Market Segment
US Steel: “We Have Probably Seen Bottom”
Written by John Packard
April 26, 2016
US Steel Corp. announced a net loss of $340 million for first quarter 2016 and a segment EBIT loss of $242 million or $70 per ton.
“It’s my perception that we have probably seen bottom,” said president and CEO Mario Longhi to reporters following U.S. Steel’s shareholder meeting Tuesday in Pittsburgh.
US Steel began first quarter under challenging conditions but results were in line with expectations. The flat rolled segment posted a $188 million EBIT loss due to decreases in average realized prices in the contract business and lower average spot prices. Flat rolled shipments totaled 2,498,000 tons. Additionally, seasonally lower results from US Steel’s mining operations and a $50 million loss from LIFO inventory reduction contributed to lower results in the first quarter.
The tubular segment posted a $64 million loss due to lower prices and shipments attributed to the decline of drilling activity and increasing import levels. The loss was somewhat offset by lower substrate, spending and operating costs. Tubular shipments for Q1 were 89,000 tons compared to 220,000 tons in Q1 2016.
US Steel Europe posted a loss of $14 million.
At the shareholders meeting Longhi acknowledged that the company was willing to sell off the tubular steel segment although nothing was currently pending.
“We will look at everything without any restriction,” he said. “We’re always open, and conversations take place on a regular basis. So this is not something new. If there’s an opportunity that enhances shareholder value, then we’ll certainly pursue it.”
Longhi said the company is encouraged that efforts to improve trade laws and their enforcement are beginning to be realized in preliminary trade rulings.
At the shareholders meeting, he noted that after years of dumping steel on foreign markets, the Chinese steel industry is beginning to struggle.
“For the first time, you’re seeing all the Chinese steel makers lose money…and a lot of it,” said Longhi. “From what they’ve been doing to us, they’re now beginning to do to themselves.”
In the 2016 outlook remarks, US Steel said, “If market conditions, which include spot prices, customer demand, import volumes, supply chain inventories, rig counts and energy prices, remain at their current levels, we would expect 2016 adjusted EBITDA to be near $400 million.”
The flat-rolled segment is expected to improve from 2015, the European segment will be flat and the tubular segment below 2015 results.
US Steel holds its first quarter 2016 earnings conference call at 8:30 a.m. on Wednesday. SMU will have more to report following the call.
John Packard
Read more from John PackardLatest in Market Segment
Nucor targets ‘white hot’ data center boom
With infrastructure demand shifting toward digital capacity, Nucor Corp. is positioning itself as the go-to steel supplier for the data center boom.
Gerdau’s N. American earnings rise in Q3 due to fall in imports
Gerdau’s North American profits rose in the third quarter, boosted by a decline in imports due to Section 232 steel tariffs.
Ternium swings to Q3 loss, eyes 2026 recovery
Ternium closed the third quarter with steady shipments and improving margins. But trade policy uncertainty and subdued demand in Mexico weighed on the Latin American steelmaker’s results.
SMU Mill Order Index fell in September
SMU’s Mill Order Index declined in September after repeated gains from June through August. The shift came as service center shipping rates and inventories fell.
Algoma’s losses widen in Q3 as tariff troubles continue
Algoma Steel’s net loss more than quadrupled in the third quarter on trade woes and its EAF transition. Separately, the company announced a change in leadership, as CEO Michael Garcia will retire at the end of the year.