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How Did U.S. Steel’s Flat Rolled Segment Fare in 3Q16?

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U.S. Steel’s Flat Rolled segment

U.S. Steel Corporation’s (X) Flat Rolled segment is its largest segment. It accounted for ~67% of the company’s total shipments in 3Q16.

The Flat Rolled segment produces flat steel products, including hot rolled, cold rolled, and corrosion-resistant steel products. These are the products on which duties were imposed earlier this year. ArcelorMittal (MT), AK Steel (AKS), Steel Dynamics (STLD), and Nucor (NUE) also produce flat rolled products.

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3Q16 performance

The Flat Rolled segment reported shipments of 2.5 million tons in 3Q16, a year-over-year (or YoY) fall of 7.1%. U.S. Steel attributed its lower shipments to unplanned outages at some of its facilities. Because of these outages, the company’s 3Q16 steel shipments were negatively impacted by 125,000 tons in 3Q16.

While lower shipments dragged on the Flat Rolled segment’s 3Q16 performance, higher steel selling prices supported it. The segment reported an ASP (average selling price) of $718 per ton in 3Q16, significantly higher than the average realized prices of $642 per ton in 2Q16 and $674 per ton in 3Q15. Read Steel Companies in 3Q16: A Comparative Analysis to explore how U.S. Steel’s 3Q16 ASP compares to those of its peers.

EBITDA

Higher ASP supported the Flat Rolled segment’s 3Q16 earnings, and the segment generated adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $201 million in the quarter, a considerable improvement over 2Q16, when it generated EBITDA of $95 million. Furthermore, 3Q16 marked the Flat Rolled segment’s highest EBITDA since 4Q14.

In the next article, we’ll explore what factors could drive the segment’s performance in the coming quarters.

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