Steel makers say slow economy will hit 3Q results

AP News
Posted: Jul 26, 2011 2:13 PM
Steel makers say slow economy will hit 3Q results

Three of the nation's steel makers expect weakness in the U.S. and global economy will affect their third-quarter performances.

AK Steel Holding Corp. on Tuesday joined United States Steel Corp. and Nucor Corp. in predicting weaker results in the July-to-September quarter. Individual companies cited factors ranging from softer demand, higher costs and lower steel prices to rising supplies that could pressure prices and margins.

Shares of all three companies tumbled in afternoon trading.

Most steel makers say demand will strengthen in the fourth quarter, although that's a time when the industry typically has seasonal slowdowns, Argus Research analyst Bill Selesky said.

"I think that's what has the market worried is that trying to catch up and make things work in the fourth quarter sometimes doesn't always work," he said. "I think that's what's scaring some investors."

The nation's economic growth can be gauged in part from steel sales to the broad range of customers; including makers of appliances, automobiles, industrial equipment, construction materials and pipes.

The pace of growth in the manufacturing sector, one of the key drivers of the economy recovery, slowed last spring. Factory production picked up in June but it was the slowest growth rate in 20 months. Construction spending also remains weak.

AK Steel said on Tuesday said its second-quarter profit was $33.1 million, or 30 cents per share, for the three months ended June 30 compared with $26.7 million, or 24 cents per share, a year ago. Sales rose 12 percent to $1.79 billion on higher prices and shipments.

The results missed Wall Street expectations, and the company said it expects a decline in shipments in the third quarter while raw materials costs rise.

U.S. Steel said Monday it expects operating profit to fall in the third quarter on lower prices for flat-rolled steel, used to make a range of products. Shipments are expected to be similar to the second quarter.

Last week, steel manufacturer Nucor Corp. also cautioned that stiffer competition could affect its third-quarter performance.

Shares of AK Steel fell $2.47, or 16 percent, to $13.05. U.S. Steel lost $3.78, or 8.5 percent, at $40.54. Nucor gave up $1.02, or 2.5 percent, at $39.68.