USS posts lower Q2 profit on weaker steel prices, BRS2 startup in Q4

U.S. Steel posted significantly lower second-quarter profits on falling prices and start-up costs at its Big River Steel (BRS) campus in Osceola, Ark.

The Pittsburgh-based steelmaker also warned that third-quarter results at its North American flat-rolled business could “soften slightly.”

Continued start-up costs at Big River will be an issue in Q3 as will lower spot pricing. And weak spot tags could offset strength in its contract business, the company said.

Recall that U.S. Steel has four primary divisions: integrated flat-rolled mills in the US; Big River Steel, its EAF sheet mills in Osceola; pipe and tube mills; and a steel mill in Slovakia.

By the numbers

All told, U.S. Steel earned $183 million in Q2’24, down nearly 62% from $477 million in Q2’23 on revenue that fell approximately 18% to $4.1 billion over the same comparison.

Company President and CEO David Burritt focused on the positive in comments released with earnings data after the close of markets on Thursday.

“We were pleased with our performance during the second quarter… in spite of pricing headwinds that grew in the quarter across our operating segments,” he said.

An example of those headwinds: SMU’s price for hot-rolled (HR) coil started the second quarter at $845 per short ton (st) on average. HR prices had fallen 21% to $670/st by the end of June, according to our pricing records.

Prices have since stabilized in the mid/low $600s/st. And domestic mills have announced increases. But it remains to be seen whether those price hikes will stick.

Nippon Steel deal

U.S. Steel said it expects that its more than $14-billion acquisition by Nippon Steel will close later this year. “We continue to make progress on the U.S. regulatory processes ahead of the anticipated closing,” Burritt said.

Recall that the sale of the company first became public last August. U.S. Steel named the Japanese steelmaker as the winning bidder in December. And the deal was initially expected to close without issue.

But the deal has since become a political football. The United Steelworkers (USW), a key voting bloc, opposes the deal. Both President Biden and former President Trump have criticized it. And earlier this week, Pennsylvania Gov. Josh Shapiro said he would not support the deal unless the USW did.

Shapiro’s apparent objection to the pact was notable. He was as of Thursday evening the odds-on favorite to be vice president should current Vice President Kamala Harris win the presidency in November elections.

BRS2

On the operations side, U.S. Steel said the first coil from its Big River Steel 2 (BRS2) expansion should be produced in the fourth quarter. It said the cadence of the ramp-up there should match that of the first EAF sheet mill in Osceola (BRS1).

The company also noted that BRS1 had recently commissioned a dual Galvalume/galvanized coating line. That line is ramping up as expected, the company said.

“Galvanized coils (from BRS) are being delivered to customers, and the team is on track to produce Galvalume coils later this summer,” Burritt said.

Recall that BRS2 is intended to roughly mirror and improve on BRS1. It is slated to have capacity of three million tons per year (tpy). That would bring annual capacity at Osceola to six million tpy.

Some context

U.S. Steel’s Gary Works in northwest Indiana – its largest integrated mill in the US – has annual raw steelmaking capacity of 7.5 million tpy. Gary Works would remain the company’s largest domestic mill.

In contrast, Mon Valley Works, an integrated mill in the Pittsburgh area, has annual raw steelmaking capacity of 2.9 million tpy. And U.S. Steel’s Granite City Works, an integrated mills near St. Louis, has annual steelmaking capacity of 2.8 tpy. So Big River, once BRS2 is complete, would produce slightly more than those two facilities combined.