Metals

Sims issues profit warning, plans to cut up to 800 jobs

Sims Metal Management, headquartered in Sydney and in New York, has issued a profit warning prior to reporting its quarterly results and says it will buy back shares of its stock and scale back operations globally, with a focus on the U.S.

In a presentation available at www.simsmm.com, Sims warns of “flat earnings” in the first half of its 2016 fiscal year (the second half of calendar year 2015) and that it “now expects a $230 million impairment charge during [fiscal] 2016.”

Sims CEO Galdino Claro and Chief Financial Officer Fred Knech say “ferrous prices [that fell] sharply by 30 percent from mid-September to November” are a leading cause of its financial woes.

Sims also intends to buy back up to 10 percent of its issued stock, which “reflects the confidence [the] board has in the outlook for the business and the attractive underlying value of the operations relative to current market prices.”

Sims says it will eliminate as many as 800 jobs and cut back operations or idle as many as 35 of its 270 facilities.

The sale of some “noncore facilities and properties” also may occur.

Regarding the timing of the layoffs and shutdowns, Sims says, “The majority of these initiatives will be in progress by the end of the first half of fiscal year 2016 (Dec. 31, 2015) and will be completed by the end of the second half of fiscal year 2016 (June 30, 2016).”

London Metal Exchange launches two new futures contracts

The London Metal Exchange has launched two new ferrous futures contracts, LME Steel Scrap and LME Steel Rebar.

The contracts are cash-settled against leading benchmark prices from Platts and TSI and are designed to provide new routes to trade steel futures and protect against price volatility.

LME says the new contracts, developed in response to market demand, also are designed to complement its existing ferrous contract, LME Steel Billet.

The combination of contracts is intended to deliver the optimal balance between physically settled and cash-settled contracts, LME says. Maintaining a physically delivered billet contract helps to ensure price convergence and will act as the core of a suite of products that can then be cash-settled, enabling the market to trade spreads back to the billet contract, LME says. Having this ability benefits physical customers as it allows them to hedge every step of the value chain, while also giving financial players the opportunity to arbitrage between different stages of the chain.

Additional information about the LME Steel Scrap and LME Steel Rebar contracts, including factsheets, pricing information and LME focus pieces, are available online at http://lme.com/metals/ferrous.

Alcoa reverses decision about curtailing New York smelter

Alcoa, with headquarters in New York and in Pittsburgh, has announced that it has entered into a three-and-a-half year agreement with New York state to increase the competitiveness of the Massena West smelter. The company previously had announced plans to curtail the facility; however, this agreement will help maintain hundreds of jobs in New York’s North Country, improve the cost position of the smelter and support growth projects for the casthouse, Alcoa says.

“Sen. Schumer and Gov. Cuomo have been tremendous allies for Alcoa’s Massena operations for many years, and we thank them for their continued support,” says Chairman and CEO Klaus Kleinfeld. The agreement “helps better position the smelter in light of prevailing market conditions, providing this facility a bridge to a stronger commodity market and maintaining jobs in the North Country. We remain focused on ensuring our Upstream business is well-positioned to succeed throughout the cycle,” he adds.

The state’s incentive package will help maintain approximately 600 jobs at the Massena West facility through the term of the agreement. The plant has 130,000 metric tons of smelting capacity.

Alcoa says it will continue with its other previously announced curtailments of uncompetitive smelting and refining capacity, which will reduce its smelting capacity by 373,000 metric tons.

Dakota Metals to open in South Dakota

Mark Ridall, CEO of Dakota Metals, says the newly launched nonferrous scrap processing company is building its offices and facility in Beresford, South Dakota. The company is currently based in Sioux Falls, South Dakota.

Ridall says Dakota Metals “will be one of a handful of companies in the world performing advanced recovery and separation of ‘micro fines,” referring to particles that measure 15 or less millimeters in size. “In short, we will have the ability to recover coffee-ground-size pieces of metal from material currently being sent to a landfill.”

The company will use equipment from a particular supplier, though Ridall says he cannot release details as of yet.

In addition to Ridall, who worked most recently with Wendt Corp. in Buffalo, New York, Peter S. Mason has joined the company as director of metal trading. He is a recycling industry veteran with more than 35 years of experience.

