An steel analyst recently raised the issue of pension expense with US Steel (X) noting that the steep decline in the world's stock markets is likely to increase pension expense for X as accrued benefits are trouncing pension fund returns. The pension problem is the root of the problem for US autoworkers who are guaranteed pension benefits. These legacy costs are killing the competitiveness of the US auto industry.

X and other old steel companies who have defined benefit programs will likely to run into the same problems as the the auto industry. These programs are historically under funded even under optimistic return scenarios. The steep drop in stocks is highly likely to produce more pension problems.

In the 1Q release, CRS noted:

"Based primarily on the decline in the market value of the securities in the Company's defined benefit pension plans' as of June 30, 2008, the Company will experience a pre-tax net pension expense during fiscal 2009 of $20.1 million. This is a non-cash expense that will be amortized equally during the fiscal year. The pension expense equates to a year-to-year difference in reported earnings of $0.28 per share, with a first quarter pre-tax impact of $5.1 million or $0.06 per share. The defined benefit plans were fully funded as of June 30, 2008."

This expense is as of June 30, 2008 and we all know how the market has done since then. While it's a non-cash expense, it will become an increasingly bigger problem if stock markets don't recover.