US Steel, SDI signal caution to investors

Pittsburgh-based United States Steel Corp. and Fort Wayne, Indiana-based Steel Dynamics Inc. (SDI) have joined other steelmaking and scrap recycling companies warning of difficult conditions in the second half of this year.

They join earlier announcements from steel producer Nucor Corp., Charlotte, North Carolina, which also operates a network of scrap yards, and global scrap recycling firm Sims Ltd. in issuing cautionary guidance to investors.

In the case of U.S. Steel, the firm has provided third-quarter 2023 adjusted net earnings per diluted share guidance of $1.10 to $1.15. That per-share figure is down about 40 percent from the $1.89 per diluted share earned in the prior quarter.

In comments accompanying the guidance, U.S. Steel President and CEO David B. Burritt also announced the firm intends to idle a blast furnace in Illinois.

“Today’s guidance also reflects the expected impact on third quarter financial results from the United Auto Workers union strike announced earlier this month,” Burritt says. “Consistent with actions taken in 2022 to balance our melt capacity with our order book, we will temporarily idle blast furnace ‘B’ at Granite City Works and are reallocating volumes to other domestic facilities to efficiently meet customer demand.”

U.S. Steel also says earnings in its Mini Mill segment, which consists predominantly of the Big River Steel business unit in Arkansas, are expected to be lower than in the second quarter.

However, the company says selling prices in the segment moderated during the quarter and recent results are “expected to reflect better customer volume performance than previously anticipated and benefit from lower raw material costs.”

Unmentioned by the company is its consideration of bids received by outside companies and investors to purchase all or part of U.S. Steel.

SDI, meanwhile, provided third-quarter 2023 earnings guidance in the range of $3.46 to $3.50 per diluted share. That marks a drop of about 27 percent from the previous quarter, when earnings were $4.81 per diluted share.

“Third-quarter 2023 profitability from the company’s steel operations is expected to be significantly lower than sequential second-quarter results, based on metal spread contraction as lower realized flat-rolled steel pricing [that] more than offset lower scrap costs,” SDI says as part of its guidance.

Regarding the firm’s OmniSource scrap processing operations, SDI says third-quarter 2023 earnings in that business unit are expected to be lower compared with sequential second-quarter results based on lower volume and metal spread compression as pricing declined throughout the quarter.