Shipments are a key driver of steel companies’ performance. Generally, shipments depend on demand from end consumers as well as any portfolio actions undertaken by the company. Steel Dynamics (STLD) and AK Steel (AKS) expect to have fewer shipments in 4Q15 than they had in the previous quarter. Nucor (NUE) has not provided guidance for 4Q15 steel shipments. However, according to Nucor, “operating performance at the steel mills segment in the fourth quarter of 2015 is expected to decrease from the third quarter of 2015.” Other steel companies, including U.S. Steel Corporation (X), could also report lower steel shipments in 4Q15.
Currently, Nucor forms 0.2% of the Guggenheim S&P 500 Equal Weight ETF (RSP)
Steel companies expect 4Q15 steel shipments to fall for two reasons:
- seasonal slowdown
- depressed spot steel pricing
Generally, the fourth quarter is slow for US steel companies in terms of shipments. This year looks no different and steel companies expect a seasonal decline in steel shipments. However, we could see deeper cuts in steel companies’ 4Q15 shipments this year than in previous years.
Falling steel production
US steel production has been falling since the beginning of the year, as can be seen in the graph above. Weekly steel production figures have been falling in the ballpark of 8% YoY (year-over-year) for the last few months. This production slowdown has intensified over the last couple of months. In November, US steel production fell by 15.6% YoY. December has been no better and US steel production has fallen more than 14% YoY in the first three weeks. In the next part of this series, we’ll discuss how falling spot steel prices are to be blamed for lower steel shipments in 4Q15.