US Steel 1Q15 Earnings Call Notes

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Faced extremely difficult conditions in Q1

“We faced extremely difficult conditions in the first quarter with high levels of imports and supply chain inventories and rapidly falling spot prices and rig count significantly impacting volumes at both our flat rolled and tubular segments. The continuing strengthening of the U.S. dollar, particularly in relation to the euro helped to keep import pressure high in North America and negatively impacted our European segment results.”

Flat rolled impacted by foreign steel, unfairly traded

“Our flat-rolled segment results continue to be adversely impacted by the mass of steel imports that accelerate during the first quarter many of which we believe are unfairly traded.”

Tubular segment decreased significantly

our tubular segment decreased significantly compared to fourth quarter, primarily due to lower shipments. Shipments were adversely impacted by reduced drilling activity caused by low coal prices and a significant amount of tubular import volumes. Inefficiencies from reduced operating levels at all of our tubular facilities also negatively affected first quarter results.”

The Carnegie way

” our Carnegie way transformation process. The Carnegie way is focused on value creation through a disciplined and structured improvement process with the objective being to earn an economic profit throughout the business cycle and deliver above market returns to our stockholders.

Aggressive actions to address extremely challenging conditions

“We’ve taken aggressive and decisive actions to address the extremely challenging conditions we are currently facing in North America. ”

“We have reduced our operating grades at all of our facilities in North America and will continue to make the adjustments necessary to serve our customers in the most cost effective manner without sacrificing quality, delivery and service that our customers rely on”

We have had to lay off employees in response to imports

“Our order rates have been significantly impacted by high levels of imports into the North American market that have continued unabated, resulting in operating levels that have caused us to lay off a significant number of our employees and will likely result in the number of lay-offs increasing going forward. We are attacking every aspect of our cost structure and exercising every opportunity that we have to eliminate, reduce and defer costs. We have many cost levers that we can pull in response to a downturn in market conditions and we are pulling them as quickly and as hard as we can.’

Demand in most markets is strong

“The automotive market continues to be a very good market for us and we expect it to remain strong throughout the year. We expect to see continued growth in construction, including increased demand for construction equipment.”

Order rates should start to improve in 2Q

“Recent service center data, particularly flat rolled inventory levels and materials and order levels suggest that order rates should start to improve during the second quarter.”

Steel consumption is pretty good, we’re just getting pressured by imports

“Excluding the energy sector, steel consumption in North America is generally good, but extremely high level of imports, many of which we believe are unfairly traded continue to negatively impact order rates for domestic steel producers.”

Recovery will be late in the year at best

“rig counts continue to decline and the high levels of import tons that continues to arrive suggest that a recovery in domestic order rates will be difficult until late in the year at best. ”

Order intake is picking up and pricing is inflecting

“We are beginning to see an order intake pick-up and there seems to be inflection as far the pricing is concerned.”