Drumbeat continues for steel tariffs

Although several key economic indicators are positive, the U.S. steel industry is closing plants and shedding jobs, and its defenders say imported steel is the culprit. Producers in China in particular are being blamed for churning out steel they can only sell at a discount.

After U.S. and Chinese officials met to discuss the situation in late November 2015, Thomas J. Gibson, president and CEO of the Washington-based American Iron and Steel Institute (AISI), said, “Overcapacity in China’s steel industry is a major factor fueling the import surge currently injuring the U.S. industry.”

One result of the meeting, according to Gibson, was that “the official U.S. government fact sheet on the meeting recognized that China’s exports of steel and aluminum are large and growing and are the central cause of a glut of supply on the global market.”

Figures collected by the U.S. Census Bureau and analyzed by AISI show an increase in imported steel into the U.S. in October 2015. The U.S. imported a total of 2.99 million tons of finished and semifinished steel in October, including 2.26 million tons of finished steel—a figure that is 5.4 percent higher than what was imported in September 2015.

Year to date through the first 10 months of 2015, total steel imports are down 8 percent compared with the same period in 2014.

One product segment where imports spiked in October was reinforcing bar (rebar), which saw import levels nearly double from 112,700 tons in September to 222,100 tons in October. Rebar imports are up 47 percent year to date through the first 10 months of 2015.

A Minnesota congressman is urging Congress and President Obama to take action immediately with prohibitive tariffs on many forms of steel. An article in the Minneapolis Star-Tribune says Democratic Rep. Rick Nolan is not optimistic that Congress will act quickly, so he is urging President Obama to issue an executive order to propose a prohibitively high tariff, similar to what President George W. Bush did in 2002.

That action was eventually struck down by the U.S. International Trade Commission one year later, but Nolan is quoted as saying, “If a couple of big time free-traders like [President Ronald] Reagan and Bush can take that kind of action, there is no reason President Obama can’t do the same thing. We need to do it right now before it’s too late.”

Constellium to build plant in Georgia

Constellium N.V., headquartered in Amsterdam, has announced that it will construct a new greenfield manufacturing facility in Bartow County, Georgia, in response to growing demand for its automotive structures in North America. (For an interview with Constellium’s Catherine Athènes, see “Altogether More Sustainable” in the accompanying Metals Recycling Supplement.)

The company says the project represents a $20 million investment by Constellium and a $12 million investment by developer Seefried Properties, for a total project value of $32 million. Construction of the plant will begin in early 2016 with production starting in 2017. Constellium says it expects to create approximately 150 high-tech manufacturing jobs at this location by 2019.

“The new Georgia plant demonstrates Constellium’s commitment to work in partnership with automakers in North America and to be near their assembly plants,” says Paul Warton, president of Constellium’s Automotive Structures and Industry business unit. “This expansion of our footprint in the Southeast United States will allow us to better serve our automotive customers and to respond the industry’s growing demand for aluminum structural parts to lighten vehicles, improve fuel economy and reduce environmental impact.”

The planned 84,000-square-foot greenfield plant may be expanded up to 220,000 square feet to adapt to customers’ future supply needs.

US Steel confirms idling of Granite City, Illinois, mill

United States Steel Corp. (U.S. Steel), Pittsburgh, has announced it will idle most of its integrated steelmaking complex in Granite City, Illinois. The company had disclosed in early October 2015 that it was considering the move.

In a Nov. 23, 20015, press release, U.S. Steel says it “will temporarily idle its Granite City Works steelmaking and finishing operations in Granite City, Illinois. As the primary flat-roll supplier of the oil and gas industry, the idling is part of an ongoing adjustment of steelmaking operations throughout North America to match customer demand.”

The company says the idling of the plant, with some 2,000 workers, “is a result of continued challenging global market conditions, including fluctuating oil prices, reduced rig counts and associated inventory overhang, depressed steel prices and unfairly traded imports, which continue to have a significant impact on the business.”

U.S. Steel says it will continue to operate its steelmaking facilities in Indiana, Michigan and Pennsylvania, “as well some finishing operations in Alabama.”