Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

US Steel (USS) has lifted its earnings guidance for Q1 2021 on demand strength and gains received from its Jan 15 purchase of Big River Steel’s (BRS) remaining equity. 


The company cited in a news release that strong consumer demand for flat-rolled steel throughout the major end-markets, combined with steel price increases, has led to greatly improved results in its flat-rolled division, European segment, and the recently shaped mini-mill section that bares BRS’ performance.


USS’ flat-rolled operating efficiencies have improved following the restart of the No. 4 blast furnace in Gary. Its European segment has surpassed January’s expectations and is achieving strong commercial performance and better operating productivity from running all three blast furnaces. This, together with cost management efforts, has compensated for raw material challenges and order book impacts due to the semiconductor shortages in Europe’s auto industry.


Market environment strength, lowered steel inventories, rising customer demand, and infrastructure demand constraints have also led to the steelmaker’s increased sentiment. The company continues to implement its customer-focused approach that has allowed for expanded operations, balance sheet improvements, and benefits from current market conditions it noted.


The tubular segment is facing increased customer demand and OCTG and seamless pipe prices are starting to indicate improved activity as high import volumes are restricting commercial recovery, USS indicated. The cost structure in the section is progressively showing gains from insourcing production of rounds as it completes final rounds from third parties. The company’s tubular output remains consolidated at Fairfield Works, however, the Lorain and Lone Star sites may remain idled indefinitely.


The steel producer’s adjusted EBITDA is projected to be near $540mn in Q1 2021, not including the effects associated with purchasing BRS’ remaining stake. The company’s adjusted net earnings are expected to be around $265mn in Q1 2021, revised from $160mn on Friday, and also bars the impacts linked with acquiring the remaining share in BRS and impacts from non-recurring refinancing costs that correlate with a lifted balance sheet as achieved in Q1.


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