Steel Mills

USS guides to higher Q1 profits as questions remain on Nippon deal

Written by Ethan Bernard

U.S. Steel expects higher earnings in the first quarter of this year vs. the previous quarter.

The Pittsburgh-based steelmaker provided Q1’24 adjusted net-earnings-per-diluted-share guidance of $0.80 to $0.84. This is up from adjusted net earnings per share in Q4’23 of $0.67.

Additionally, the Pittsburgh-based steelmaker said it expects adjusted earnings before interest, income taxes, depreciation, and amortization (ebitda) of ~$425 million. The company reported adjusted ebitda of $330 million in Q4’23.

U.S. Steel President and CEO David Burritt noted that the company’s Big River Steel dual coating line in Osceola, Ark., comes online in Q2’24, followed by its Big River 2 minimill later in 2024.

Big River 2, an EAF sheet mill, is slated to double capacity at Osceola from three million tons per year (tpy) to six million tpy once it is fully ramped up.

Flat-rolled and minimill guidance

U.S. Steel expects higher adjusted ebitda in Q1’24 vs. Q4’23 in its flat-rolled segment. The company cited higher spot steel prices and the “favorable impact” from fixed-priced contracts negotiated for 2024.

Burritt said “balanced and diverse markets are keeping the order book strong” in this segment.

But “typical seasonal mining operations headwinds” in Q1 are expected to partially offset these tailwinds,” according to U.S. Steel.

Like other integrated steelmakers, U.S. Steel stockpiles iron ore pellets near its mines in Minnesota during the winter. The material is then transported across the Great Lakes to its mills once navigation resumes in the spring.

Recall that U.S. Steel’s flat-rolled segment includes its unionized, integrated sheet mills – facilities like Gary Works in northwest Indiana and Mon Valley Works in the Pittsburgh area.

Meanwhile, the company said its minimill segment’s adjusted ebitda is anticipated to nearly double in Q1’24 vs. the previous quarter.

U.S. Steel said higher average selling prices would support earnings despite higher raw materials costs and ~$20 million in construction costs related to Big River.

Note that U.S. Steel’s minimill segment comprises Big River Steel, a non-union EAF sheet.

Nippon Steel acquisition

“We remain focused on running our business as we make progress towards closing our transaction with Nippon Steel Corp.,” Burritt said in a statement on Monday.

The guidance comes as questions swirl around U.S. Steel’s $14.1-billion sale to Japan’s Nippon Steel. Last week, President Biden said it was “vital” for U.S. Steel to remain an American company.

“Opposition to the Nippon takeover from President Biden seems tough to surmount, in our view,” Timna Tanners, managing director of equity research for Wolfe Research, said in a research note on Monday.

Recall that former President Trump has said that, if re-elected, he would also oppose the deal.

Nippon provided a response to Biden’s comments last Friday.

Ethan Bernard

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