US Steel expects an adjusted EBTIDA of approximately $30mn in Q1 2020—declining by 89.5pc from $285mn during the same quarter a year ago.
David B. Burritt, president and chief executive officer of USS, noted the company’s flat-rolled segment had a strong performance this quarter. Operational cost improvements and seasonally strong shipment volumes offset what is typically a weak mining season. The US domestic flat-rolled steel market was healthy throughout Q1, with extended lead times supported by construction demand. The market was also buttressed by restocking after a high destocking rate during H2 2019, which adversely impacted orders.
Burritt added that the tubular market remains challenging, and that European conditions are volatile. In Europe, steel prices steadily increased, but lower monthly and quarterly contract prices, as well as elevated raw material costs, will hinder the company’s short-term financial performance.
The tubular segment also remains challenging because oil prices are under significant pressure and rig counts are declining. In Q1 2019, tubular comprised 7pc of USS’s total segment earnings before interest and income taxes, while flat rolled products comprised 67pc.
USS is closing some previously planned projects, but—while ensuring employee safety amid the COVID-19 pandemic—maintaining production commensurate with current market demand. USS’s regional supply chain also minimizes the risk of significant disruptions.
The market was already reeling before being exacerbated by COVID-19 policies, and it has impelled USS to focus on preserving cash and liquidity.