What: Shares of TimkenSteel (TMST 0.57%) rocketed higher on Friday, up more than 47% by 12:30 a.m. ET. Driving investor enthusiasm was a slimmer-than-expected fourth-quarter loss on strong cost reductions as well as favorable forward guidance.

So what: TimkenSteel reported a 11.2% sequential drop in net sales to $206.6 million leading to a net loss of $25.5 million, or $0.58 per share. That reported loss, however, was $0.10 per share better than the consensus estimate after the company was able to overcome weaker commodity prices by reducing its costs. Also, it was able to generate $18 million in free cash flow during the quarter.

The weak oil and gas market was a primary driver of lower sales, with the 60% year-over-year drop in the U.S. rig count leading to decreased demand for energy and related industry products. This was evident in shipments, which were 175,000 tons during the quarter and down 1.9% over last quarter and more than 35% lower year over year.

TimkenSteel also released first-quarter guidance, with the company expecting shipments to be 5% higher than during the fourth quarter. This is due to strong automotive demand, which is expected to offset weaker demand from industrial end markets caused by lower oil prices and a weak commodities market. That said, it does expect earnings to remain under pressure, with EBITDA at negative $10 million to $20 million during the quarter because of pricing pressure from imports and weak market dynamics. These were both issues that U.S. Steel (X -1.72%) noted in its earnings release earlier this week. U.S. Steel was especially critical of foreign competitors, which it thought were dumping products onto the domestic market. Because of this and other issues, U.S. Steel sees significant headwinds in 2016, which will pressure its business segments, leading to lower year-over-year results.

Now what: Given these headwinds, TimkenSteel and its competitors face an uphill battle in 2016. Steel companies need oil prices to rebound since that industry is such a big consumer of steel products.