United States Steel Corp.(X) announced that its $600 million coke oven battery and two quenching towers at its Clairton plant will be completed in November 2012; two months earlier than previously announced.
The project is a major investment by U.S. Steel in the Mon Valley and western Pennsylvania. U.S. Steel will reduce the emissions by a greater amount than expected by replacing two coke quenching towers with low-emission quenching towers, and by bringing three old coke batteries into compliance, eliminating the need to shut them down. The two new quenching towers will reduce more emissions than if U.S. Steel replaced the three coke batteries, and will be cheaper than building new batteries.
The coke oven battery will have 84 ovens, compared with 192 ovens in the current battery, reducing emissions and enabling the plant to meet air quality standards
Last month, the company’s Serbian unit also launched a new roll servicing facility at its cold rolling mill in Smederevo, worth more than $5.0 million. The Serbian Roll Service Company is part of a joint venture with Canadian Court Holdings Ltd.
The joint venture will provide services to other companies as well, and currently employs six people, who are performing chrome plating and roll grinding for the needs of U.S. Steel.
Recently, the company reported a first quarter 2011 net operating loss of 60 cents per share, wider than the Zacks Consensus Estimate for a loss of 38 cents. However, the loss was a huge improvement over the loss of $1.10 per share in the prior-year quarter.
Revenue in the quarter improved 24.8% year over year to gross $4.9 billion and was slightly above the Zacks Consensus Estimate of $4.8 billion. Results were driven by improved economic conditions and customer demand, leading to increased average realized prices, shipments and raw steel capability utilization for the North American and European flat-rolled operations. Increased raw material costs partially offset these improved conditions.
U.S. Steel’s European operations, which also include a steel mill in Kosice, Slovakia, reported an operating loss of $5 million in the first quarter of 2011, versus a profit of $12 million in the year-ago quarter. Shipments soared 17% over the prior quarter to 1.4 million tons, attributable to increased customer demand, driven by improved economic conditions, reduced imports and lower customer supply chain inventory levels.
Management expects U.S. Steel Europe results to be in line with the first quarter of 2011 based on increased average realized prices, offset by higher raw material costs and decreased shipments. Average realized prices are expected to increase from first-quarter 2011.
The raw steel capability utilization rate is expected to decrease from the first quarter of 2011 due to reduced spot market demand caused by an enhanced production level across Europe and the rising threat of imports.
U.S. Steel is an integrated steel producer of flat-rolled and tubular products with major production taking place in North America and Europe. It is currently the tenth largest steel producer in the world with an annual raw steel production capability of 31.7 million tons. It competes with international steel giants like ArcelorMittal (MT), BaoSteel, Posco (PKX), Nippon Steel and ThyssenKrupp.
We maintain our Neutral recommendation on U.S. Steel and its quantitative Zacks # 3 Rank (short-term ‘Hold’ rating).
