U.S. Steel Swings to Loss, Cuts Guidance -- 2nd Update

By Josh Beckerman And John W. Miller 

U.S. Steel Corp. swung to a loss and lowered its pretax 2015 earnings forecast by around $500 million, citing "massive" amounts of imports, low oil prices and excess inventories.

The results were worse than expected and pushed the Pittsburgh-based steelmaker's stock down more than 6% in after-hours trading.

Across the board, steelmakers in the U.S. are reeling as prices have dropped to their lowest levels since the 2009 financial crisis. The benchmark hot-rolled coil index has declined 26% since the start of the year, to $444 per ton.

U.S. Steel Chief Executive Mario Longhi called market conditions "extremely difficult" as the company, in a statement, blamed imports and oil prices.

Overall steel imports into the U.S. rose 14% to 7.9 million tons during the first two months of 2015, according to Global Trade Information Services. The U.S. imported 397,062 tons of steel from China during that time, up 24% from the same period a year before.

Oil prices have fallen over 40% in the past year to under $60 a barrel, leading to a pullback by energy producers and lower demand for steel pipe for drilling.

Under Mr. Longhi, who took over as CEO in 2013, U.S. Steel has been aggressive about laying off workers and cutting costs. Already this year, U.S. Steel has issued layoff warnings to more than 9,000 workers, laying off around 2,800 of them. It has cut back operations at nine plants.

Last month, the company said it would temporarily idle an Illinois plant as it consolidates its North American flat-rolled steel operations, reflecting weakened demand from the energy sector. It also said it would temporarily idle a portion of its Minntac iron ore operations in Minnesota.

The company Tuesday lowered its full-year forecast for adjusted earnings before interest and taxes to between $115 million and $315 million, from a prior projection of between $550 million and $850 million.

For the quarter, U.S. Steel posted a loss of $75 million, or 52 cents a share, compared with a profit of $52 million, or 34 cents a share. Overall, net sales fell 26% to $3.27 billion in the first quarter.

Earlier Tuesday, AK Steel Holding Corp. posted a loss of $306.3 million, or $1.72 a share, compared with a loss of $86.1 million, or 63 cents a share, a year earlier. Last week, Nucor Corp. said first-quarter earnings fell 39%.

The curtailing of capacity by U.S. Steel and others should soon have an impact on prices, say analysts. ArcelorMittal this week sent a letter to customers announcing a price increase of $20 per ton. "The mills are at a point of exhaustion and are starting to draw a line in the sand," says Phil Gibbs of Keybanc in Cleveland. "And the mills have been good about taking the pain and reducing capacity."

U.S. Steel also said market conditions should "improve during the second half of 2015."

Write to Josh Beckerman at [e-mail] and John W. Miller at [e-mail]

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