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U.S. Steel loss narrows to $50 million; Surma optimistic

| Tuesday, Jan. 29, 2013, 9:06 a.m.

Despite continued challenges in the global economy, U.S. Steel Corp. expects slightly better demand this quarter from makers of cars and other hard goods, as well as from off-shore oil rig operators, CEO John Surma said on Tuesday.

His guarded optimism came after the steelmarker reported a $50 million loss for the October-December quarter, narrower than the year-ago deficit.

Flat-rolled steel volume should improve in North America, for instance, as new vehicle sales are projected to exceed 15 million units in 2013, compared with 14.4 million units last year.

“We expect higher shipments in the first quarter than the fourth quarter with increases across many of our industry segments,” said Surma on a conference call with analysts. He added that average spot prices should be higher than the fourth quarter, as recently announced price increases take effect.

The flat-rolled steel segment should break even this quarter, he said. Sales in Europe are expected to improve, as lean operators there have reached the point where they need to restock.

Tubular product operating results are projected to improve, due to “slightly higher” shipments, said Surma, and lower raw materials costs. For instance, U.S. Steel projected its coking coal costs should fall 20 percent in 2013.

U.S. Steel stock closed at $23.20, down 52 cents.

On Thursday, U.S. Steel will commission the C Battery for making coke at Clairton Works, after a $500 million improvement project. The battery is supposed to produce more coke for the company's blast furnaces with fewer emissions than older batteries. The C Battery and the company's coke-making plant in Indiana will use more natural gas.

“We have the capability to produce all the coke we need in North America,” Surma said.

U.S. Steel's fourth-quarter loss of $50 million equaled 35 cents a share, an improvement from the loss of $211 million, or $1.46 a share, in the same quarter a year ago.

The results were much better than the loss of 70 cents per share expected by analysts surveyed by FactSet. Revenue for quarter fell 6.9 percent to $4.49 billion. Analysts had been expecting revenue of $4.33 billion.

The results include a gain of $9 million, or 6 cents a share, from a favorable settlement related to a supplier contract dispute.

The steel industry has been buffeted by an inconsistent global economy. On Monday, the Commerce Department reported overall orders for durable goods rose 4.6 percent in December. But a key gauge of business investment plans rose just 0.2 percent.

“For the third consecutive quarter, all three of our reportable segments had positive operating results despite the uncertain global economic environment,” said Surma.

“Lower drilling and project line pipe activity, as well as continued high import levels, significantly reduced our tubular segment's results.” Results for the flat-rolled segment were hurt by uncertain conditions in the United States, in addition to imports, he said.

For all of 2012, the company lost $124 million, or 86 cents, which includes a loss of $353 million that relates to the sale of U.S. Steel Serbia.

Staff writer Thomas Olson contributed to this report. Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or kleonard@tribweb.com.

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