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US Steel Plunges as Industry Earnings Reel With Price of Metal

Sept. 19, 2019
Steelmakers in the U.S. are struggling with the weak U.S. energy sector and with decreased weakness in Europe.

U.S. Steel Corp. (IW500/85) shares plunged the most in more than a year after the company said it expects to report a wider loss than analysts were expecting, the third American steelmaker in three days to warn on their outlook.

The Pittsburgh-based company cited weakening markets for flat-rolled steel and tubular products for the energy industry. It expects an adjusted loss of 35 cents a share this quarter, according to a statement Wednesday, compared with the average analyst estimate for a 6-cent loss.

The outlook comes after Nucor Corp. (IW500/48), the largest U.S. producer of the metal, and Steel Dynamics Inc. (IW/98) this week gave guidance short of estimates. Steelmakers raised some prices earlier this quarter, but buyers have been slow to accept the increases, underscoring fading optimism more than a year after the introduction of U.S. tariffs meant to bolster the industry.

“This speaks to the emerging weakness in the energy sector in U.S., it speaks to pervasive weakness in Europe as well,” Phil Gibbs, an analyst at Keybanc Capital Markets, said in a telephone interview. “They’re not getting help anywhere right now.”

U.S. Steel fell 13% at 9:37 a.m. in New York, the biggest intraday drop since April 2018. The stock has declined by about 40% this year. The S&P Supercomposite Steel Index of 13 producers slid, led by U.S. Steel, AK Steel Holding Corp. and Steel Dynamics.

On Monday, Charlotte, North Carolina-based Nucor fell after saying its profit waned in the third quarter as prices decreased amid softening in several end markets. Performance in the steel mills segment is expected to decrease from the previous quarter “due primarily to lower prices for sheet and plate steel,” Nucor said.

Since the tariffs were announced in 2018, shares of U.S. steelmakers have slumped amid mounting concern that U.S.-China trade tensions threaten global economic growth and demand for the commodity.

U.S. Steel also said Wednesday that it’s almost three-quarters of the way toward its goal of reducing its European workforce by 2,500 by the end of 2021. The company has eliminated 1,800 jobs in its European unit, according to the statement.

The company expects third-quarter 2019 adjusted EBITDA to be about $115 million, which excludes about $53 million of estimated impacts from a fire at a coke-making facility and restructuring charges.

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