United States Steel Corp. reported net income of $245 million on net sales of $3,582 million for the second quarter of 2005.

The $245 million net income ($1.88 per diluted share) compares to first quarter 2005 net income of $455 million ($3.48 per diluted share) and second quarter 2004 net income of $211 million ($1.62 per diluted share).

Commenting on results, U. S. Steel President and CEO John P. Surma said, "Considering global steel market conditions, we had a good quarter with strong operating results from our European and Tubular segments and a solid performance by our Flat-rolled segment."

The company reported income from operations of $413 million, compared with income from operations of $640 million in the first quarter of 2005 and $388 million in the second quarter of 2004.

Other items not allocated to segments reduced net income by $3 million (2 cents per diluted share). First quarter 2005 results included net income of $58 million (45 cents per diluted share), primarily from a property tax settlement. Second quarter 2004 net income was reduced by $22 million (17 cents per diluted share), primarily resulting from a $33 million charge to net interest and other financial costs for the early redemption of senior debt.

Foreign currency losses were $43 million, compared to losses of $27 million and $16 million in the first quarter of 2005 and the second quarter of 2004, respectively. The losses primarily reflect accounting remeasurement losses from the appreciation of the U.S. dollar functional currency versus the euro and other local currencies.

Reportable Segments and Other Businesses—U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $487 million ($100 per ton) in the second quarter of 2005, compared with $652 million ($127 per ton) in the first quarter of 2005 and $454 million ($82 per ton) in the second quarter of 2004.

The decrease in second quarter 2005 Flat-rolled income from operations compared to the first quarter primarily reflected declining spot market prices, reduced shipments and lower operating levels, with higher outage costs largely offset by lower raw materials costs. The decline in European operating results was due mainly to lower sheet spot market prices and higher raw material costs. Tubular results remained at record levels.

Outlook—Commenting on U. S. Steel's outlook, Surma said, "Operating results for the third quarter of 2005 are likely to be lower than in the second quarter, reflecting recent spot price trends in domestic and European markets for sheet products. We have been encouraged by recent reports of lower service center sheet inventory levels and improved Flat-rolled order entry rates; however, market conditions will determine if these trends will be sustained throughout the third quarter and the remainder of the year."

For Flat-rolled, third quarter 2005 average realized prices are expected to be moderately lower than in the second quarter, reflecting lower spot prices, and shipment levels and costs are expected to be comparable to second quarter levels. The Gary blast furnace project will continue throughout the third quarter and our remaining domestic production facilities will be operated at levels necessary to balance our inventories and our order book.

For U. S. Steel Europe (USSE), third quarter average realized prices are expected to be significantly lower than in the second quarter, primarily reflecting the recent decline in hot-rolled spot prices. The price decline should be partially offset by a significant decrease in raw material costs. The planned partial reline of the No. 2 blast furnace at U. S. Steel Kosice is expected to be completed during the third quarter and this furnace will be restarted when market conditions warrant. Third quarter 2005 shipments for USSE are expected to be about the same as in the second quarter.

Shipments and average realized prices for the Tubular segment in the third quarter of 2005 are expected to be in line with second quarter levels. Tube round costs will reflect a July 1 increase of $20 per ton to the transfer price for tube rounds supplied by Flat-rolled because of higher metallic addition costs.