On Tuesday, Pittsburgh, Pennsylvania-based US Steel reported that Q3 2012 earnings totaled $44 million, doubling Q3 2011 net income of $22 million, but down from $101 million in Q2 2012. US Steel's flat rolled segment took the biggest hit in Q3 2012, with earnings totaling $29 million, down from $177 million in the previous quarter and $203 million in Q3 2011. Flat rolled Q3 results decreased from Q2 primarily due to a $31 per ton decrease in average realized prices, as significant price decreases for domestic scrap and globally traded steelmaking raw materials placed downward pressure on spot and index-based pricing mechanisms in North America.
In its Q4 outlook, US Steel said that the company expects a loss for the flat rolled segment due to slightly lower average realized prices, as well as lower shipments and higher operating costs. Average realized prices and shipments are expected to be lower compared to Q3 as a result of cautious purchasing patterns early in the quarter created by the uncertain global economic outlook. "However, market conditions have recently begun improving in North America, and we believe that we are already beyond the spot price trough of the fourth quarter. New spot orders are being transacted at higher prices for delivery later this quarter. Operating costs are expected to increase due to scheduled blast furnace and other maintenance projects," US Steel said in a press release.
US Steel's tubular segment income of $102 million was little change from $103 million in Q2 2012, but reflected a decrease from the $134 million the company generated in Q3 2011. The company noted that tubular shipments decreased as end users adjusted their drilling plans and curtailed spending due to economic uncertainty and concern over energy prices. Average realized prices declined slightly as import levels remained high resulting in pricing pressure from increased supply. "We expect Q4 results for our tubular segment to remain profitable but well below Q3 results. Average realized prices are expected to be lower and shipments are projected to be significantly lower than Q3 as imports continue at high levels despite end users decreasing drilling activity in order to operate within their 2012 capital budgets. Inventory management by our customers may also be a considerable factor as we approach year-end," US Steel said in its Q4 outlook.