United States Steel Corp. believes business will improve in the second quarter, as the recovering global economy sparks more demand for steel.
The nation’s largest steelmaker on April 26 forecast higher prices and stabilizing raw materials costs in the second quarter. The company said customer order rates have moderated recently, but it remained cautiously optimistic.
It’s similar to outlooks from Nucor Corp. and AK Steel Holding Corp., which also expect better second-quarter results. The industry has seen some market weakness, particularly in construction, and expects some impact from auto production cutbacks following Japan’s earthquake and tsunami in March.
“I think the one thing that all these companies are talking about are higher raw material and input costs, and those things seem to be front-page concerns,” Argus Research analyst Bill Selesky said.
U.S. Steel Corp. said its first-quarter loss narrowed sharply as it sold more steel at higher prices, although it paid more for raw materials such as coal and scrap steel.
It lost $86 million, or 60 cents per share, in the first three months of the year. That compared with a loss of $157 million, or $1.10 per share, in the same part of last year.
The most recent results reflected an $81 million one-time gain on foreign currency exchanges.
Sales increased 25 percent from the year-ago quarter to $4.86 billion.
The results missed analysts’ estimates for a loss of 33 cents per share on revenue of $4.89 billion, according to FactSet.
“The biggest takeaway from the U.S. Steel report is that things are slowly improving on a demand basis,” Selesky said.
During a conference call with analysts, Chairman and CEO John Surma said he believes demand will be firm across most markets in the second quarter; including containers, appliances, pipes and construction.
He said some service and processing centers might cut back on buying steel because they are trying to moderate inventories. Those centers buy steel in large quantities and hold it in inventories until it is sold to customers.
He also said the company is looking at ways to shift its energy resources, at least in part, from coal and coking coal to natural gas as a way to reduce costs and lower carbon emissions.
U.S. Steel has posted consecutive quarterly losses since December 2008 as demand fell from automakers, construction companies and other customers as the recession ran its course.
The company said first-quarter flat-rolled steel shipments rose three percent from the fourth quarter to four million net tons. The average price increased $63 per ton to $720 per ton. Flat-rolled steel is used in a range of products, from automobiles to appliances.
Shipments of pipe products rose 10 percent from the fourth quarter to 425,000 tons but the average price fell $57 to $1,447 per ton.
In Europe, U.S. Steel’s shipments rose 17 percent from the fourth quarter to 1.4 million tons due to stronger demand. The average price rose $30 per ton to $823 per ton.
The company is evaluating effects on its business from the March 11 earthquake, tsunami and ensuing nuclear plant crisis in Japan that closed some factories and slowed auto production.
Surma noted that some automotive customers have adjusted production schedules because of parts shortages.
“We expect reductions in automotive production during the quarter to be made up in 2011 as vehicle inventories, presently low compared to historical levels, will need to be replenished,” he said in a statement.
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