Tags: US | Steelmakers | Warn | Prolonged | Weak | Economy

US Steelmakers Warn of Prolonged Weak Economy

Wednesday, 15 Sep 2010 12:17 PM

Three top U.S. steelmakers are warning of depressed third-quarter results, signaling that the economy may not be rebounding from the recession as quickly as originally believed.

AK Steel said Wednesday it expects to post an operating loss in the third quarter due to higher raw material and operating costs. It is also bringing forward a planned maintenance outage at its Ashland, Kentucky blast furnace — often an indication that orders have slowed.

The warning came a day after Nucor, currently the biggest U.S. steel producer, said it expects profit to drop in the third quarter because of a sluggish industry, especially in the construction sector.

"A general slowdown has indeed occurred from the second quarter, particularly in our flat-rolled business," Nucor said in a statement.

And late Tuesday, Steel Dynamics Inc forecast third-quarter profit below market estimates, hurt by reduced margins due to lower sales prices.

Chief Executive Keith Busse acknowledged "weakness experienced earlier in the quarter," although he did report some improvement in orders for its sheet steel products.

Steel prices have slumped recently as demand from heavy industry and manufacturers dropped while the global economy only slowly recovers from the recession.

"Demand is not good," said analyst Charles Bradford of Affiliated Research Group in New York. "The (federal) stimulus package did not help the steel industry much. It went to roads and not bridges and infrastructure that use steel."

He noted the biggest customer for steel in the United States is the non-residential construction sector, "and that is not coming back in the foreseeable future."

But analyst Michelle Applebaum, of Steel Market Intelligence in Chicago, was more optimistic.

"The steel industry's fourth-quarter outlook continues to look brighter following Chinese production cuts, significantly reduced Chinese exports and broad-based global pricing improvement," she wrote in a research note.

In morning trading on the New York Stock Exchange, AK Steel shares were down 3.8 percent at $13.97. Nucor slipped 17 cents to $39.24 and U.S. Steel was 1.4 percent lower at $46.16. On Nasdaq, Steel Dynamics was off 14 cents to $14.45.

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Three top U.S. steelmakers are warning of depressed third-quarter results, signaling that the economy may not be rebounding from the recession as quickly as originally believed. AK Steel saidWednesday it expects to post an operating loss in the third quarter due to higher...
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