NGDIR News Section-Steelmakers painted a gloomy picture of the short-term prospects for the industry on Tuesday as global prices have fallen and industrial demand is not recovering from the recession as quickly as expected.
   The negative outlook from Japan to North America sent steelmakers’ shares tumbling, with US Steel ending down over 6 percent, Reuters wrote
  
   US Firms
   US Steel complained of slower order rates with lower shipments in the third quarter and it idled a blast furnace in Serbia and has begun maintenance work on another in Slovakia.
   One of its four blast furnaces in Gary, Indiana, is down for maintenance and US Steel said it will probably be operating at a lower capacity rate in the third quarter than the second.
   Another US steelmaker, AK Steel, said it is cutting production capacity to match weak demand from big steel buyers like the automobile and construction industries.
   “Our bookings for August...are quite a bit less than they were for May,” further evidence of the caution that prevails in the market, US Steel’s Chairman and Chief Executive Officer John Surma told Wall Street analysts. “There is a recovery underway...(but) it is going to be a choppy recovery and it is going to take some time.”
   Asked about lower shipments in the third quarter, he said it was not a huge reduction and likely less than a 10 percent cut. “There is uncertainty there because we’re not seeing the orders in spot businesses.”
   Surma said the average industry production capacity rate was 72 percent to 74 percent in the second quarter. “I think we’re probably today operating in excess of that, but probably below where we operated for the second quarter.”
   Over the past year, steel prices had slowly risen, but in the last couple of months they have slipped back as demand has stalled and raw material costs have risen. Dahlman Rose & Co. analyst Tony Rizzuto said the price of US hot-rolled coil steel dropped 3.8 percent in just the last five days.
   “Prices have just collapsed and a lot of people have not recognized that yet,” said analyst Charles Bradford of Affiliated Research Group.
   “Too much capacity came back on line too soon,” he said, noting that the US rates had risen from about 45 percent last year to an average in the 70-percent range now.
   AK Steel, which had operated at somewhere between 85 percent and 90 percent of capacity in the second quarter, said on Tuesday it will cut that to 80-85 percent.
   Chief Executive James Wainscott said its two blast furnaces, in Middletown, Ohio, and Ashland, Kentucky, will be “paced. We’ll match the order intake rate and will probably not produce carbon slabs at our Butler works (near Pittsburgh).”
  
   Volatile
   The gloom over the health of the steel industry came as Japan’s JFE Holdings Inc (5411.T), the world’s fifth-largest steelmaker, which produced 25.8 million tons last year, returned to a profit. US Steel posted a narrower second-quarter loss and AK Steel posted a profit that beat Wall Street expectations.
   US Steel, which shipped under 15 million tons in 2009, has reported six consecutive quarterly losses. It said in April, there were signs of economic recovery and it was increasing production. But on Tuesday it gave a gloomier outlook.
   Earlier, JFE reported earnings for its fiscal first quarter were sharply down from the previous quarter, hit by a delay in pushing through price increases and the steelmaker gave only a cautious full-year outlook below consensus.
   US Steel said its second-quarter net loss shrank to $25 million, or 17 cents per share, compared with a loss of $392 million, or $2.92 per share in the year-ago quarter.
   Excluding a currency remeasurement of intercompany loans, earnings per share were 45 cents, falling short of the 63 cents per share that analysts had on average expected, according to Thomson Reuters I/B/E/S.
   AK Steel, which produced just under 4 million tons of steel last year, beat estimates to report a net second-quarter profit of $26.7 million after a loss in the 2009 quarter.
   JFE said April-June recurring profit--before tax and one-time items--was 51.4 billion yen ($591 million). That was a turnaround from a 67.3 billion yen loss a year before, but about 30 percent below the previous quarter’s profit.
   The Japanese firm predicted a profit of 220 billion yen for the full year to March 2011, well below a consensus of 310.5 billion yen in a poll of 18 analysts by Thomson Reuters I/B/E/S.
   US Steel’s stock fell 6.4 percent on Tuesday to close at $45.76 on the New York Stock Exchange and AK Steel ended the day down 4.7 percent at $14.49. JFE stock fell 3.14 percent at the close in Tokyo.
   The present trend predicts a volatile ride ahead for the global steel market.