U.S. Steel Corporation Investors Should Look at Iron Ore Prices
Iron ore prices have been weak this month. U.S. Steel Corporation produces iron ore from captive mines in its US operations (NUE).
Steel companies like U.S. Steel Corporation (X), ArcelorMittal (MT), and AK Steel (AKS) use coking coal as an input for their blast furnaces.
Recently, the Indian Steel Ministry expressed concern about rising steel prices. It said that steelmakers shouldn’t be allowed to “exploit the country.”
The US is the world’s largest steel importer. The country’s steel imports totaled 30.9 million metric tons last year.
US steel imports have risen on a year-over-year basis for nine consecutive months. Nucor (NUE) lamented the steep increase in US steel imports.
Steel production is raw material–intensive in nature. Iron ore, steel scrap, and coking coal are the key raw materials that go into steel production.
Although HRC prices have historically been the benchmark for other grades of steel products, we have started to see some dislocation in US steel markets.
Steel prices are a key driver of steelmakers’ earnings. Investors in companies like Nucor and ArcelorMittal should keep track of spot steel prices.
The US steel industry is having a weak year despite a presumably supportive Trump Administration. There are doubts about the US steel industry’s health.
ArcelorMittal is expected to post revenues of $16.2 billion in 3Q17 compared to $17.2 billion in 2Q17.
According to the consensus estimates compiled by Thomson Reuters, AK Steel is expected to post revenues of $1.53 billion in 3Q17 versus $1.56 billion in the sequential quarter.
According to estimates compiled by Thomson Reuters, U.S. Steel Corporation is expected to post revenues of $3.06 billion in 3Q17 versus $3.14 billion in the sequential quarter.
Despite the challenge of steel imports, Nucor’s (NUE) expected 3Q17 earnings and earnings for the first half of 2017 exceed its full-year profitability for the last eight years.
Nucor’s (NUE) 3Q17 earnings guidance wasn’t received well by the markets, and the stock saw selling pressure after it released its 3Q17 earnings guidance.
Nucor expects its 3Q17 earnings to fall on a yearly basis as well as a sequential basis.
As for the US steel industry, 2017 has been a tepid year for steel stocks (XME). After the meteoric rise last year, most US steel companies are trading with year-to-date losses this year.
The United States is the world’s largest net steel importer. The country’s net steel imports totaled 21.7 million metric tons last year.
China was the largest steel consumer last year, with the mainland’s ASC at 681.0 million metric tons.
China was the world’s largest steel producer last year, with shipments of 808.0 million metric tons.
In this series, we’ll look at the top ten companies in the global steel industry based on steel production, steel consumption, and steel imports.