Oct. 31, 2012
Profits Decline in Third Quarter for U.S. Steel
U.S. Steel’s net income slipped, but the company remained profitable during its third quarter. The Pittsburgh-based steelmaker reported net income of $44 million, less than half the $101 million in the second quarter but double the $22 million reported during last year’s third quarter.
Net sales for the quarter totaled $4.7 billion, down about 8 percent from both the previous quarter and third-quarter 2011.
“Third-quarter operating results were positive for all three reportable segments in an economic environment that was more challenging than the second quarter,” said U.S. Steel Chairman and CEO John P. Surma. “Our Tubular segment once again had solid results, despite declining rig activity and pricing pressure caused by rising oil country tubular goods inventory and continued high levels of imports. Our Flat-rolled and European segments were profitable, but continue to be challenged by difficult global economic conditions. In addition, our Flat-rolled segment continued to be adversely affected by increased import levels.”
Flat-rolled third-quarter results dipped from the second quarter primarily due to a $31 per ton decrease in average realized prices. Significant price decreases for domestic scrap and globally traded steelmaking raw materials placed downward pressure on spot and index-based pricing mechanisms in North America in the third quarter, company officials said.
The spot market continues to be pressured by high import volumes, which for sheet products have increased 13 percent through the first nine months of 2012. Proceeds from steel substrate sales to the company’s Tubular segment also have decreased. Shipments and operating costs for the Flat-rolled segment were comparable to the second quarter.
Third-quarter results for U.S. Steel’s Tubular segment were in line with the second quarter. Shipments decreased as end users adjusted drilling plans and curtailed spending due to economic uncertainty and concern over energy prices, officials said. Average realized prices declined slightly as import levels remained high, resulting in pricing pressure from increased supply. Operating costs decreased compared to the second quarter due to lower substrate costs.
“Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America,” Surma said.
The company expects a loss for its Flat-rolled segment due to slightly lower average realized prices, as well as lower shipments and higher operating costs. Average realized prices and shipments are expected to be lower compared to the third quarter as a result of cautious purchasing patterns early in the quarter created by the uncertain global economic outlook.
“However, market conditions have recently begun improving in North America, and we believe that we are already beyond the spot price trough of the fourth quarter. New spot orders are being transacted at higher prices for delivery later this quarter. Operating costs are expected to increase due to scheduled blast furnace and other maintenance projects,” he said.