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Steel''s still waiting for a turnaround: given trade protection and temporary capacity shutdowns, a few steelmakers fared well last year. But many still face financial troubles as demand remains sluggish. No one is oozing optimism for the remainder of 2003. (The Mill Scene).

Article Excerpt
Given some historical perspective, people I may point back to 2002 as a turning point for the American steel industry.

It was a year that saw dramatic recovery of steel prices, due as much to capacity curtailments as to the Bush administration's Section 201 tariffs. It was the year that announcements of new Chapter 11 bankruptcy filings gave way to those of mill mergers and asset buyouts. It was also the year the Steelworkers finally conceded that old-line mills could not survive in the global market if they were held accountable for crippling legacy costs.

The relative success of individual mills varied widely last year. The number of steel companies that have filed for Chapter 11 since the end of 1997 has grown to 37, according to the United Steelworkers of America and various other sources. The most recent filers were Bayou Steel Corp. on Jan. 22, 2003, and Kentucky Electric, Steel Inc. on Feb. 6. Kentucky shut down its operations, but Bayou continues to produce and ship steel with debtor-in-possession financing.

Seventeen bankrupt steel companies ceased operations over the past five years, and others closed or rationalized a portion of their facilities in an effort to cut costs. (See "Plant Closures & Cutbacks" chart, page 5.)

The import "time-out" provided by the Section 201 steel safeguard measure, implemented in March 2002, allowed for well-financed players to make some strategic acquisitions last year while jettisoning burdensome legacy retiree pension and health care costs. Other mega-mergers, still in the works in first-quarter 2003, include competing U.S. Steel and AK Steel bids for the assets of National Steel Corp., and International Steel Group's offer to acquire Bethlehem Steel Corp. (See "Steelmakers' M&A Activity" chart, page 6.)

In spite of the Section 201 tariffs, total steel imports last year, at more than 32.5 million tons, were the fourth-highest level in U.S. history and 8.2 percent higher than in 2001, according to the American Iron and Steel Institute.

2002: HIGHS AND LOWS

U.S. Steel Corp.--one of the industry's potential consolidators with its bid for National--shipped 10.6 million tons domestically last year, or 8.9 percent more than in 2001. It realized an average per-ton price of $410 on domestic flat-roll shipments last year, up from $397 the prior year. Its average per-ton price of $651 on tubular products was down from $685 per ton in 2001.

The company increased its raw steel capacity utilization to 90.1 percent, from 78.9 percent in 2001. Revenues increased 10.5 percent, moving the company back into profitability. (See "Steelmakers' Results" chart, page 9.)

Nucor Corp. shipped about 13.6 million tons in 2002, or 10.6 percent more volume than in 2001. Its 2002 revenues and net earnings grew 10.3 and 43.4 percent, respectively, over 2001.

With the recent acquisition of Birmingham Steel, a 2-million-ton producer, plus the restart of the former Trico mill, which is expected to make 1.5 million tons of steel this year, Nucor could top 17 million tons of shipments in 2003.

AK Steel shipped 3.3 percent more volume last year compared with 2001, and saw revenues grow by 11.8 percent, in part due to higher average realized selling prices. However, the company posted a loss, attributed in large part to a charge of $483 million associated with the company's pension and retiree benefit obligations.

Similarly, at Bethlehem Steel Corp.--under Chapter 11 and the target of a buyout proposal from International Steel Group--2002 losses totaling $700 million were exacerbated by $427 million in expenses related to pension and retiree health care and life insurance costs. Bethlehem shipped 2.5 percent less volume last year, vs. 2001,...

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