Low scrap prices to hit Sims’ Metals H1

Global metals and electronics recycler Sims Metals says results for the six months to December will be “materially lower” than a year earlier due to the US-China trade war and falling demand for cars.

Sims chief executive Alistair Field said reduced scrap demand from steel mills had pulled prices below levels at which it is economic for some suppliers to gather and sell materials, while others could sit on inventory and only sell when prices rose.

He said that demand for twitch – an aluminium-dominated scrap – had fallen with a drop in automobile sales, while rising sea freight prices had compounded the problems.

“While it is not possible to predict the duration of these very low prices and poor liquidity, history shows that the scrap market tends to mean-revert, so we expect it will recover over the medium term,” Mr Field said on Monday.

“What I can say, however, is that there will definitely be an impact on our first half result and I am expecting the outcome to be materially lower than the prior corresponding half year.”

Mr Field said prices tended to recover quickly and that Sims’ remained well positioned to deliver good returns through the commodity cycle.

Shares in Sims Metal were worth $12.57 before the start of trade on Monday, up 25 per cent this calendar year but still 30 per cent lower than in June 2018.

AAP

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