Steel Mills

USS Earnings Guidance: Contract Gains to Offset Spot Volatility in '22

Written by Michael Cowden

U.S. Steel expects lower adjusted EBITDA in the fourth quarter compared to the third but a strong 2022 thanks to contract prices resetting higher.

The Pittsburgh-based steelmaker forecast fourth-quarter adjusted EBITDA of $1.65 billion, down from adjusted EBITDA of $2.03 billion recorded in the prior quarter.

US Steel

The fourth-quarter dip represents a temporary slowdown in order entry that is consistent with typical year-end buying patterns, U.S. Steel President and CEO David Burritt said in a statement released with earnings guidance on Thursday, Dec. 16.

“Next year, our fixed-price contracts are resetting significantly higher, providing better earnings stability compared with competitors with more spot exposure,” Burritt said.

He did not specify how much higher contract prices were. But market participants agreed that contract prices with big end-users such as automakers had reset significantly higher this year compared to last.

The contract gains follow a record increase in spot prices over the last 12 months. Hot-rolled coil prices currently stand at $1,670 per ton ($83.50 per cwt), down 15% from a 2021 record of $1,955 per ton in early September but up 75% from $950 per ton in mid-December 2020, according to SMU’s interactive pricing tool.

And mills have secured more favorable contract terms not only when it comes to steel prices but also when it comes to freight and quantity extras, sources said.

All told, U.S. Steel expects solid fourth-quarter results from Big River Steel, its other domestic flat-rolled mills and its tubular facilities.

The company offered a more downbeat forecast for its steelmaking operations in Slovakia, which it said would see lower EBITDA because of lower steel prices, unfavorable currency exchange rates, and higher outage and energy costs.

Case in point: The Slovakian mill started a 60-day outage at its No. 1 blast furnace on Nov. 29, U.S. Steel said.

By Michael Cowden,

Michael Cowden

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