Derivative Instruments

6 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

U. S. Steel is exposed to foreign currency exchange rate risks as a result of our European and Canadian operations. USSE’s revenues are primarily in euros and costs are primarily in U.S. dollars and euros. USSC’s revenues and costs are denominated in both Canadian and U.S. dollars. In addition, foreign cash requirements have been, and in the future, may be funded by intercompany loans, creating intercompany monetary assets and liabilities in currencies other than the functional currency of the entities involved, which can affect income when remeasured at the end of each period.

U. S. Steel uses euro forward sales contracts with maturities no longer than 12 months to exchange euros for U.S. dollars to manage our currency requirements and exposure to foreign currency exchange rate fluctuations. Derivative instruments are required to be recognized at fair value in the balance sheet. U. S. Steel has not elected to designate these euro forward sales contracts as hedges. Therefore, changes in their fair value are recognized immediately in the results of operations. The gains and losses recognized on these euro forward sales contracts may also partially offset the accounting remeasurement gains and losses recognized on intercompany loans.

As of June 30, 2013, U. S. Steel held euro forward sales contracts with a total notional value of approximately $347 million. We mitigate the risk of concentration of counterparty credit risk by purchasing our forward sales contracts from several counterparties.

Additionally, we routinely enter into fixed-price forward physical purchase contracts to partially manage our exposure to price risk related to the purchases of natural gas and certain nonferrous metals used in the production process. During 2013 and 2012, the forward physical purchase contracts for natural gas and nonferrous metals qualified for the normal purchases and normal sales exemption described in ASC Topic 815 and were not subject to mark-to-market accounting.

The following summarizes the location and amounts of the fair values and gains or losses related to derivatives included in U. S. Steel’s financial statements as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012:

		Fair Value		Fair Value
(In millions)	Balance Sheet Location	June 30, 2013		December 31, 2012
Foreign exchange forward contracts	Accounts receivable	$	2	$	—
Foreign exchange forward contracts	Accounts payable	$	5	$	12

	Statement of Operations Location	Amount of Gain (Loss)			Amount of Gain (Loss)
(In millions)		Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
Foreign exchange forward contracts	Other financial costs	$	(7	)	$	4

	Statement of Operations Location	Amount of Gain (Loss)		Amount of Gain (Loss)
(In millions)		Three Months Ended June 30, 2012		Six Months Ended June 30, 2012
Foreign exchange forward contracts	Other financial costs	$	26	$	13

In accordance with the guidance found in ASC Topic 820 on fair value measurements and disclosures, the fair value of our euro forward sales contracts was determined using Level 2 inputs, which are defined as “significant other observable” inputs. The inputs used are from market sources that aggregate data based upon market transactions.