U.S. Steel recently announced a surprising fourth-quarter loss forecast, sending shockwaves through the market. The company's shares dropped nearly 5% during aftermarket trading. This projection highlights the challenging environment for steelmakers, particularly in the United States.
U.S. Steel loss expects an adjusted decline of $0.25 to $0.29 per share, far below analysts' expectations of a $0.16 profit. The company also revised its fourth-quarter adjusted core profit forecast to $150 million, a significant reduction from the previous estimate of $225 to $275 million.
Depressed steel prices and rising costs from ramping up the Big River 2 (BR2) facility have created considerable pressure. CEO David Burritt explained that efforts to increase production at the new mill are ongoing. However, these efforts have yet to offset the challenges posed by weak pricing and demand in Europe.
To meet production requirements after a fire incident, U.S. Steel temporarily activated three blast furnaces on December 7. The company plans to scale back to two blast furnaces by January. Additionally, the flat-rolled segment's core profit is projected to decline due to reduced selling prices, volumes, and increased maintenance activities.
Similarly, the mini mill segment faces lower volumes, impacting profitability. Start-up and construction costs for the BR2 facility, totaling approximately $30 million, have further strained the company’s finances. Despite these challenges, U.S. Steel aims to achieve full capacity at BR2 by 2025.
The company’s forecast comes amidst its $14.9 billion buyout offer by Nippon Steel. However, U.S. government officials have expressed concerns over potential national security risks, complicating the acquisition.
As U.S. Steel navigates these hurdles, it underscores the volatile nature of the steel industry. Investors and analysts alike will closely monitor the company’s performance and strategic responses in the coming months.
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U.S. Steel forecasts a surprising fourth-quarter loss, citing weak prices and rising costs. Learn about the challenges facing the industry.
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