Tue Jul 27, 2004
By Michael Erman

NEW YORK (Reuters) - United States Steel Corp. (X.N: Quote, Profile, Research) on Tuesday posted higher-than-expected quarterly earnings and said it expects strong profitability through year-end on surging demand and higher prices that have revived the U.S. steel industry.

The Pittsburgh steelmaker reported earnings of $211 million, or $1.62 a share, in the quarter, compared with a loss of $49 million, or 51 cents, a year earlier.

Excluding items, the company said it earned $1.79 a share in the quarter, well above the average earnings estimate of analysts polled by Reuters Estimates of $1.50 a share.

Steel prices have soared in the United States this year, buoyed by strong global demand, the weak dollar and the effects of high raw material costs, sparking a recovery in a sector once believed to be on its last legs.

Average sales prices at U.S. Steel's flat-rolled products unit, which makes sheet steel for cars, appliances and the construction industry, rose nearly 40 percent from last year. Average prices at the company's European unit were up about 33 percent.

"Europe did better than I thought it was going to do," said analyst Charles Bradford of Bradford Research/Soleil Securities. "That price increase is pretty spectacular, keeping in mind that their prices tend to be pretty fixed, because they are bringing in raw materials from Russia and Ukraine."

Revenue in the quarter rose to $3.47 billion from $2.36 billion last year.

U.S. Steel said it expects strong profitability through year-end on strong worldwide pricing, tight supplies and high demand from developing countries, especially China.

The company said it expects third-quarter flat-rolled prices to exceed second-quarter levels but shipments will drop by about 200,000 tons in the quarter. U.S. Steel Europe margins should increase due to a July 1 price hike.

The company's shares were off 52 cents, or 1.5 percent, to $33.40 in Tuesday morning New York Stock Exchange trade.

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