Moody's Places U.S. Steel (X) on Review for Downgrade

Moody's Investors Service, ("Moody's") placed United States Steel Corporation's (NYSE: X)(U.S. Steel) Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default rating, B1 senior unsecured notes and B1 industrial revenue bond ratings suppported by US Steel and (P)B1 senior unsecured shelf rating under review for downgrade. The SGL-2 speculative grade liquidity rating was affirmed.

On Review for Downgrade:

..Issuer: United States Steel Corporation

.... Corporate Family Rating, Ba3, Placed on Review for Downgrade

.... Probability of Default Rating, Ba3-PD, Placed on Review for Downgrade

....Senior Unsecured Shelf, (P)B1, Placed on Review for Downgrade

....Senior Unsecured Conv./Exch. Bond/Debenture, B1 (LGD4), Placed on Review for Downgrade

....Senior Unsecured Regular Bond/Debenture, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Allegheny County Industrial Dev. Auth., PA

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Bucks County Industrial Development Auth., PA

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Gulf Coast Waste Disposal Authority, TX

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Indiana Finance Authority

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Lorain County Port Authority, OH

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Ohio Air Quality Development Authority

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Ohio Water Development Authority

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Southwestern Illinois Development Authority

....Senior Unsecured Revenue Bonds, B1 (LGD4), Placed on Review for Downgrade

..Issuer: Utah (County of) UT

....Senior Unsecured Revenue Bonds, B1 (LGD4) Placed on Review for Downgrade

Affirmations:

..Issuer: United States Steel Corporation

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

Outlook Actions:

..Issuer: United States Steel Corporation

....Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

The review for downgrade results from the deterioration in U.S. Steel's performance and debt protection metrics and expectations that continued contraction will be evidenced given the challenging conditions facing the US steel industry, particularly for flat-rolled and tubular products. In addition, given ongoing weak fundamentals in the drilling industry and U.S. Steel's exposure to the OCTG (Oil Country Tubular Goods) market, performance in the third quarter of 2015 is expected to continue to result in losses. Given industry fundamentals, no material turnaround is expected over the next several quarters. For the second quarter ended June 30, 2015 the company's EBIT/interest metric turned negative, after adjusting for non-cash charges associated with further write downs on U.S. Steel Canada and other non-cash charges while leverage, as measured by the debt/EBITDA ratio increased, on a twelve month basis, to 3.2x. Notwithstanding the company's success with its Carnegie Way program, given the ongoing weak industry fundamentals, these metrics are expected to show further deterioration in the third quarter of 2015 and for the balance of the year.

The US steel industry continue to struggle with challenging market conditions with 2015 evidencing weaker capacity utilization rates and meaningful price deterioration. U.S. Steel's capacity utilization in the second quarter of 2015 was 58%. While key input costs for scrap, iron ore and metallurgical coal have also declined significantly, this has not been sufficient to help earnings, particularly for integrated producers such as U.S. Steel given the degree of price degradation and weaker capacity utilization rates relative to fixed cost absorption. The industry also continues to be pressured by high import levels and in the case of U.S. Steel weak energy markets, which will continue to materially impact the performance of the tubular segment

The review will focus on U.S. Steel's ability to further reduce costs through the Carnegie Way program, expected costs per ton, level of spot and contract value added sales and the ability of the company to be at least break even free cash flow generation. The review will also focus on the end markets to which U.S. Steel sells and the expected demand from such markets as well as the time horizon over which an improved performance by US Steel is likely to be realized.

The principal methodology used in these ratings was Global Steel Industry published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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