U.S. Steel, Carpenter Join Forces

Zacks

U.S. Steel (X), the largest U.S. steel maker (by volume), has entered into a collaboration agreement with specialty alloy maker Carpenter Technology Corporation (CRS) to develop lighter high-strength steel for automotive applications. The focus of the partnership will be fuel economy and passenger safety.

The collaboration will develop Carpenter Technology’s patented Temper Tough specialized steel alloy, geared for use in flat-roll automotive and other demanding applications. The alloy was originally designed for use in the aerospace industry.

The new alloy is expected to help automakers address the recently mandated Corporate Average Fuel Requirement (CAFE) standards by “light weighting” vehicles through mass reduction. The CAFE regulation has been intended to improve the average fuel economy of vehicles sold in the U.S. The Temper Tough steel alloy also offers extremely high-strength and ductility attributes, which will support safety needs.

U.S. Steel, on Jan 29, posted its fourth-quarter 2012 results. Its losses narrowed 76% year over year to $50 million or 35 cents a share in the quarter. Excluding a favorable settlement associated with a supplier contract dispute, net loss was 41 cents a share, below the Zacks Consensus Estimate of a loss of 75 cents.

Revenues clipped nearly 7% year over year to $4,487 million in the quarter, yet beat the Zacks Consensus Estimate of $4,396 million. The company faced continued economic challenges and pricing pressure in the quarter.

Oversupply and increased steel imports into the domestic market continues to put pressure on steel prices and impact the results of leading U.S. steel makers like U.S. Steel, Nucor Corporation (NUE) and AK Steel (AKS).

U.S. Steel expects its first-quarter 2013 results to be affected by sustained economic uncertainty. The company expects near breakeven results for its Flat-rolled segment in the first quarter and envisions higher shipment on a sequential basis. Average spot prices are expected to improve from the fourth quarter level while raw material costs have been predicted to decline.

U.S. Steel currently carries a short-term Zacks Rank #3 (Hold).

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