(Reuters) - Steel makers U.S. Steel Corp (X.N) and AK Steel Holding Corp (AKS.N) expect results to improve in the current quarter as the global economy recovers and the cost of raw materials such as coal and iron ore stays low.
Global steel demand is expected to rise 3.2 percent this year, compared with projected growth of 2.1 percent in 2012, the World Steel Association said in its most recent forecast in October.
China, the world’s biggest steel producer and consumer, will account for most of the increase in 2013, the association said.
“Steel buyers in North America continued to exhibit caution early in the year, but recent increases in our daily order entry rates suggest increased spot market demand as the quarter progresses,” U.S. Steel Chief Executive John Surma said in a statement accompanying the company’s results on Tuesday.
U.S. Steel, the largest steel producer in the United States by volume, reported a smaller-than-expected loss in the fourth quarter as lower costs helped offset a decline in prices.
The company reported a net loss of $50 million, or 35 cents per share on revenue of $4.49 billion. Excluding items, the loss was 41 cents per share.
Analysts had expected a loss of 75 cents per share on revenue of $4.35 billion, according to Thomson Reuters I/B/E/S.
AK Steel, which also reported a smaller-than-expected loss, said it expected a significantly better first quarter and full-year 2013.
Construction markets are showing signs of improvement, while the automotive, energy and heavy equipment sectors remain the strongest end-markets, said Nucor Corp (NUE.N), which reported a better-than-expected profit.
Operating costs for the companies fell close to 10 percent on average in the December quarter, helped largely by weak prices of coal and iron ore.
AK Steel’s raw material and energy costs are expected to decline by $150 million in 2013, Chief Executive James Wainscott said in a conference call with analysts. Operating costs in 2012 totaled $6.06 billion.
There were indications of growth in Europe too. U.S. Steel said its business in the region had operating income of $7 million, compared with a loss of $89 million a year earlier.
However, Goldman Sachs analyst Sal Tharani cut the industry to “cautious” from “neutral” on Monday, saying rapid demand growth would not materialize in the foreseeable future and excess supply would keep steel prices from rising.
Near- to medium-term earnings for U.S. Steel and AK Steel would remain depressed, he said. Tharani is rated four stars out of five for the accuracy of his earnings estimates for the metals and mining industry, according to StarMine data.
U.S. Steel’s shares were down about 0.5 percent at $23.62 in morning trade on the New York Stock Exchange Tuesday. The stock has fallen 20 percent over the past year, compared with an 8 percent drop in Thomson Reuters United States Steel Index .TRXFLDUSPSTEL.
Shares of AK Steel and Nucor were up slightly.
Reporting By Thyagaraju Adinarayan and Garima Goel; Editing by Sriraj Kalluvila, Robin Paxton and Ted Kerr