Sims Metal Management says a crash in the price of scrap metal has been worse than it feared, and it expects to lose $20 million to $30 million this half-year.
The ASX-listed metals and electronics recycling company said the price for scrap metal has fallen so low it has become uneconomic for a number of its suppliers to gather and sell it.
“Margins and volumes are meaningfully lower across all metals recycling regions and this will continue to impact our results for as long as prices remain at these subdued levels,” Sims announced on Monday.
Sims said it also has unsold inventory, most significantly in the UK, from before the crash that it will have to sell at a loss.
Prices for scrap metal crashed in early September, which Sims blamed on a decline in automobile sales and global manufacturing; a slowdown in both China’s growth and world growth; and the unresolved trade warns.
Sims chief executive Alistair Field said the strong balance sheet would allow it to navigate the market volatility, forecasting the company would return to profit in the second half with earnings of between $50 million and $70 million if the market stabilised.