U.S. Steel CEO optimistic about second half of 2015

PITTSBURGH — U.S. Steel president and CEO Mario Longhi told analysts Wednesday the Pittsburgh steel producer should do better in the second half of the year after slumping prices and shipments and onetime charges produced a second quarter loss of $261 million, or $1.79 per share.

During a morning conference call, Longhi said much of his optimism is based on $590 million in cost savings the company expects to realize this year from the company’s Carnegie Way initiative. Those projected savings are $250 million higher than what the company expected at the end of the first quarter. He said the company also expects to generate additional, but temporary, savings of $175 million in the second half from short-term cost cuts that are separate from the permanent benefits provided by the Carnegie Way.

“We are attacking every aspect of our cost structure,” Longhi said.

Sales fell 34 percent during the quarter to $2.9 billion while steel shipments fell 23 percent to 3.9 million tons. Prices of flat roll steel produced at the company’s U.S. mills dropped 10 percent. Those mills operated at 58 percent of capacity during the quarter.

In the year-ago quarter, U.S. Steel reported a loss of $18 million, or 12 cents per share, on sales of $4.4 billion.

Results for the current quarter included a non-cash charge of $136 million, or 93 cents per share, for writing down the value of U.S. Steel’s remaining interest in its bankrupt Canadian operations, as well as a noncash charge of $10 million, or 7 cents per share, for restructuring and other items. They also reflect a $186 million tax benefit related to its iron ore operations. Excluding the two noncash charges, U.S. Steel said its adjusted loss for the quarter was $115 million, or 79 cents per share. Analysts had forecast an adjusted loss of 68 cents per share on sales of $2.97 billion.

WASHINGTON — Expectations have grown that sometime this year, the Federal Reserve will raise interest rates from record lows. The only question seems to be when.

A statement the Fed issued after ending its latest policy meeting provided no timetable.

The central bank signaled that it wants to see further economic gains and higher inflation before raising rates.

Many analysts foresee the first hike in September, though Fed Chair Janet Yellen has stressed that any increase will be driven by the latest economic data.

The statement noted that the job market, housing and consumer spending have all improved. The Fed still expects inflation to rise gradually toward its 2 percent target.

The statement made only slight changes to the wording of the previous statement in June. The few modifications suggested a healthier economy.

Describing the job market, the Fed for the first time pointed to “solid” job gains. In addition, the Fed said it needs to see only “some further” improvement in hiring, rather than the “further” improvement it said last time — a hint that the job market is nearing full health.

Michael Hanson, an economist at Bank of America Merrill Lynch, said the Fed’s more upbeat language about the job market suggests that policymakers are nearing the point where they will raise rates. He expects that to occur in September.

“They haven’t made up their minds, but ... we’re getting that much closer to satisfying their criteria” for a rate hike, Hanson said.

Yellen has stressed that when the Fed begins to raise rates, it will do so only gradually. The idea is to avoid weakening an economy that’s still benefiting from low borrowing rates resulting from the Fed’s policies. She has suggested that raising rates in small increments, followed by pauses, will let the Fed assess the effects of slightly higher borrowing costs.

The Fed has kept its key short-term rate at a record low near zero since 2008. Once it raises it, other rates — for mortgages, auto loans and corporate borrowing — could rise, too.

“In my mind, the Fed is very comfortable with a slow, deliberate pace,” said Brian Bethune, an economics professor at Tufts University in Boston. “The Fed doesn’t want to upset the apple cart with any type of market shock that could cause further problems in the global economy, whether that is in China or in Europe.”

The statement was approved on a 10-0 vote, marking the fifth straight time it has been unanimous.

Yellen has left little doubt that the Fed is preparing to raise short-term rates by year’s end from the nearzero lows it set at the depths of the 2008 financial crisis.