The steel industry's outlook has dimmed with the unevenness of the global economy. Sales have dropped with prices while costs have risen, leaving companies pessimistic about the rest of the year.
Two of the world's biggest steel manufacturers turned in third-quarter performances Tuesday that demonstrated how much expectations have changed since mid-year as many countries and regions fail to generate significant growth.
ArcelorMittal, the world's largest steel maker by output, and U.S. Steel Corp., the biggest U.S. steel company, said the lack of recovery in the construction market, a huge customer, is a primary drag on results. Other key industries, such as autos and appliances, are faring better but still aren't using steel at pre-recession rates.
Argus Research analyst Bill Selesky said steel customers are worried about future growth, which has cut into their orders. "They don't see it picking up noticeably down the road," he said.
As a result, U.S. Steel, which in July predicted a profit for the third quarter, instead reported a $51 million loss. The company, which owns Granite City Works, blamed the decline largely on the choppy recovery in North America and Europe, a weak construction market and seasonal buying patterns.
U.S. Steel's outlook started to deteriorate last month. CEO John Surma warned analysts at a Credit Suisse conference that demand was weaker than anticipated and he didn't anticipate any improvement in the year's final quarter.
Surma also said U.S. Steel isn't seeing orders for next year from automobile manufacturers that it would expect, given some of the automobile industry forecasts for next year.
Other U.S. steel manufacturers reported similar struggles, particularly in the flat-rolled steel segments, which serves the appliance, autos and construction markets.
"The flat-rolled market in the U.S. has been more challenged right now than it has been earlier this year," said Bridget Freas, a steel analyst for Morningstar Inc.
The choppy economic recovery also has increased the number of steel imports flooding into the country, U.S. Steel said. More imports from South Korea will lead to lower shipments and lower prices for the company, Surma said.
Whereas most countries are trying to spur growth, China is trying to slow its red-hot economy. Steel makers there, who can't sell as much domestically, may try to undercut U.S. companies by selling their products overseas at lower prices. U.S. companies must then slash prices to compete.Luxembourg-based ArcelorMittal reported third-quarter results fell 21 percent from the second quarter, although it posted a 48 percent jump in profit from a year ago.
Arcelor said shipments are expected to improve in the fourth quarter, but average selling prices are expected to decline.