Pittsburgh, Pennsylvania-based US Steel reported Tuesday a Q1 2013 net loss of $73 million, compared to a Q4 2012 loss of $50 million and a Q1 2012 net loss of $219 million.
The flat rolled segment results were the weakest in Q1 due to increased operating costs. Shipments for Q1 increased slightly versus Q4 while average realized prices were comparable. Lead times throughout Q1 2013 remained short and afforded buyers the opportunity to limit their order book exposure, preventing upward movement in spot market prices, the company said in statement. US Steel recorded a segment loss in Q1 of $13 million compared to $11 million segment earnings in Q4 2012 and $183 million in Q1 2012.
US Steel acknowledged early in the call the lockout at the Lake Erie Works mill that began early on April 28. US Steel Chairman and CEO John Surma noted that Canadian facilities are higher in cost and need an agreement that reflects the very competitive environment in which Lake Erie operates. Locked out workers are not paid during the work stoppage. When asked about overcapacity concerns in the domestic market, Surma said that the US is a net importing country and "I'm not sure capacity is the US' problem," explaining the US needs more manufacturing-friendly laws and for US trade laws to be respected.
In the Tubular segment, Q1 results improved compared to Q4 due to decreased operating costs and increased shipments partially offset by lower average realized prices. Shipments increased as distributors began replenishing inventory while prices were lower due to the available supply of tubular products and decreased drilling activity. Segment income in Q1 2013 doubled to $64 million from $32 million in Q4 2012 but was lower than the $129 million recorded for Q1 2012. Surma said during the company's conference call that the underlying drivers of energy in Q1 were positive despite a lower rig count, but imports arrived at very high levels. OCTG imports in January/February were 50 percent of market share while line pipe imports were 60 percent of total market share.
Q1 results for the European segment improved compared to Q4 due to a significant increase in shipments. Shipments increased due to additional value-added volume and improved spot market activity associated with service center and distributor restocking.
Looking forward, Surma said "results for our Tubular segment are projected to be comparable with the first quarter; however we expect lower results from our Flat-rolled and European segments. While we project North American flat-rolled market conditions for the second quarter to be comparable to the first quarter, we expect an operating loss for our Flat-rolled segment primarily due to higher operating costs. Operating costs are projected to increase due primarily to higher repairs and maintenance costs as well as higher natural gas costs offset by lower raw materials costs."