Steelmakers don't have Xmas

U.S. steelmakers reported better-than-expected third-quarter results on Tuesday but offer gloomy short-term views for the industry and the economy.

As pointed out in September post, over production of steel in China continued to pressure steel prices. Despite fairly upbeat 2010 forecast by the World Steel Association on the ground of Chinese stimuli, U.S steelmakers have generally expected the end of "Cash-and-Clunker" to slow down demand for steel toward the end of the year. US steelmakers also expect lower prices for the fourth quarter.

U.S. Steel expects to report a fourth-quarter operating loss and idle two blast furnaces to lower production.
AK Steel, which has been operating at less than 60-percent capacity, said that while it expects to post an operating profit in the fourth quarter, it anticipates a decline in average selling prices.

"Technically speaking, we may be out of the recession, but it certainly doesn't feel that way," James Wainscott, AK Steel's chairman, president and chief executive told analysts. 

"Suffice to say we've bounced off the bottom, but we've got a long way to go from here."

According to Reuters,

Wainscott said AK Steel expects to ship more steel in the fourth quarter as it increases its capacity rate to around 65 percent from 55-60 percent in the third quarter.Wainscott said he was optimistic that auto build rates would increase since carmakers currently had low inventories, due to the business generated by the clunker program.

U.S. Steel's third-quarter net loss was $303 million, or $2.11 per share, compared with a year-earlier profit of $919 million, or $7.79 per share. Revenue dropped 61 percent to $2.82 billion, but was 32 percent higher than in the second quarter, the Pittsburgh-based company said.

Excluding a one-time currency gain, the loss was $2.43 per share versus analysts' average forecast of a loss of $2.87 and revenue of $2.72 billion, said Thomson Reuters I/B/E/S.

AK Steel's third-quarter net earnings were $6.2 million, or 6 cents per share, compared with earnings of $188.3 million, or $1.67 per share, in the same quarter last year.

Revenue fell more than half to $1.04 billion, the West Chester, Ohio-based company reported. Analysts on average were expected a profit of 1 cent per share.

These forecasts are consistent with the peers that have recently announced their earnings.