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Losses Continue to Mount for United States Steel Corp.
04/26/2016 - United States Steel Corp. posted a first-quarter net loss of US$340 million on Tuesday and announced that it filed a Section 337 petition seeking to bar unfairly traded, Chinese-made steel products from entering the country.
For the quarter ended 31 March, the company reported US$2.3 billion in sales, a decline of 28 percent from the same quarter last year. It's losses, meanwhile, grew -- it had posted a net loss of US$75 million in the year-ago quarter.
The company said the loss reflects lower prices and shipments and includes US$25 million in unemployment benefit and severance costs.
“Our first-quarter results reflect the challenging conditions as we started 2016, but were in line with our expectations. Contract pricing resets had an immediate impact on our results, while our cost reduction efforts progressed as planned and will continue to grow throughout the year,” said U. S. Steel CEO Mario Longhi.
Also on Tuesday, the Pittsburgh-based steelmaker said it filed a Section 337 petition with the U.S. International Trade Commission, contending that the largest of Chinese steel producers and distributors have conspired to fix prices, stolen trade secrets and circumvented duties through false labeling.
The company didn’t elaborate on the allegations in its announcement. But in 2014, a federal grand jury indicted five members of the Chinese military, alleging that they hacked several U.S. businesses and stole secrets and sensitive internal communications from them. The affected companies included U. S. Steel and specialty steelmaker Allegheny Technologies Inc.
Although Section 337 investigations usually involve allegations of patent or trademark infringement, they can pertain to unfair trade practices that could substantially injure or destroy a domestic injury.
If U. S. Steel prevails in its case, the commission could issue what's known as an exclusion order. Such orders direct U.S. Customs and Border Protection to turn away shipments of products from offending producers or countries. The commission will have 30 days to decide whether to open a case.
The United Steelworkers union, which issued a statement of its own in support of the petition, said U. S. Steel’s case lays out an array of improper and unfair actions China has taken. Producers have conspired on prices, the union said, and have created elaborate schemes to evade trade actions.
"America's steel sector is under attack by China. Repeated illegal and predatory trade practices have devastated production and employment in steel and many others sectors,” said USW International President Leo Gerard.
"Today the USW stands with U. S. Steel in its effort to put a stop to China's illegal and predatory acts targeting our country's steel sector. The approach the company is taking is bold, but necessary,” he said.
“This effort is adding a new arrow in the quiver to attack their actions.”
U. S. Steel and other domestic producers already are pursuing a variety of anti-dumping cases against foreign producers, including those in China. The cases are being finalized, but already are sparking market improvements, Longhi said, adding that recent flat rolled price increases are expected to show up in the company's second-quarter earnings.
However, the headwinds continue to blow, he said.
“While we will benefit from the improving market conditions, the global steel industry continues to face many challenges,” Longhi said.
Those challenges are evident in its quarterly results.
Shipments from its domestic flat rolled and tubular mills and its European mill declined 12 percent from a year ago, falling to 3.6 million tons. Its tubular operation reported the steepest drop as shipments fell 60 percent, dropping to 89,000 tons.
In the same quarter last year, the tubular mills shipped 220,000 tons.
In March, U. S. Steel said it was temporarily idling tube mills in Texas and Alabama due to low prices and weak demand. Longhi told reporters at the company’s annual meeting on Tuesday that U. S. steel is open to selling its tubular assets, but added that no deals are pending.
“We’re always open, and conversations take place on a regular basis. So this is not something new. If there’s an opportunity that enhances shareholder value, then we’ll certainly pursue it,” he said, according to the Pittsburgh Business Times.
The company said the loss reflects lower prices and shipments and includes US$25 million in unemployment benefit and severance costs.
“Our first-quarter results reflect the challenging conditions as we started 2016, but were in line with our expectations. Contract pricing resets had an immediate impact on our results, while our cost reduction efforts progressed as planned and will continue to grow throughout the year,” said U. S. Steel CEO Mario Longhi.
Also on Tuesday, the Pittsburgh-based steelmaker said it filed a Section 337 petition with the U.S. International Trade Commission, contending that the largest of Chinese steel producers and distributors have conspired to fix prices, stolen trade secrets and circumvented duties through false labeling.
The company didn’t elaborate on the allegations in its announcement. But in 2014, a federal grand jury indicted five members of the Chinese military, alleging that they hacked several U.S. businesses and stole secrets and sensitive internal communications from them. The affected companies included U. S. Steel and specialty steelmaker Allegheny Technologies Inc.
Although Section 337 investigations usually involve allegations of patent or trademark infringement, they can pertain to unfair trade practices that could substantially injure or destroy a domestic injury.
If U. S. Steel prevails in its case, the commission could issue what's known as an exclusion order. Such orders direct U.S. Customs and Border Protection to turn away shipments of products from offending producers or countries. The commission will have 30 days to decide whether to open a case.
The United Steelworkers union, which issued a statement of its own in support of the petition, said U. S. Steel’s case lays out an array of improper and unfair actions China has taken. Producers have conspired on prices, the union said, and have created elaborate schemes to evade trade actions.
"America's steel sector is under attack by China. Repeated illegal and predatory trade practices have devastated production and employment in steel and many others sectors,” said USW International President Leo Gerard.
"Today the USW stands with U. S. Steel in its effort to put a stop to China's illegal and predatory acts targeting our country's steel sector. The approach the company is taking is bold, but necessary,” he said.
“This effort is adding a new arrow in the quiver to attack their actions.”
U. S. Steel and other domestic producers already are pursuing a variety of anti-dumping cases against foreign producers, including those in China. The cases are being finalized, but already are sparking market improvements, Longhi said, adding that recent flat rolled price increases are expected to show up in the company's second-quarter earnings.
However, the headwinds continue to blow, he said.
“While we will benefit from the improving market conditions, the global steel industry continues to face many challenges,” Longhi said.
Those challenges are evident in its quarterly results.
Shipments from its domestic flat rolled and tubular mills and its European mill declined 12 percent from a year ago, falling to 3.6 million tons. Its tubular operation reported the steepest drop as shipments fell 60 percent, dropping to 89,000 tons.
In the same quarter last year, the tubular mills shipped 220,000 tons.
In March, U. S. Steel said it was temporarily idling tube mills in Texas and Alabama due to low prices and weak demand. Longhi told reporters at the company’s annual meeting on Tuesday that U. S. steel is open to selling its tubular assets, but added that no deals are pending.
“We’re always open, and conversations take place on a regular basis. So this is not something new. If there’s an opportunity that enhances shareholder value, then we’ll certainly pursue it,” he said, according to the Pittsburgh Business Times.
