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

US Steel (USS) expects a marked improvement in its flat-rolled segment in Q3 2020 compared with the previous quarter due to the current market’s improved momentum. However, the segment’s performance will remain lower compared with the same time last year.


The steelmaker’s lead times and order book are improving and could continue to recover. The company restarted three blast furnaces that were paused due to the COVID-19 pandemic, though two more blast furnaces in Gary and Granite City, will likely remain idle through the end of 2020, based on current orders.


Market conditions have improved since June, following the steelmaker’s requirement to idle three blast furnaces. The bolstering steel market along with the company’s fast response to growing consumer demand is anticipated to bring about considerable improvements in the adjusted EBITDA for Q3 2020, David B Burritt, president and chief executive officer of USS said.


Burritt expressed optimism on the progress made in North America and Europe and expects the upturn to continue. Moreover, management decisions led to improved financial performance and as a result, Q3 2020 results are expected to be better than Q2. Burritt said that in Q3 2020, the company is prepared to repay around $900mn of its US asset-backed loans, placing those advances below levels prior to COVID-19.


The company’s European operations are likely to exceed market expectations during the quarter as the industry has sustained progress in the region, also evidenced by USS’ lead times and orders. 


Conditions in the tubular segment seem to have reached a low point due to depressed conditions in the oil and gas sector and improvement measures are currently limited. Instead, the company is focusing on elements within its control and plans to commission its electric arc furnace by the end of 2020. Performance in Q3 2020 is projected to remain comparable to Q2 for this segment.


The steelmaker also intends to obtain the remaining stake in Big River Steel (BRS) in Osceola, Arkansas, Burritt concluded, also referring to this venture as the company’s highest priority. In 2019, USS announced it will pay $700mn for a 49.9pc stake in BRS and it currently maintains the option to purchase the remaining portion by 2023. 


USS expects its Q3 2020 adjusted EBITDA to stand around negative $100mn, showing some recovery compared with an adjusted EBITDA loss of $264mn in the previous quarter. The adjusted EBITDA was at $144mn in Q3 2019.


The steelmaker projects adjusted net loss attributable to the company at $320mn in Q3 2020, an improvement from $469mn logged in Q2 2020. It anticipates Q3 2020 adjusted diluted loss per share to be about $1.45, improved from a loss of $2.67 in Q2 2020.

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