers with 200 facilities, operations in 20 countries and more than 4,750 employees globally. More than half the revenue comes from operations in the US.
Steel exports from China remain close to historically high levels. However, encouragingly, the rate of exports has begun to reduce, declining 9% in the third quarter over the previous year. In addition, rising prices across iron ore and coking coal has increased the competitiveness of ferrous scrap-based electric arc furnaces, as well as greater use of ferrous scrap by blast open furnaces. These recent positive trends should lead to improved demand for ferrous scrap metal, particularly in export markets, during the course of FY17. Non-ferrous markets have also shown recent signs of improvement. US export demand for copper and aluminium have steadily increased since the start of the calendar year. While improved demand and stronger prices are positive, overall volumes are not yet above last year’s levels.