The only reason X made a profit is that they are substantially overprovided on pensions and took a bunch of the excess as profit. In my opinion, if LTV and BS continue to generate losses over the next 2 years at the rate incurred in 1999 actual, they'll be insolvent and will be forced to file for BK. In the fourth quarter alone, LTV lost $70 million and have leveraged their balance sheet up the yingyang with the acquisition of Copperweld which under a best case scenario will be mildly accretive.
And of course if LTV and BS go under, there will be many other integrated producers who will be forced to pack it in. The only way the Steel industry can return to normal RONAs is to increase prices substantially. Today's selling levels are probably equivalent to levels actually experienced in the mid 1990s while inflation has gone up 20% over this time. Productivity improvements have offset the inflation.
So, something has to give. Either, the American steel industry folds or they return to normal RONAs. My bet is on the latter. Detroit needs the integrated steels as badly as the integrated steels need Detroit.
Lastly, look at the market valuation of each company's stock:
AKS is valued at less than 50% of X but generates 3.5 times the profit. And what's really ludicrous is that AKS and BS valuations are roughly the same even though AKS generates $430 more pretax profit dollars. BS is desperate. They just cut their manpower by 500 people. That's worth $25 million annually so they only need another $475 million to get to a marginal RONA acceptability level.