Flat-rolled income surged in Q2 for Pittsburgh, Pennsylvania-based United States Steel Corporation (US Steel), while tubular sales fell, but the trend is expected to move in the opposite direction in Q3.
As SteelOrbis previously reported, US Steel recorded Q2 2011 net income of $222 million, compared to a net loss of $86 million in the previous quarter and a $25 million net loss in Q2 2010, as the flat-rolled sector recovered tremendously. Flat-rolled sales were $374 million in Q2 compared to a loss of $36 million in segment in the previous quarter, due to sustained higher spot prices. On the other hand, during Q2, US Steel's tubular product sector saw sales decline from $32 million to $31 million as compared to Q1.
But during Tuesday's conference call, US Steel's Chairman and CEO John P. Surma explained that roles will reverse in both the tubular and flats sectors in Q3. Due to lower average prices on monthly index-based contracts and lower spot prices as a result of increasing capacity and heavy imports, flat-rolled results are expected to decline. Surma noted during the conference call that lead times have narrowed, but there are no immediate plans to reduce capacity, outside of minimal planned maintenance projects. Surma also said that US Steel operated at a 90 percent capacity utilization rate during Q2 and expects raw steel production in Q3 to be in line with Q2.
On the tubular side, US Steel expects results to improve significantly compared to Q2, driven by increased shipments and improved average realized prices. Surma also said that demand for energy-related tubular products is projected to increase during Q3, primarily due to the continued strength of horizontal and oil-directed drilling. With steadily increasing rig counts, Surma believes US Steel has "good momentum heading into the third quarter." Additionally, substrate costs, in the form of hot-rolled bands supplied by US Steel's flat-rolled segment, are expected to be lower throughout Q3.