U.S. Steel Europe
Previously, we learned that U.S. Steel Corporation’s (X) Tubular segment posted a massive per-ton loss in 2Q15. Surprisingly, while steel prices have corrected sharply across the board, OCTG (oil country tubular goods) prices are holding stable. In 2Q15, average selling prices at U.S. Steel’s Tubular segment actually rose ~1% as compared to 1Q15. However, even higher selling prices couldn’t help the segment’s 2Q capacity use ratio of 15%.
In this part, we’ll take a look at the 2Q15 financial performance of U.S. Steel Europe.
U.S. Steel posts a profit in Europe
U.S. Steel posted a profit in Europe (VGK) in 2Q15. Apparently, out of U.S. Steel’s three operating segments, only Europe posted a profit in 2Q15. Yet U.S. Steel’s shipments in Europe fell 15% in 2Q15 as compared to the previous quarter. This can be seen in the previous chart.
Fewer shipments were on account of planned maintenance during the quarter. Higher maintenance and repair costs negatively impacted the 2Q15 profitability of U.S. Steel Europe.
Strong indicators from Europe’s steel industry
Steel demand indicators in Europe continue to be strong. You can read more about global steel demand indicators in our monthly steel indicator series.
ArcelorMittal (MT) derives almost half of its revenues from Europe. It also stands to benefit from the resilient fundamentals of Europe’s steel industry.
U.S. Steel realized substantial cost savings in 2Q15 from its Carnegie Way program. The program targets several cost elements in U.S. Steel’s operations. In the next part, we’ll discuss this in more detail.