Steel Producers Sales Drop in 3Q

Companies cite higher iron-ore prices, maintenance costs and slow demand.

Major steel manufacturers reporting third-quarter results Oct. 26 attributed declining sales and income to higher costs and lower volume during the three-month period.

United States Steel Corp. reported a net loss of $51 million during the quarter, compared with a $25 million loss in the year-ago period. Revenue dropped 4% to $4.5 billion.

The company attributed the decline to higher facility maintenance and repair costs and higher raw materials prices.

The company increased inspections at its facilities after a structural failure at its Gary Works mill in July. Costs associated with repairs and inspection activities totaled $80 million in the third quarter, up from $60 million in the previous reporting period.

Shipments dropped 6% to 3.8 million tons because of lower order rates related to slow recovery in the construction market, the company said.

U.S. Steel expects continued maintenance costs and low raw steel order rates will result in a comparable fourth-quarter performance.

"Our current order entry rates reflect the uncertain economic situation in North America and Europe, with spot customers reducing inventory levels in light of short lead times, while our contractual customers' order rates are consistent with traditional downtime taken late in the fourth quarter," U.S. Steel Chairman and CEO John Surma said in a statement.

The world's largest steel producer ArcelorMittal said sales declined 3% due to seasonally lower volumes. But the Luxembourg-based company's profit rose 48% to $1.35 billion.

The company said shipments are expected to improve slightly in the fourth quarter but average steel selling prices are expected to decline. ArcelorMittal said capacity utilization rates are expected to remain flat, while operating costs will increase because of higher raw-material prices.

West Chester, Ohio-based AK Steel Holding Corp. reported a $59.2 million net loss in the third quarter compared with a $6.2 million profit in the year-earlier period. The company cited higher iron ore prices, which increased its third-quarter operating loss by approximately $76 million, or $52 per ton. AK Steel also attributed the loss to an 11-day blast furnace maintenance outage at its Ashland, Ky., operations.

"A stubbornly reluctant economic recovery and soaring raw-material costs will continue to challenge us in the near term," said James Wainscott, AK Steel's president and CEO.

The company expects to incur an $80 per-ton operating loss in the fourth quarter from lower shipments and selling prices combined with high iron ore and other raw material costs.

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