Bridgewater Associates’ new stake in US Steel Corporation
Bridgewater Associates started a position in US Steel Corporation (X) during the fourth quarter of 2014. The fund bought 569,965 shares worth $15 million. X accounted for 0.12% of Bridgewater’s total 4Q14 portfolio, according to the hedge fund’s latest 13F filings.
US Steel Corporation in brief
US Steel Corporation had been the largest steel company in the United States until last year, when Nucor Corporation (NUE) surpassed the company by acquiring Gallatin Steel.
US Steel has three reportable operating segments:
- Flat-Rolled Products
- US Steel Europe (USSE)
- Tubular Products
US Steel forms 0.57% of the iShares US Basic Materials ETF (IYM).
Impacts of strong dollar and falling steel prices
Over the last few months, US Steel’s share price has been quite volatile, as shown in the chart above. Currently, the company forms 3.24% of the SPDR S&P Metals and Mining ETF (XME). Peers TimkenSteel (TMST) and Steel Dynamics (STLD) make up 3.3% and 3.7% of XME, respectively.
US Steel said it had faced “challenging headwinds” during the fourth quarter of 2014. Its 4Q14 net profit came in lower at $275 million due to a strengthening dollar and declining steel prices. The company added, “As we enter 2015 with this volatile market, we face significant challenges from dramatically lower oil prices, lower steel prices, and the impact of the stronger US dollar and global overcapacity on imports and our operations, but we expect our Carnegie Way journey to continue to generate additional benefits in 2015, including healthy cash flows, strong liquidity, and sustaining our improved balance sheet.”
Earlier this month, a Market Realist report titled Is a Bottom in Sight for Worsening Steel Industry Indicators? noted that steel prices have fallen to their lowest levels since 2009. The report added that the 4Q14 earnings of steel companies had also failed to instill any confidence among analysts.
Temporary idling of Minnesota plants
In March, US Steel Corporation said it would temporarily idle its Minnesota Ore Operations Keetac plant in Keewatin, Minnesota and temporarily idle a portion of its Minnesota Ore Operations Minntac plant in Mt. Iron, Minnesota. The company said in a press release that “These ongoing operational adjustments are a result of challenging market conditions that reflect the cyclical nature of the industry. Global influences in the market, including a high level of imports, unfairly traded products, and reduced steel prices, continue to have an impact.”
Supply chain improvements
The management of US Steel Corporation had announced changes in its raw materials and procurement organization in September 2013. Under a transformational plan known as The Carnegie Way, US Steel realized financial benefits of approximately $500 million in 2014. One-third of those benefits came about due to supply chain improvements.
The next article in this series will discuss Bridgewater’s position in Wynn Resorts.