Sector Snap: Steel Producer Shares Tumble

NEW YORK (AP) — Steel producers fell Thursday after Steel Dynamics Inc. replaced its forecast of a first-quarter profit with a forecast of a loss amid an industrywide utilization rate of only 43 percent.

The Fort Wayne, Ind., steel producer cut its first-quarter earnings guidance late Wednesday, predicting a per-share loss of 40 cents to 45 cents instead of the its previous prediction of a profit of 5 cents to 10 cents.

The company cited inventory adjustments needed to reflect weak market conditions.

Analysts on average expected a profit of 10 cents per share, according to Thomson Reuters.

Those weak market conditions have forced many steel companies to sharply reduce how fully they utilize their production facilities, said Citi Investment Research analyst Brian Yu.

Whereas the industry was running its plants at a 60 percent utilization rate in the fourth quarter of last year, that figure has dropped to 43 percent, Yu said.

The analysts said the industrywide downturn will not only weigh on Steel Dynamics' results but also those of Nucor Corp., United States Steel Corp., AK Steel Holding Corp., Commercial Metal Co. and Gerdau Ameristeel Corp.

In midday trading, Steel Dynamics shares were down $1.69, or 20 percent, to $6.86, AK Steel was off 57 cents, or 8.7 percent, to $6 and US Steel was lower by $1.40, or 7.2 percent, to $17.93.