U.S. Steel Sees Improving Market

U.S. Steel Sees Improving Market
Pipe and Sheet Going Strong

U.S. Steel sees improving market

May 2, 2010

The Herald-Star

United States Steel Corp. continues to see improved demand for steel used in products such as appliances, automobiles and heavy industrial equipment. That improvement is slowly working its way to the steelmaker's bottom line, the Associated Press said. The Pittsburgh manufacturer reported a narrower loss for the first three months of the year and its best result since it reported a profit in the last quarter of 2008. The company predicted more improvement in the current quarter as shipments increase and prices rise, although it cautioned that raw materials also continue to rise. U.S. Steel is the latest steel maker to note a gradual improvement in business after struggling through a difficult 2009 when recession-battered customers cut back on orders. "Our operating results have been making a slow and steady recovery since hitting a low point in the first quarter of 2009 until this quarter, when the benefits of improved utilization rates and selling prices began to be realized in a more significant way," John P. Surma, chairman and CEO, told analysts during a conference call. Surma said all of the company's operating segments should be profitable in the second quarter, a little sooner than Wall Street had been expecting. "Gradually improving business conditions should be reflected in our operating results," he said in a statement. The results are an indication of both an improving global economy and a slow turnaround in the U.S., Argus Research analyst Bill Selesky said. He noted U.S. Steel is increasing production at some facilities. "They would not do that unless they thought they had a window here where demand was going up," he said. U.S. Steel reported a loss of $157 million, or $1.10 per share, for the quarter. A year ago, it lost $439 million, or $3.78 per share. Revenue rose 42 percent to $3.9 billion from $2.75 billion. Prices for flat-rolled steel, used in everything from automobiles to appliances, fell to $654 a net ton from $715 a net ton a year ago. But they improved from the fourth quarter. Prices also fell year over year in U.S. Steel's European operations and in the tubular business, which produces pipe products. Yet companywide, overall shipments jumped 67.5 percent from a year ago. U.S. Steel said cost-cutting measures that it has taken in the past year have made operations more efficient. In the months ahead, the company expects to see higher costs for coal used in the steelmaking process and iron ore for its European operations. Although U.S. Steel has its own iron ore source for North American operations, it expects to pay more for the raw material in Europe. Manufacturers that buy iron ore in the marketplace are expected to pay more because of a new international system that allows prices to be set quarterly instead of annually. U.S. stocks fell overall after Standard & Poor's downgraded the debt of Greece and Portugal. The move intensified investors' fears that Europe's debt problems are spreading. A German company is buying two idled Hamilton, Ontario, steel plants in a deal that could mean 300 new jobs for the city. The sale of the No. 1 bar mill and No. 3 bloom and billet mill at U. S. Steel Canada's Burlington Street complex will mark the North American debut of Max Aicher Group, a German company that already commands more than 20 per cent of Europe's market for automotive steel, according to the Hamilton Spectator newspaper. The report indicated the terms of the deal for the plants, which have been shuttered since January 2009, were not disclosed. Reuters reported Aurora Capital Group, a U.S.-based investment firm, is buying four steel service centers from Northern Steel Group, a unit of Severstal, which owns the former Wheeling-Pittsburgh Steel plants in the Ohio Valley. The service centers include Miami Valley Steel Service, Premier Resource Group, Electric Coating and Technology and U.S. Metals and Supply. Northern Steel Group is the former steel service center network of Esmark dating to the period before and during its ownership of Wheeling-Pittsburgh Steel Corp. Esmark sold W-P and its former service centers businesses to Severstal in August 2008. ArcelorMittal SA, the world's largest steelmaker, said Thursday it swung to a relatively modest profit of $679 million in the first quarter compared to a loss a year earlier, and predicted that the recovery will pick up throughout 2010. The Associated Press said ArcelorMittal reported it raised output to meet improving demand, particularly in China and developing countries. ArcelorMittal was hit hard by the recession-related slump in demand for steel used in buildings, bridges, cars and machinery, and cut production and jobs last year. ArcelorMittal owns the steel mill in Weirton. "The year has started with improved demand in all main markets, which will have a positive impact in the second quarter," CEO Lakshmi Mittal said in a statement. The quarter's profit compared with a loss of $1.06 billion in the first quarter of 2009, but was below the $1.07 billion profit in the fourth quarter of last year and the $903 million in the third quarter. Cold winters in Kazakhstan and Ukraine meant production was lower than hoped in those countries' operations, Chief Financial Officer Aditya Mittal said. Still, sales in the first quarter grew 23 percent to $18.6 billion from $15.1 billion as customers ran down their stocks and demand in the automotive industry picked up, said Aditya Mittal. He said shipments were up 35 percent from the first quarter a year ago to 21.5 million tons. "The steel market is improving in line with our expectations," he told reporters. The Luxembourg-based company said earnings before interest, tax, depreciation and amortization were $1.89 billion in the first quarter, and forecast those profits to rise to between $2.8 billion and $3.2 billion in the second quarter. ArcelorMittal produced some 6 percent of world steel in 2009, down from its usual share of 10 percent. Aditya Mittal said developing country demand is picking up but the expectation for demand in Europe and the United States is 20 to 25 percent lower for this year than in 2008. Net debt grew 10 percent in the first quarter to $20.7 billion. The company is carrying a large amount of debt from a recent expansion.

Q1 US mill shipments rise 10%; pipe and sheet strong

First quarter steel shipments from US mills were nearly 10% higher than last year, with pipe and tube

products seeing one of the highest percentage increases and tin mill products one of the largest

decreases, according to American Iron and Steel Institute statistics sent to Steel Business Briefing.

US mills shipped just over 22.5m short tons in the first three months of this year compared to about

20.5m s.t in Q1 last year.

Sheet products accounted for more than 54% of total Q1 shipments at 12.3m s.t – also 10% higher than

last year. Q1 hotrolled coil shipments were up 18% from last year to 5.25m s.t while coldrolled shipments

were up 16% to more than 2.84m s.t in Q1. Hot-dipped galv shipments, however, were down nearly 2% to

3.28m s.t in the same comparison.

Shipments of pipe and tube totaled almost 1.1m s.t during Q1 – 33.6% higher than last year. Line pipe

shipments of 104,275 s.t were up 74% and mechanical pipe shipments rose 56% to 181,680 s.t.

Shipments of OCTG, at 577,060 s.t, rose 26% from last year while standard pipe shipments jumped 30% to

202,910 s.t.

Tin mill product shipments fell by nearly a quarter from last year with 530,125 s.t shipped in Q1 this year.

While coiled plate shipments were down 9% to 778,660 s.t, shipments of cut plate rose 16% to just about

1.75m s.t, SBB observes in the AISI data.

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