Among Price Rise, Chinese Surplus Limiting Profit

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Schnitzer Steel Industries, Inc. reported positive financial gains this week, with $0.41 earnings per share, compared to losses in the second quarter of 2016. Ferrous sales volumes also increased 13% in the third quarter of 2015. Total domestic volume remains low, as scrap products are exported to international buyers (including India, Turkey, and South Korea).

“Successful execution of our multi-year strategy to reduce costs and improve productivity led to our auto and metals recycling business delivering its best quarterly performance since 2011,” said Tamara Lundgren, Schnitzer’s president and Chief Executive Officer. 1

Nucor Corporation also reported an increase of 14% in consolidated net sales to $4.25 billion in the second quarter of 2016. Steel mill operating rates increased to 83% during the same period, as mill energy costs decreased $1 per ton. Nucor attributes these benfits to, “lower electricity and natural gas unit costs and improved productivity resulting from higher steel production volumes.” 2

Hulamin, supplier of Aluminum in South Africa, also touted higher profits based on operational performance. Hulamin CEO, Richard Jacob, said in a call last week, “we had a very challenging first half last year, but we have seen volumes picking up in response to some of our risk-mitigation exercises as well as improved efficiencies.” 3

Despite short-term growth, some investors warn the second half of 2016 will see softened prices. The latest report from BMI Research forecasts, “We expect the January-June 2016 steel rally to fade and prices to head lower in the latter half of 2016 as declining Chinese steel demand growth, stemming from a slowdown of the country’s construction activity, will result in an oversupplied market [but] prices will gradually edge higher from 2017 onwards, due to Chinese supply moderation.” 4

Ethan Frederick GrantAmong Price Rise, Chinese Surplus Limiting Profit

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