U.S. Steel: 2016 will be profitable

Shares of U.S. Steel hit their highest level in nearly 14 months Wednesday after the Pittsburgh steelmaker forecast 2016 will be profitable despite losing $386 million in the first half.

U.S. Steel president and CEO Mario Longhi said a series of trade cases that has contributed to a 29 percent drop in steel imports is putting the U.S. industry in a better position to compete.

“We are certainly pleased with the outcomes we’ve seen so far. The level playing field is being established,” he told analysts during a conference call discussing the Pittsburgh steelmaker’s narrower second-quarter loss of $46 million, or 32 cents per share.

The results were better than analysts expected.

Mr. Longhi said the company expects to report 2016 net income of about $50 million, or 34 cents per share, as steel price increases announced earlier in the year are implemented with customers who buy steel through contracts. The price hikes were made possible by the reduced imports, which restricted supply and gave domestic producers more leverage in negotiating with customers.

The full-year forecast is based on prices, demand, imports and inventories remaining at current levels.

U.S. Steel and other domestic producers filed complaints over imports of three types of sheet steel from China, South Korea, India and other countries. They claimed the imports were being sold at below market prices, and in some cases benefited from government subsidies.

The Commerce Department has made final rulings in two of those cases, imposing duties as high as 266 percent in the case of China. They are expected to issue a final ruling in the third case next month.

U.S. Steel also filed a separate complaint against China in April, accusing that country’s major steel producers of conspiring to fix prices, stealing trade secrets and evading duties imposed on Chinese steel by falsely labeling imports. The U.S. International Trade Commission agreed in May to open a formal investigation of the complaint.

“I think we will prevail in that matter,” Mr. Longhi said on the call. “We do have very high expectations that this is going to be a positive for the industry, not just for us.”

The company said it has realized year-to-date cost savings of $645 million from its Carnegie Way efficiency initiative.

Independent metals analyst Charles Bradford was skeptical about the forecast, noting that the company has to report a second half profit of nearly $3 per share to offset the $2.64 per share it lost in the first half.

“They’ve got to have one heck of a second half,” he said.

U.S. Steel shares finished Wednesday at $25.49, up $2.54 or 11 percent. They have more than tripled in value this year.