Steelmakers predict gradual recovery in markets

(AP) — Steelmakers are seeing the first blush of a recovery with more orders from manufacturers of autos, appliances and similar products. Yet, the battered industry's full recovery has been stalled largely by a sluggish construction market.

United States Steel Corp. and Nucor Corp. on Tuesday indicated they believe the steel market will gradually improve this year as the economy rebounds but warned that demand in commercial construction remained weak.

The forecast came as the two manufacturing giants released fourth-quarter earnings reports showing an industry still struggling from the ill-effects of the recession that left key markets reeling — autos, construction, industrial equipment and consumer products.

Both companies reported improved demand for some products but each said sales declined at least 50 percent for the year. Spot prices rose, but so did raw materials costs.

"While we are becoming more optimistic, primarily due to improvements we are starting to see in the manufacturing sector, we remain cautious in our outlook for end-user demand," U.S. Steel Chairman and CEO John P. Surma said in a statement.

Signs of an improving economy have been surfacing in recent weeks across several sectors.

Manufacturers have been busier as customers restock inventories. The Institute for Supply Management, a trade group of purchasing executives, has reported five straight months of improved manufacturing activity. Economists believe industrial production is likely to keep expanding in coming months.

Automakers, for example, are hoping for a better 2010 after many reported improved sales last month.

While overall U.S. sales of cars and light trucks declined 21 percent to 10.4 million in December, Hyundai reported an 8 percent yearly gain, Kia had an annual gain of nearly 10 percent. And auto dealerships saw a typical post-Christmas rush as buyers sought year-end bargains. Analysts expect sales to rise to 11.5 million to 12 million this year.

In addition, Americans' confidence in the economy improved in January for the third straight month, according to a survey released Tuesday.

The Conference Board's Consumer Confidence Index increased to 55.9 in January, the highest in more than a year. That compares with 53.6 in December.

Economists watch confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity. It takes a reading of 90 to indicate an economy on solid footing and 100 or more to indicate growth.

The U.S. construction market remains the weak spot.

"The nonresidential construction market is not projected to have a significant upturn here in the first half of the year," said Dan DiMicco, chief executive of Nucor.

In the fourth quarter, U.S. Steel, which is based in Pittsburgh, reported a net loss of $267 million, or $1.86 per share, compared with earnings of $290 million, or $2.50 per share, during the same period last year.

Revenue declined 26 percent to $3.35 billion from $4.5 billion.

Analysts surveyed by Thomson Reuters had predicted a loss of $1.43 a share on revenue of $3.1 billion.

The company cautioned that these signs of improvement won't be fully reflected in first-quarter operating results, which should show a loss "in line" with the fourth quarter.

U.S. Steel had a 2009 loss of $1.4 billion, or $10.42 a share, compared with net income of $2.1 billion, or $17.96 a share in 2008. Revenue fell 54 percent to $11.05 billion.

Nucor, which is based in Charlotte, N.C., reported a fourth-quarter profit of $58.9 million, or 18 cents per share. The company earned $105.9 million, or 34 cents per share, in the year-ago quarter. Revenue tumbled 29 percent to $2.94 billion.

The results topped analysts' forecasts for profit of 7 cents a share on revenue of $1.58 billion.

Although Nucor did not release detailed first-quarter guidance, it said it expected a 5 percent increase in steel mill shipments, higher sales prices and higher scrap costs.

For the full year, the company posted a loss of $293.6 million, or 94 cents per share, compared with earnings of $1.83 billion, or $5.98 per share, in 2008. Revenue fell 53 percent to $11.19 billion.

KeyBanc analyst Mark L. Parr, who follows the industry, noted that U.S. Steel missed analysts' estimates on higher costs and lower-than-expected increases in prices. Nucor, meanwhile, beat the analysts' estimates thanks to higher steel prices.

Shares of U.S. Steel fell $6.62, or 11.8 percent, to close at $49.61, and Nucor finished down 57 cents at $43.56.

On Monday, AK Steel Holding Corp., based in West Chester, Ohio, credited increased demand, particularly from automotive customers, for better-than-expected fourth-quarter profit.

It predicted that stronger pricing will help the company drive growth in 2010 but warned that the first quarter will likely be the lowest shipment quarter of the year.

AK Steel Holdings' shares lost 4 cents to close at $21.23.

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Associated Press reporters Ashley M. Heher in Chicago and Deborah Jian Lee in New York contributed to this report.