Tubular segment of U.S. Steel Corp.
We have seen the 3Q14 performance of U.S. Steel Corporation’s (X) European operations in the previous part. In this part, we will analyze the financial performance of the company’s tubular segment, which supplies products to the oil and gas industry. The segment was badly hit by cheap imports. Recently, the United States imposed anti-dumping duty on imports of tubular goods from nine nations. Let’s see how this has impacted U.S. Steel (X).
Positive impact of anti-dumping duty
The previous chart shows the 3Q14 financial performance of U.S. Steel’s (X) tubular segment. As you can see, the earnings before interest, taxes, depreciation, and amortization (or EBITDA) increased over 2Q14. Interestingly, total shipments were down over the same period. The increase in profits is primarily due to an increase in the average selling prices of tubular goods. The average selling prices have increased by almost $90 per ton over 2Q14.
The prices of tubular goods were under pressure due to cheap imports, which reduced the ability of U.S. Steel producers to raise the prices of their products. The prices of imported tubular goods increased after the imposition of anti-dumping duties. This provided U.S. steel producers with some flexibility in pricing.
U.S. Steel is the largest supplier in this segment
U.S. Steel’s (X) strength is tubular steel. It is the largest supplier in the North American market. Moreover, its tubular segment is the company’s most profitable segment. Similarly, every steel company has its individual area of strength. For Nucor (NUE), it is the construction industry, where it is the largest supplier. ArcelorMittal’s (MT) expertise is making steel for the automotive industry. Please note that apart from these companies, investors can also access steel industry through AK Steel (AKS) and State Street Global Advisors (or SPDR) Standard & Poors (or S&P) metals and mining exchange-traded fund (or ETF) (XME).
So far, we have seen that U.S. Steel (X) has delivered solid profits in 3Q14. One of the reasons behind this is improvements in its day-to-day operations. We will discuss some of these factors in the next part.