US Steel Narrows Loss in 2016

Flat rolled sales totaled $65 million down from $114 million in Q3. The segment was negatively impacted during the quarter by lower average realized prices, fewer shipments and outage spending. Flat rolled shipments totaled 2.37 million tons compared to 2.5 million tons the previous quarter. Earnings for flat rolled were $65 million down from $114 million in Q3. Average realized price per ton was $692, down from $718 per ton in third quarter.

Lead times for hot rolled products are at approximately five weeks while cold rolled and coated product lead times are currently eight weeks. Flat rolled utilization rate, excluding the capacity at the idled Granite City facility, was 69 percent in fourth quarter.

The Tubular segment posted a net loss of $304 million for the full-year 2016 and a loss of $87 million in fourth quarter. U.S. Steel Europe remained positive last quarter at $63 million net earnings, compared to $81 million in third quarter.

US Steel expects a better year in 2017 with net earnings of approximately $535 million if market conditions remain at current levels.

Commenting on U. S. Steel’s outlook for 2017, Longhi said, “We are starting 2017 with much better market conditions than we faced at the beginning of 2016. Our Carnegie Way transformation efforts over the last three years have improved our cost structure, streamlined our operating footprint and increased our customer focus. These substantive changes and improvements have increased our earnings power. While we will benefit from improved market conditions, they continue to be volatile and we must remain focused on improving the things that we can control. Pursuing our safety objective of zero injuries, improving our assets and operating performance, and driving innovation that creates differentiated solutions for our customers remain our top priorities.”

US Steel provides analysts a question and answer sheet prior to the earning conference call. One of the questions sure to come up during the call is the Vietnam circumvention case.

US Steel filed the case with other steel producers in September 2016 requesting an investigation into cold rolled and CORE steel are circumventing existing AD/CVD duty orders by processing substrate from China. The DOC received responses from Vietnam on December 28, 2015 and the investigation should conclude with 300 days of the original initiation, most likely by May or June.

The Section 337 case continues to work its way through the DOC. The suit alleges a conspiracy to fix prices and control output and export volumes, circumvention of duties by false labeling and transshipment, and theft of trade secrets. The claim regarding transshipment was dismissed on January 12, 2016 and U.S. Steel subsequently filed for a review of that determination. US Steel is seeking the barring of all Chinese carbon and steel and alloy steel products from the U.S. market.

US Steel would not comment on rumors of the sale of its Kosice facility in Slovakia noting the company is always reviewing and improving the long-term viability of the company which can include acquisitions and divestures.

US Steel Corporations 4th quarter and full year 2016 earnings call is scheduled for Wednesday, January 1. Steel Market Update will cover the comments made during the call in our Thursday edition.