Fitch Ratings has downgraded its issuer default rating (IDR)
for US Steel to BB- from BB, it said this week.
The ratings outlook is stable.
The ratings reflect adequate liquidity, weak but improving
market conditions and a period of higher financial leverage,
while earnings are below the expected average.
The stable outlook reflects Fitchs view that US
Steels liquidity is sufficient to support operations,
should the recovery remain weak for the next 12-18
months, it said.
Fitch believes that free cashflow could be negative-$160
million to neutral in 2012 given high capital spending, offset
by a modest workdown of raw material inventory. Capital
expenditures are expected to remain at elevated levels with
projects to improve costs or for new products, it added.
While management has a high degree of control over its
raw materials, the company has a large fixed cost base, and
industry-wide capacity utilisation in North America has been
less than 80% ,thereby pressuring earnings, it concluded.
Industry-wide capacity utilisation has averaged 78% in the USA
for the year to date and recently hit 81%.
US Steels capacity utilisation for North America for the
first quarter was 83%.