On Tuesday, United States Steel Corporation (US Steel) reported Q2 2012 net income $101 million compared to a net loss of $219 million in Q1, and Q2 2011 earnings of $22 million. Flat rolled segment income of $177 million reflected a decrease from Q1 earnings of $183 million and Q2 2011 earnings of $374 million. Meanwhile, tubular segment income of $103 million showed an increase from $374 million in Q2 2011 and $183 million in Q1 2012. US Steel said that shipments of 493,000 tons were approximately 7 percent lower than the record levels of Q1 as distributors rebalanced their inventory to reflect lower forecasts for drilling activity. Average realized prices of $1,706 per ton remained near first quarter levels. Average prices per ton for US Steel's flat rolled division of $772 were higher than $764/nt in Q1, but below Q2 2011 prices of $803/nt.
Commenting on US Steel's outlook for Q3, President and CEO John Surma said, "We expect total reportable segment and Other Businesses operating results to be positive in the third quarter but below our second quarter results, reflecting the continued weakness in the North American, European and emerging market economies. Average realized prices are expected to be lower for all three operating segments with total reportable segment shipments slightly lower than the second quarter. Our Tubular segment is expected to continue its trend of solid operating profits."
Flat-rolled segment income in Q3 is expected to break-even due to lower average realized prices. Proceeds are expected to be lower compared to the second quarter as spot and index-based contract prices decrease. Tubular segment earnings are poised to be in line with the Q2 results. Shipments are expected to be lower as end users continue to adjust their drilling plans due to economic uncertainty and concern over energy prices. Similarly, average realized prices are projected to decline as supply has outpaced demand, mainly due to a substantial increase of imported products.
US Steel commented on its current labor negotiations and said that the company anticipates reaching a "competitive agreement without a work stoppage," but did not comment further. As for the current asset sale of RG Steel, Surma was vague about any potential involvement from US Steel, only saying that "we look at everything that's available" to determine whether or not it would "add value" to the company's current portfolio.