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U.S. Steel nets $44M in 3d qtr.

Keywords: Tags  USS, U.S. Steel, earnings report, John Surma, Michael Cowden

CHICAGO — U.S. Steel Corp. remained profitable in the third quarter, but warned that fourth-quarter results could tumble due to economic uncertainty at home and abroad.

"Third-quarter operating results were positive ... in an economic environment that was more challenging than the second quarter," U.S. Steel chairman and chief executive officer John P. Surma said Tuesday in a statement released with the company’s earnings results.

The Pittsburgh-based steelmaker posted net income of $44 million in the third quarter, double the $22 million recorded in the same period last year despite an 8.4-percent decline in sales to $4.65 billion from $5.08 billion. However, the latest quarterly results were down sharply from second-quarter net income of $101 million on sales of $5.02 billion.

For the first nine months of the year, U.S. Steel posted a net loss of $74 million in contrast to net income of $158 million a year earlier on sales that slipped 1.5 percent to $14.84 billion from nearly $15.07 billion.

Average flat-rolled prices of $741 per net ton were down $31 from the second quarter and were $32 lower than a year earlier as "significant" decreases in domestic scrap tags and other steelmaking raw materials pushed down index-based prices in North America, U.S. Steel said.

The spot steel market was hit hard by imports, which were up 13 percent from the first nine months of last year, the company said.

U.S. Steel’s tubular segment, while profitable in the third quarter, faced increasing pricing pressure from high inventories of oil country tubular goods (OCTG) and continued high levels of OCTG imports, Surma said. The tubular segment also saw shipments drop as end-users cut back their drilling plans because of economic uncertainty and concern over energy prices, the company said.

In Europe, results narrowed compared with the second quarter as average prices fell. U.S. Steel said shipments also declined because of normal summer holiday outages, cuts to automotive production schedules and continued conservative buying by service centers and distributors.

"Our results are expected to reflect continued weakness in the Europe and emerging-market economies, as well as economic uncertainty in North America," Surma said, forecasting decreased results across the company in the fourth quarter, with operating results "around breakeven."

U.S. Steel’s flat-rolled segment expects to record a fourth-quarter loss due to slightly lower average prices, lower shipments and higher operating costs, Surma said, with the company seeing more cautious buying patterns early in the fourth quarter than in the third quarter.

But Surma also stressed that market conditions for U.S. Steel’s flat-rolled division had started to improve recently in North America. "We believe that we are already beyond the spot price trough of the fourth quarter," he said, noting that spot orders for material slated for delivery later in the fourth quarter were being transacted at higher prices.

U.S. Steel’s tubular segment is expected to remain profitable in the fourth quarter, albeit at levels "well below" those seen in the third quarter, Surma said. Average prices likely will fall in the quarter as shipments are projected to be "significantly lower" than in the third quarter because of high levels of imports and decreased drilling activity. Customer inventory management also might impact fourth-quarter tubular results, he added.

The U.S. drill rig count, a key indicator of energy tubular consumption, slipped to 1,826 rigs in the week ended Oct. 26, down 13 rigs from the previous week and off 195 rigs from the same week last year (, Oct. 29).

In addition, energy tubular buyers historically look to trim inventories and purchases in the fourth quarter ahead of year-end inventory taxes in some parts of the United States.

In Europe, U.S. Steel expects average selling prices to decrease, given lower tags for both spot market and quarterly contract business, Surma said. Shipments in Europe probably will slide as well due to lower consumption in the automotive and other end-user sectors, he added.

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