By Aatreyee Dasgupta

(Reuters) - Top U.S. steelmakers are expected to post a decline in second-quarter earnings and could face additional pressure from a further retreat in steel prices heading into a slow summer season, according to analysts.

Nucor ( NUE ), Steel Dynamics ( STLD ) and U.S. Steel have highlighted a fall in profitability in their steel-making operations on lower realized pricing, in June.

Steel prices fell because of a supply glut fueled by domestic production and imports, prompting distributors to refrain from purchasing more material in excess of their inventory.

"On the back of plentiful supply, prices have declined, but this hasn't prompted an increase in steel buying as the market's levels of demand remain subdued," said Stuart Gray, a steel market analyst at UK-based consultancy MEPS International.

CONTEXT

Analysts expect the decline in prices to extend into the summer period, when steel consumption usually sees a dip, before a possible restocking by distributors on bottoming of prices.

They also expect steelmakers to curb supply until the inflation-hit domestic demand catches up.

"U.S. steel producers in the short term will shut some of their plants until demand increases and eventually steel prices go back up," said Patrick Penfield, professor of supply chain practice at Syracuse University.

FUNDAMENTALS

Steelmaker LSEG estimated Forecast for Reported Reported

mean for Q2 2024 Q1 2024 Q2 2023

adjusted EPS adjusted EPS adj EPS adj EPS

Nucor ( NUE ) $2.37 $2.20 to $3.46 $5.81

$2.30

Steel $2.67 $2.64 to $3.67 $4.81

Dynamics $2.68

U.S. Steel 76 cents 76 cents to 82 cents $1.92

80 cents

Average North America price for hot-rolled coil - the most actively traded form of finished steel - dropped to $885 per ton in the second quarter from $1,041.7 in the preceding three months, according to MEPS data.

WALL STREET SENTIMENT

** The S&P 500 steel sub-industry index is flat year-to-date, compared with a 28.4% rise in 2023.

** Steel Dynamics ( STLD ) has outperformed the steel sub-index, with an 11.7% rise year-to-date.