Steel Profits Melting Down

Steelmakers are warning their shareholders and the investment community that results for the third quarter of this year are going to reflect a much weaker landscape.

An Associated Press report notes that U.S. Steel Co., Pittsburgh; Nucor Corp., Charlotte, N.C.; and Netherlands-based Mittal Steel Co. have all issued warnings to institutional investors to be ready for a drop-off in revenue and profits.

Red ink is even being discussed, according to Wheeling Pittsburgh Steel Corp. President, Harry Page, who tells AP, “The horse race at this time will be keeping selling prices ahead of the cost of operations.”

The various warnings cite pressures caused by lower prices and sluggish demand for their products while the costs of making steel, including scrap and energy, have not necessarily fallen in tandem.

The results will be in sharp contrast to the third quarter of 2004, when some steelmakers reported profits at record or near-record levels.

Many steelmakers have cut back production to try to fall in line with slumping demand (and to minimize their losses), but thus far the production cuts have not resulted in a pricing rebound for finished steel. The AP report notes that just 23 blast furnaces were operating in the U.S. at one point this summer, the fewest since a nationwide steelworkers’ strike in 1959.