Schnitzer Steel Industries Inc (SCHN) Q1 2015 Earnings Call Transcript

Operator
Thank you. Our next question comes from the line of Andrew Lane from Morningstar.

Andrew Lane, Morningstar
Hi, all, good morning.

Tamara Lundgren, President, CEO
Good morning.

Andrew Lane, Morningstar
You mentioned a capacity utilization increase for the SMB from 65 percent to 72 percent year-over-year, but it looks like shipment volumes were flat over that time period. This would seem to indicate you have reduced your production capacity. Is that accurate or is there something else at play here like a temporary capacity adjustment related to an outage?

Richard Peach, CFO, SVP
No, there’s no temporary – actually, what was happening here, Andrew, is that utilization will naturally change from quarter-to-quarter and even though our volumes were flat compared to last year’s Q1, but our utilization was up, the reason the utilization is up slightly is related to a generally stronger order book, so that higher production is probably already sold in the month of December.

Andrew Lane, Morningstar
Okay, understood. Then on a separate topic, I am curious if you could comment on the impact of falling oil prices on the scrap market and specifically on the supply side. As the U.S. rig count declines, would a large-scale decommissioning of oil and gas rigs add a meaningful quantity of scrap to the overall market or would this most likely not move the needle in terms of scrap availability in the coming quarters and months?

Tamara Lundgren, President, CEO
I don’t foresee that it’s going to change the availability of scrap in the immediate or short-term. Obviously, energy prices go through their peaks and troughs as well. So I wouldn’t anticipate that is going to affect the supply of scrap material.

Andrew Lane, Morningstar
Thank you.

Tamara Lundgren, President, CEO
Thank you.