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US Steel Expects Markets To Improve

U.S. Steel Corp. cautiously expects business to improve in the first three months of this year after a rough second half of 2010.

PITTSBURGH (AP) -- U.S. Steel Corp. cautiously expects business to improve in the first three months of this year after a rough second half of 2010.

America's largest steelmaker by sales said rising steel prices and greater demand from most of its customers should offset higher costs for raw materials like scrap metal and coal. But it's not yet ready to predict a return to profitability.

"We're expecting (first-quarter improvements) but we didn't say that we expected to be profitable," Chief Financial Officer Gretchen R. Haggerty told analysts during a conference call.

U.S. Steel joined AK Steel and Steel Dynamics in reporting a loss for the fourth quarter. All three said they expect better days ahead.

Chairman and CEO John Surma said steel prices began to rise late in the fourth quarter and should be reflected in U.S. Steel's earnings in the first half of 2011.

On Tuesday U.S. Steel reported a smaller fourth-quarter loss after it sold assets and cut spending.

The Pittsburgh company lost $249 million, or $1.74 per share, in the October-December period. That compares with a loss of $267 million, or $1.86 per share a year earlier. Revenue increased 28 percent to $4.3 billion from a year ago.

The results missed Wall Street expectations for a loss of $1.11 per share on revenue of $4.2 billion.

U.S. Steel said that market conditions were "soft" during most of the last three months of 2010. The price it got for steel products dropped from the third quarter, when it lost $51 million.

At the same time, the cost of sales, which includes raw materials, jumped 23 percent.

"We remain cautiously optimistic that global economic conditions will continue to improve in the first quarter," Surma said. "We are essentially sold out through March in North America," he told analysts. "Everything we see today looks OK, but tomorrow could be, of course, a much, much different picture."

The message is similar from other steelmakers. AK Steel Holding Corp. and Steel Dynamics expect business to pick up in the first quarter as the economy improves. On Tuesday AK Steel posted a loss of $98.3 million. A year ago it earned $39.8 million. Steel Dynamics on Monday reported earnings of $7.8 million, down from a profit of nearly $26.7 million in the same quarter a year ago.

U.S. Steel narrowed the loss in its flat-rolled segment to $156 million. The company's tubular business reported a profit of $96 million.

Flat-rolled steel is used in appliances, cars and construction. Tubular steel is used to make pipes.

For the full year, United States Steel Corp. lost $482 million, or $3.36 per share, compared with a loss of $1.4 billion, or $10.42 per share, in 2009.

Analysts expected U.S. Steel to log a weak fourth quarter but some were disappointed with muted first-quarter expectations.

Argus Research analyst Bill Selesky said the fourth quarter typically is weaker than others for most steel companies because customer demand falls at the end of the year. Going forward, the main challenges will be to offset higher raw materials costs by passing along higher prices to customers, he said.

Selesky also expects a weak showing from steelmaker Nucor Corp., which is scheduled to report fourth-quarter results on Thursday. Nucor has forecast a loss of 10 cents to 15 cents a share in the fourth quarter because of higher material costs and weak demand from construction markets.

Shares of U.S. Steel rose $2.86, or 5.3 percent, to close at $57.30. AK Steel added $1.11, or 7.7 percent, to close at $15.57. Steel Dynamics rose 24 cents to close at $18.32 and Nucor lost 13 cents to close at $44.94.

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