US Steel (USS) anticipates steel demand to improve in Q3 2020 and remains optimistic about the market recovery occurring in the automotive industry and among original equipment manufacturers (OEMs).
The steelmaker noted while reporting its H1/Q2 2020 earnings on July 30 that both OEMs and the automotive businesses are beginning to reach standard production levels and have stronger order books heading into Q3—all positive signs for the steel industry.
Demand in the construction sector is also above prior projections and could remain strong, chiefly for value-added items.
USS has resumed two blast furnaces in response to growing activity and is set to restart an additional furnace on Aug 1 at its Gary Works plant. Moreover, demand in Europe is gradually recovering consistent with overall industry resumption in Europe.
David B. Burritt, president and chief executive officer, USS said the company surpassed its Q2 guidance as shipments picked up in the North American flat-rolled business in late June, leading to improved productivity and cost savings at the company’s mines and steel mills. However, Q2 operations were affected by COVID-19 and nonrecurring expenses connected with substantial amounts of the company’s steelmaking activities being shut down during the quarter.
USS anticipates an increase of incoming orders for steelmaking and sheet finishing, though some operating inefficiencies will remain and affect its Q3 2020 performance. The company is assured that the second quarter was its low point for 2020.
In the first six months of 2020, the company’s flat-rolled raw steel production fell to 4.62mn nt in (4.2mn mt) from 6.1mn nt in H1 2019. Flat-rolled raw steel production declined to 1.47mn nt in Q2 2020 from 2.98mn nt in Q2 2019.
Raw steel capability utilization in the flat-rolled sector was at 54pc in H1 2020 compared to 72pc in the same period last year and fell to 35pc in Q2 2020 from 70pc in Q2 2019 based on raw steel production capability of 17mn nt per year.
USS shipped a total of 6.02mn nt of steel in H1 2020, down 25pc from 8mn nt of total steel shipped in the same period last year. Shipments in Q2 2020 declined by 37pc to 2.53mn nt from 4mn nt of total steel shipped in Q2 2019.
The steelmaker’s net sales decreased to $4.84bn in H1 2020 from $7.04bn in the first six months of 2019 and fell to $2.1bn in Q2 2020 from $3.55bn in the same period last year. USS reported a net loss of $980mn in H1 2020 compared with a profit of $122mn in H1 2019. The company recorded a net loss of $589mn in Q2 2020 compared with net earnings of $68mn in Q2 2019.
USS recorded an adjusted EBITDA loss of $200mn in H1 2020 compared with an adjusted EBITDA of $563mn in the same period last year. It posted an adjusted EBITDA loss of $264mn in Q2 2020 compared with an adjusted EBITDA of $278mn in Q2 2019.