U.S. and European Steel Cannot Confirm Recovery: United States Steel Corporation (X), Steel Dynamics, Inc. (STLD)

US Steel exports for 2012 climbed 2.2% to a record 13.745 million tons despite a slowdown at the end of the year according to American Institute for International Steel (AIIS). Month-over-month, total steel exports dropped 16% from October to November and then dipped further by 2.9% to 879,053 tons in December.  The slowdown witnessed at the end of 2012 is continuing into 2013 due to soft demand from local and international markets.

This is a bearish leading indicator for the 2nd half of 2013.  The leading US steel producers have reported falling revenues and shipments for the final quarter of the CY-2012 due to falling prices and weak demand.  For 2012, Mexico was the bright spot for the American steel industry in terms of year-over-year growth; increasing by an impressive 20%.

United States Steel Corporation (NYSE:X) posted improving year-over-year results in which fourth quarter net losses narrowed to $50 million from $211 million in 2011.  Although its net sales dropped by 6.8% from last year to $4.49 billion it topped analysts’ estimates of $4.35 billion. Steel Dynamics, Inc. (NASDAQ:STLD) , however, had a better quarter than that, nearly doubling its net income year over year to $60.57 million in Q4. This translated into an EPS of $0.27 per share, making a near mockery of analysts’ estimates of $0.15 per share. The latest results included a $16 million (or $0.07 per share) boost from positive tax adjustments. The company’s net sales fell 8.1% from $1.86 billion to $1.71 billion and it did so on lower operating margins as shipments declined just 0.6% 1.46 million tons.

By contrast, ArcelorMittal (ADR) (NYSE:MT) , the world’s leading steel producer, which is heavily exposed to the debt ridden continent of Europe, saw its net loss widen from $1 billion in Q4-2011 to $3.99 billion in Q4-2012 on a previously announced goodwill write off of $4.3 billion of its European operations in December.  So, this is a balance sheet, not operational loss.  That’s not to say business in Europe is booming or anything. Steel demand in Europe dropped by 8.8% in 2012 alone taking the total fall from 2007 cumulatively to 29% and ArcelorMittal appears to be bearing the brunt of this drop.

Its quarterly sales dropped by 14.0% to $19.31 billion due to declining average selling prices and lower volumes. Total steel shipments fell by 2.9% from 2011 to 20.0 million metric tons. However, the company is expecting to improve its annual EBITDA in 2013 from 2012 levels. Its EBITDA for 2012 stood at $7.1 billion; analysts are expecting 14% growth to $8.11 billion in 2013.

ArcelorMittal’s American rival, Nucor Corporation (NYSE:NUE), was not immune to the issues in Europe and posted a 7% drop in net sales for its fourth quarter to $4.45 billion while earnings remained flat down just $200,oo to $136.9 million while its EPS remained at $0.43 per share. Like ArcelorMittal, Nucor’s revenues were also hit by declining prices; the company’s average selling price per ton fell by 4% year-over-year. Quarterly production and shipments fell by 1% and 3% to 4.73 million tons and 4.76 million tons, respectively.