AAP Finance

Low scrap prices to hit Sims’ Metals H1

By AAP Newswire

Investors have dumped Sims Metals shares after the global metals and electronics recycler said first-half results will be "materially lower" than a year earlier due to the US-China trade war and falling demand for cars.

Chief executive Alistair Field on Monday 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.

The effect will be pronounced when Sims announces its results for the six months to December.

It made a $76.5 million profit in the first half of FY19.

"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.

At 1115 AEST, shares in Sims Metal had given up almost all their gains for the calendar year and were $2.08, or 16.6 per cent, lower at $10.49.