Must-know: US Steel Corporation’s key operations
Key operations of U.S. Steel Corp.
After looking at how the company has evolved, let’s move to its current operations. U.S. Steel Corp. has major operations in the United States, Canada, and central Europe with several steel finishing joint ventures in Brazil and Mexico. It’s also involved in railroad and barge transportation services through its subsidiary Transtar Inc. and real estate operations through its USS Real Estate division.
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What are the major segments for U.S. Steel Corporation?
U.S. Steel Corp. supplies its products to all major industries like construction, automobile, appliances, and energy. It has the following reporting segments:
- Flat Products – Under this segment it has hot rolled, cold rolled, and coated sheets to offer to its customers. The key buyers are automotive, construction, and domestic appliance industry. This segment has an annual raw steel production capability of 22 million tons and has highest shipments.
- Tubular Products – Tubular products are supplied to the oil, gas, and petrochemicals market. U.S. Steel Corp. remains the largest supplier of this segment in the combined U.S. and Canadian markets. This segment has annual raw steel production capability of five million tons and remains the most profitable segment for the company. It’s also referred to as Oil Country Tubular Goods (or OCTG).
- U.S. Steel Europe – The European operations of the company are reported under this segment. It has annual raw steel production capability of five million tons. This segment has been hurt by the recession in Europe, but has shown signs of improvements over the past couple of quarters.
What process U.S. Steel Corp. uses
U.S. Steel Corp. produces most of its steel through the blast furnace method. This method uses largely iron ore as an input for the production of crude steel. The company also uses electrical arc furnace (or EAF) to a little extent. The blast furnace method decreases per unit cost if operating at higher capacities, but it also increases the fixed costs for the company. If the plant operates at less than optimal capacities, which is the case currently, the profitability gets impacted substantially. The lower capacity utilizations affect not only U.S. Steel Corp. (X), but also companies like ArcelorMittal (MT), Nucor Corporation (NUE), and Reliance Steel & Aluminum (RS). The performance of exchange-traded funds (or ETFs) like the SPDR S&P Metals and Mining ETF (XME) has also been impacted by this phenomenon.