U.S. Steel Rallies as Demand Pickup Seen Alleviating Metal Glut

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U.S. Steel Corp. shares are on the biggest tear in a year on signs steelmakers in the country are about to get some relief from a glut exacerbated by China’s slowdown.

The stock jumped 13 percent to $20.04 at 4:15 p.m. in New York, the steepest advance since July 30, 2014.

Chief Executive Officer Mario Longhi said Wednesday he’s looking for a fourfold increase in second-half earnings on cost cutting and an improving market outlook. The projection helped extend a gain this week to 23 percent as part of an industrywide rally fueled by optimism that trade complaints lodged against cheap imports will ease price pressure.

U.S. Steel surprised by maintaining its guidance based on cost cutting, which implies “a massive improvement in the second half,” David Gagliano, a New York-based analyst for BMO Capital Markets, said by phone. “Our view is it’s going to be hard for them to get to that target.”

Cliffs Natural Resources Inc. Chief Executive Officer Lourenco Goncalves said Wednesday that the trade cases are a game changer for steelmakers with volumes set to rise in the second half. Cliffs sells iron ore to steel mills.

Companies including U.S. Steel could win market share from overseas steelmakers if duties are imposed on cold-rolled imports, Bloomberg Intelligence trade analyst Caitlin Webber wrote in a report Wednesday.

Losses Deepen

After reporting on Tuesday a wider-than-forecast net loss for the second quarter, the country’s second-largest producer gave an estimate of at least $570 million in earnings before interest, taxes, depreciation and amortization for the second half of the year, compared with $130 million in the first half.

Shipments in the flat-rolled division, its biggest, and tubular segment, which produces its highest-priced goods, will improve, Chief Executive Officer Mario Longhi said on a conference call to discuss earnings.

“The automotive market continues to be a very good market for us, and we expect it to remain strong throughout the year,” Longhi said. “We also expect growth in demand in the appliance and construction markets as compared to last year.”

U.S. Steel’s net loss widened to $1.79 a share in the second quarter compared with 12 cents a year earlier. Excluding one-time items, the loss per share was 79 cents. Sales fell to $2.9 billion from $4.4 billion.

The average price of hot-rolled steel coil, a benchmark product used in everything from buildings and appliances to automobiles, tumbled 33 percent to $456 a ton in the quarter, according to data from The Steel Index. A stronger dollar and climbing domestic demand amid global oversupply has led to years of increasing imports.

The nation’s steelmakers on average used 72 percent of their capacity in the quarter, down from 76 percent a year earlier, according to the American Iron and Steel Index.

Nucor Corp., the largest U.S. producer, has gained 6.6 percent this week, reducing a year-to-date drop to 5.9 percent.