United States Steel Corp. X has declared that it will temporarily halt production in its Minnesota Ore Operations at its Keetac plant in Keewatin, MN. This will be effective May 13, 2015. U.S. Steel’s existing inventory levels and adjustments of its steel production throughout North America led the company to take this decision in order to accommodate customer demand.
U.S. Steel regularly adjusts production at its operating facilities to adapt to the changing market conditions owing to the cyclical nature of the industry. Economic factors like high levels of imports, unfairly traded products and reduced steel prices continue to have an adverse impact on steel production.
A total of 412 employees working at the Keetac plant have been informed about the idling of production and issued notices under the Worker Adjustment and Retraining Notification (“WARN”) Act.
However, U.S. Steel will maintain the production of iron ore pellets at its Minntac plant in Mt. Iron, MN.
As reported on Jan 27, 2015, U.S. Steel’s fourth-quarter 2014 profits slipped 7.4% to $275 million or $1.83 per share from $297 million or $1.93 per share recorded in the year-ago quarter. However, the company saw a significant increase in its adjusted earnings which surpassed expectations, driven by synergies from the Carnegie Way program. Revenues in the fourth quarter also fell roughly 4.6% year over year to $4,072 million.
U.S. Steel expects the Carnegie Way transformation to continue boosting the company’s business and earnings in 2015. The company expects moderate growth in the global economy during 2015 with U.S. growth rate at roughly 3% and European region growth rate at roughly 1%.
However, current trends in the steel industry are not quite encouraging. Oversupply in the industry has put steel prices under pressure, with Chinese steel production considerably outpacing demand. Cheap imports are also hurting the margins of other American steel players.
U.S. Steel currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the basic materials sector include Kobe Steel Ltd. KBSTY, ThyssenKrupp AG TYEKF and Newmont Mining Corp. NEM. While both Kobe Steel and ThyssenKrupp sport a Zacks Rank #1 (Strong Buy), Newmont Mining carry a Zacks Rank #2 (Buy).
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