Slack demand and sagging prices for steel drove Bethlehem Steel Corp. into the red in the second quarter of the year, the company announced yesterday.
The nation's second-largest steelmaker said that repairs to its 7,600-worker Sparrows Point steel plant and ship repair facility also contributed to the losses.
Bethlehem lost $29 million in the quarter that ended June 30, its third consecutive quarterly loss.
The company said that because of drops in orders from carmakers and construction firms, its sales this spring were 4 percent lower than those of last spring. And higher labor costs, resulting from a recent union settlement that gave local steel workers their first raises in 10 years, added to the financial squeeze.
Bethlehem has spent $550 million this year on capital improvements to its main steelmaking plants, which are in Baltimore and Burns Harbor, Ind.
On Monday, the Bethlehem, Pa.-based company announced that it had completed a three-year, $200 million rehabilitation of the Sparrows Point line that transforms 8-inch-thick steel slabs into long sheets about a tenth of an inch thick.
Though company insiders and industry experts have said that the Sparrows Point capital projects have hurt the company's finances at a time when the economy was turning sour, they acknowledged that the improvements have enhanced the plant's long-term competitiveness.
"By the time these [projects] are done, Bethlehem will have two really super plants," said Charles Bradford, who watches the steel industry for UBS Securities in New York.
Though there has been a recent upturn in orders for steel sheets and some of Bethlehem's competitors have proposed raising prices in September, the company said that it foresees continuing soft demand and prices.
In addition, Bethlehem said that it expects its future earnings to be strained by shutdowns and repairs at its Burns Harbor plant.
As a result, the company expects to lose money in the third quarter and to finish the year in the red.
Bethlehem said that it is studying a proposed joint venture with British Steel PLC that would modernize the U.S. steelmaker's rail operations. And the company said that it is continuing to negotiate with the United Steelworkers union for concessions the company says it needs to reorganize its bar, rod and wire division.