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
companys 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
U.S. Steels 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. Steels 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.
Steels 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
U.S. Steels 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 (
amm.com, 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
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.