United States Steel (NYSE:X)
Historical Stock Chart
2 Months : From May 2019 to Jul 2019
By Bob Tita
United States Steel Corp. said it will cut production by idling two blast furnaces in response to falling demand for steel from a weakening manufacturing sector.
The company will take one furnace off line at its flagship mill in Gary, Ind., and another at its mill in Ecorse, Mich. The latter was idled recently for maintenance work and won't be returned to service when the work is completed.
U.S. Steel and rivals Nucor Corp. and Steel Dynamics Inc have all issued downbeat guidance for second-quarter profit this week, citing weaker-than-expected demand for steel. Production of cars and farm equipment have slipped recently and U.S. manufacturing output fell in three of the first five months of this year.
"Market conditions have softened," U.S. Steel said on Tuesday. "We will resume blast furnace production at one or both idled furnaces when market conditions improve."
The company restarted two blast furnaces at its Granite City Works near St. Louis last year after the Trump administration imposed tariffs on imported steel. The duty allowed domestic producers to raise prices, but falling demand for steel has blunted the benefit of the tariff in recent months.
U.S. Steel is among the highest-cost producers of steel in the U.S., making the company more vulnerable to falling prices. The benchmark price of hot-rolled coiled sheet steel in the U.S. has dropped by more than 35% since approaching a decade high last summer. Hot-rolled steel on Tuesday was at $533 a ton, according to S&P Global Platts's price assessment.
The moves will lower the company's monthly production of steel by 200,000 tons to 225,000 tons starting in July, U.S. Steel said. If the two furnaces remain idle for the remainder of the year, the company said production would total about 11 million tons. That compares with an earlier forecast of 11.5 million tons, which took into account planned furnace outages for maintenance. Over 12 months. idling the two furnaces would reduce production by about 2.5 million tons, or about 15% of the company's total steelmaking capacity, according to analysts.
U.S. Steel said it expects to earn about 40 cents a share for the quarter ending this month. Analysts had been expecting 51 cents a share in profit. The company said its bottom line is being weighed down by costs to repair a coal coking plant near Pittsburgh following a Christmas Eve fire.
Another fire at that plant this week knocked out pollution controls there, prompting a flood of complaints about foul smells and warnings to limit outdoor activity.
U.S. Steel's shipments in the second quarter also will be reduced by flooding along the Mississippi River and in the Southern U.S. that has restricted river-barge traffic.
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(END) Dow Jones Newswires
June 18, 2019 19:47 ET (23:47 GMT)
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