Flat rolled
Flat rolled loss from operations for the fourth quarter was USD 24 per ton compared to income from operations of USD 53 per ton in the third quarter. The decrease was driven largely by lower average realized prices and shipments created by the uncertain economic outlook and increased domestic supply, which perpetuated cautious purchasing patterns early in the quarter. Fourth quarter prices decreased by USD 32 per ton to USD 741 per ton, reflecting lower average realized prices on spot market business and our index based contracts. Market related effects totaled approximately USD 185 million as compared to the third quarter. During the fourth quarter, we performed maintenance outages at several facilities, which resulted in increased costs of approximately USD 50 million compared to the third quarter. We also incurred approximately USD 20 million in costs related to the ratification of the Hamilton Works labor agreement and associated finishing facility restart costs. Accruals for profit based payments were approximately USD 30 million lower in the fourth quarter as compared to the third quarter. Additionally, lower than anticipated operating levels in 2011 and contractual obligations to purchase iron ore pellets resulted in inventory levels in excess of our expected requirements. We sold purchased iron ore pellets as they were better positioned for sale and better matched our customers' specifications. However, they were recorded at the original purchase cost, which is considerably higher than our average or incremental own make pellet cost. As a result, we recorded a loss of USD 60 million in the fourth quarter, thereby reducing the average cost of our remaining pellets and reducing future consumption costs. We also recorded a lower of cost or market adjustment of approximately USD 15 million on purchased pellets expected to be sold in 2012. These pellet sales are expected to result in cash flow of approximately USD 100 million in 2012. The raw steel capability utilization rate of 75% in the fourth quarter was comparable to the third quarter. For the full year 2011, our Flat rolled segment had operating income of USD 452 million.
US Steel Europe
Fourth quarter results for US Steel Europe were lower than third quarter 2011 primarily due to lower average realized euro based prices, production volume and shipments as market demand softened in response to the continuing difficult economic conditions in Europe. Operating costs decreased compared to the third quarter, reflecting lower raw materials and facility repair and maintenance costs partially offset by higher energy costs. In response to reduced spot market prices and weak demand, a blast furnace in Serbia remained idled and a blast furnace in Slovakia was taken off line late in the quarter. As a result, our European raw steel capability utilization rate decreased to 65% for the fourth quarter. For the full year 2011 our USSE segment had an operating loss of USD 162 million.
Tubular
Tubular fourth quarter 2011 results were in line with the third quarter as average realized prices increased to USD 1,711 per ton and shipments of 482000 tons were comparable to the third quarter. Fourth quarter results reflect the continued strong demand for energy related tubular products. Also reflected in fourth quarter results were increased maintenance outage and repair costs and start up costs for the newly commissioned heat treat and finishing facilities at our Lorain Tubular Operations in Ohio. For the full year 2011, our Tubular segment had operating income of USD 316 million.
US Steel Serbia
Effective January 31st 2012, US Steel sold US Steel Serbia d.o.o. to the Republic of Serbia for a nominal purchase price. In addition, U. S. Steel Kosice will receive payment of certain intercompany balances owed by US Steel Serbia for raw materials and support services, subject to adjustment. US Steel expects to record a total non-cash charge of between USD 400 and USD 450 million in the first quarter of 2012, which includes the loss on the sale and a charge of approximately USD 50 million to recognize the cumulative currency translation adjustment related to the company's net investment in Serbia.
Mr John P Surma chairman & CEO of US Steel said that "Our efforts to improve the operation's cost structure and shift our commercial focus towards more value added products have been unable to offset the particularly difficult economic conditions in Southern Europe. As mentioned last quarter, in response to sustained operating losses at our Serbian operations, we have been pursuing all options to improve our situation there. The option that proved to be in the best interest of our shareholders is this sale to the Republic of Serbia. The sale will allow US Steel to exit the operations quickly, avoid further losses in Serbia, which were in excess of USD 200 million in 2011 and redirect our capital to other operations."
