US Steel reported Tuesday a Q4 net loss of $50 million, following a $44 million profit in Q3 2012. In Q4 2011, US Steel incurred a net loss of $211 million. For full-year 2012, US Steel reported a net loss of $124 million compared to a net loss of $53 million for the full year 2011.
Commenting on results, US Steel Chairman and CEO John P. Surma said, "For the third consecutive quarter all three of our reportable segments had positive operating results despite the uncertain global economic environment. Lower drilling and project line pipe activity, as well as continued high import levels, significantly reduced our Tubular segment's results. For our Flat-rolled segment, our profitability was negatively affected by the uncertain domestic fiscal situation as well as continued high levels of flat-rolled steel imports."
The company said that flat rolled Q4 results remained positive at $11 million but decreased from $29 million Q3 due to lower average realized prices and shipments, partially offset by lower operating costs. Average realized prices and shipments were lower compared to the third quarter, as cautious purchasing patterns continued in light of the uncertain global economic outlook and the domestic fiscal situation and compressed mill lead times. Operating costs decreased due to lower raw materials and repairs and maintenance costs partially offset by higher natural gas costs.
Q4 results for the European segment were $7 million, lower than $27 million in Q3, Average realized prices decreased reflecting lower spot market and quarterly contract pricing, while shipments remained comparable to Q3.
Q4 results for the tubular segment were well below Q3 results, falling from $102 million to $32 million. Average realized prices and shipments decreased as end users reduced drilling activity and project line pipe purchases were delayed. Inventory management and continued high import levels also adversely affected order rates toward year-end. Operating costs increased due to lower production levels. During the question and answer portion of the conference call, Surma also commented on the high levels of US-based tubular capacity coming online, and said that while much of it will be "down on the food chain," and markets in which US Steel does not compete, there is a decent amount with which the company will need to contend. He also questioned whether the US market needs the additional capacity, commenting, "I wouldn't think so but that's not my decision."
Looking to Q1 2013, US Steel said it expects the flat steel segment results to be near breakeven. Average spot prices are expected to be higher than Q4 as recently announced price increases take effect. Lower prices for market-based contracts, which tend to lag the spot market, are expected to offset the higher spot market prices with overall first quarter average realized prices for the flat rolled segment being comparable to Q4 2012. Raw materials costs are expected to decrease slightly as lower coal prices are partially offset by higher scrap prices. Total operating costs are expected to be slightly higher compared to Q4.
Tubular segment results are likely to improve compared to Q4 due to decreased operating costs and a slight increase in shipments as drilling activity begins to improve. Average realized prices are expected to be slightly lower as compared to Q4.