What happened

It's been barely a month since U.S. Steel (NYSE:X) reported its second-quarter earnings. The news back then wasn't especially good, with earnings plunging and free cash flow deeply in the red at one of the best-known steelmakers in the business. But now it seems to be getting even worse.

Last night, U.S. Steel issued new guidance for its third fiscal quarter currently underway. With half the quarter still to go, already U.S. Steel is feeling nervous, and warning that it expects to report an "adjusted" loss of $0.35 per share.  

U.S. Steel shares are down 13% as of 10:25 a.m. EDT in response.

Ironworker pouring molten steel from a bucket

Image source: Getty Images.

So what

Providing color on the weak guidance, U.S. Steel management explained that "after a brief recovery in steel selling prices... the positive flat-rolled steel market indicators experienced earlier this summer have softened" and resumed falling. So, too, have scrap steel prices, putting pressure on makers of new steel such as U.S. Steel.

On the plus side, that latter trend may work to the benefit of mini-mill operators, such as Nucor and Steel Dynamics, that recycle scrap steel. Nucor and Steel Dynamics shares, interestingly, are suffering much less steep declines this morning.

Now what

As for U.S. Steel, though, it's responding to the weak pricing in steel by promising to keep two of its U.S. blast furnaces and one in Europe idle through the end of this year, hoping to support steel prices by limiting supply. However, the fact that U.S. Steel is predicting it will lose money in Q3 and its failure to say anything encouraging about the rest of this year suggest that even management isn't 100% convinced that this will work.