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US Steel Joins Chorus of Steelmakers Warning Of Q3 Underperformance

Shanthi Rexaline

The steel industry's cup of woes overflows, as evidenced by a string of warnings from a few of the biggest players in the sector.

United States Steel Corporation (NYSE: X) became the latest to warn of worsening fundamentals when it made a third-quarter pre-announcement late Wednesday.

U.S. Steel shares were sinking 13.455 to $10.78 at the time of publication Thursday. 

Way Off The Mark

The steelmaker said in a release it expects third-quarter adjusted EBITDA of $115 million, which excluded a $53-million impact from a fire at its Clairton coke making facility and estimated restructuring charges.

The Pittsburg-based company now expects an adjusted third-quarter loss of 35 cents per share, notably wider than the 7-cent per share loss estimated by analysts, on average.

Brittle Fundamentals

After the strength witnessed in the summer, the flat-rolled steel market has softened, U.S. Steel said.

The combination of falling steel prices through the second quarter and a bigger-than-expected drop in scrap prices will negatively impact flat-rolled earnings in the second half of the year, according to the company. 

U.S. Steel now expects full-year flat-rolled shipments to third-party customers to be 10.7 million tons, as it expects to idle two of its U.S. blast furnaces to match supply with demand forecasts.

U.S. Steel also warned of a continued deterioration of market conditions in Europe, with the incongruence between steel selling prices and raw material costs pressuring margins.

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In line with its labor productivity strategy announced earlier, the company has thus far eliminated 1,800 positions of the planned 2,500 cuts planned by the end of 2021.

Pressured by high import levels and weakening market conditions, the company's Tubular segment is expected to remain under pressure for the remainder of the year, U.S. Steel said.

Not Alone In The Quagmire

U.S. Steel's predicament is not company-specific, as two other big giants sounded the alarm in their guidance as well. 

Nucor Corporation (NYSE: NUE) pre-announced a third-quarter shortfall earlier this week, citing weakness in its steel mills and raw materials business.

Steel Dynamics, Inc. (NASDAQ: STLD) said Wednesday it expects third-quarter earnings of 68-70 cents per share, below the 71-cents-per-share consensus estimate, as shipments and average steel pricing of its sheet steel operations declined in the quarter.

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