NEW YORK U.S. Steel Corp. expects the flat-rolled market to pick up in the third quarter, underscored by recent momentum in sheet price hikes.
"Demand has been relatively stable and many of the value-added markets we serve continue to improve. While the recovery in the automotive market has clearly led the way, other markets, including appliances, agricultural equipment and residential construction, are also making progress," John P. Surma, chairman and chief executive officer of the Pittsburgh-based steelmaker, said during a second-quarter earnings conference call. "The combination of improving demand and generally lean supply chain inventory levels has provided support for the improving pricing environment as of late."
The integrated producers flat-rolled division posted a $51-million loss in the second quarter vs. a $13-million loss in the first three months of this year and earnings of $177 million in the second quarter of last year (amm.com, July 29). However, Surma said that much of the weakness in the companys financials was caused by the lockout at its Lake Erie Works in Nanticoke, Ontario, and a blast furnace outage at its Great Lakes Works in Ecorse, Mich., offsetting increasing sheet prices and lower raw material costs.
The company asked the Ontario provincial government in July to intervene and order a vote on its final contract offer for the approximately 1,000 locked-out workers at Lake Erie. Surma said that if the union ratifies the contract July 31, the mill would be started as soon as possible. "Wed have to go through a period of heating stoves and getting the furnace ready to go ... (so) it would be about a month before were up and running hard," he added.
The company has charged chief operating officer and newly elected president Mario Longhi with spearheading a cost-saving initiative to leverage small projects and ideas across operating locations while hunting for larger transformational changes.
"The goal is to be able to sustain these improvements on an ongoing basis and under all market conditions," Longhi said during the conference call. "Improvements are expected from both the costs and revenue side of the equation."
While Longhi declined to discuss specific targets, timelines or figures, he said the project would look at a number of key areas, including raw material costs, conversion costs, fixed costs and enhancement by reevaluating market strategies, and may involve new incentives to employees.
Moving forward, the company is focused on ramping up its new Pro-Tec continuous annealing line and continuing to evaluate a possible direct-reduced iron (DRI) venture with Lorain, Ohio-based Republic Steel, as well as analyzing the possibility of making DRI-quality pellets.