U.S. Steel Sees Smaller Losses in Fourth-Quarter 2010, Expects Further Gains in Early 2011

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Researched by Industrial Info Resources (Sugar Land, Texas)--United States Steel Corporation (NYSE:X) (U.S. Steel) (Pittsburgh, Pennsylvania) reported overall losses for the fourth quarter of 2010, largely due to weak steel market conditions in what is normally a "down" season for the industry, and overall losses for the year that were smaller than those experienced in fourth-quarter and full-year 2009. Net income for the quarter was reported to be a loss of $249 million, compared to a loss of $267 million in fourth-quarter 2009, and a loss of $482 million for the full year, compared to a loss of $1.4 billion for 2009.

Net sales stood at $4.3 billion for the quarter, a 28.21% increase from fourth-quarter 2009, and $17.37 billion for the year, a 57.26% increase from 2009. Among the advantages enjoyed by U.S. Steel during the quarter were reduced spending on facility maintenance and $11 million in net income from the sales of Alabama transportation assets and Canadian bar, bloom and billet mill assets. The company's Tubular segment saw the strongest overall gains.

U.S. Steel faced numerous challenges during the quarter that led to net losses, including an overall decline in realized prices and total shipments, reflecting weak steel market conditions, and a foreign currency translation loss that amounted to about $33 million.

"While we were by no means pleased with these results, they are a significant improvement over the 2009 results... when we were badly affected by the global recession," John P. Surma, the chairman and chief executive officer of U.S. Steel, said in a conference call. He also noted that total steel shipments were up by about 50% for the year.

The U.S. Steel business segments reported a $92 million net loss from operations for the quarter, compared with a $245 million loss in fourth-quarter 2009. However, the company saw a $56 million net gain for the full year, compared with a $1.59 billion loss in 2009:

• The Flat-Rolled segment reported a loss of $156 million for the quarter, compared with a loss of $284 million in the same period last year, and a loss of $312 million for the full year, compared with a loss of $1.44 billion for full-year 2009.
• The U.S. Steel Europe segment reported a loss of $39 million for the quarter, compared with a loss of $3 million in fourth-quarter 2009, and a loss of $33 million for the full year, compared with a loss of $208 million for full-year 2009.
• The Tubular segment reported a gain of $96 million for the quarter, compared with a $39 million gain in the same period last year, and a gain of $349 million for the full year, compared with a gain of only $57 million for full-year 2009.
• Other business segments reported a total gain of $7 million for the quarter, compared with a $3 million gain in fourth-quarter 2009, and a gain of $52 million for the full year, compared with a loss of $2 million for full-year 2009.

For first-quarter 2011, U.S. Steel believes it will see a noticeable improvement in segment results. Raw materials costs are expected to climb in the Flat-Rolled and European segments; however, the Flat-Rolled segment is expected to see stronger average realized prices, the European segment is expected to see improved transaction prices, and shipments and production volumes are expected to increase in both. The Tubular segment is expected to remain profitable as shipments improve.

"Order rates for most customer groups and publicly reported spot market prices began to increase later in the fourth quarter, and we remain cautiously optimistic that global economic conditions will continue to improve in the first quarter [of 2011]," Gretchen R. Haggerty, executive vice president and chief financial officer for U.S. Steel, said in the conference call.

Industrial Info is tracking 19 active U.S. Steel projects in the U.S. and Canada that are worth a total of more than $2.5 billion, including the $250 million expansion of a steel tube mill in Lorain, Ohio. The project, which is set to kick off in July of this year and conclude in March 2014, includes the installation of a new pipeline manufacturing mill to increase production at the 780,000-ton-per-year facility, as well as the design and installation of the equipment and machinery necessary to heat, treat and finish tubing and casing products used in the exploration of natural-gas fossil fuels, as well as use of the best available emissions control technology. For more information, visit Industrial Info's North American Metals & Minerals Project Database.

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