As we’ve already seen, steel companies reported a sharp rise in 3Q16 earnings. After a spectacular 3Q16, some steel companies expect their performances to fall in 4Q16. Let’s see what some steel companies had to say about their 4Q16 outlooks during their 3Q16 earnings calls.
Performance expected to fall
According to Nucor (NUE), “Earnings in the fourth quarter of 2016 are expected to decrease notably compared to the third quarter of 2016 primarily due to lower margins in the steel mills segment, with the most significant impact being on the sheet mills.” It also expects the performance of its Raw Materials segment and its Steel Products segment to fall in 4Q16.
According to Steel Dynamics (STLD), a seasonal demand slowdown coupled with year-end inventory destocking would impact the company’s 4Q16 performance.
United States Steel (X) also expects its performance to fall in 4Q16. It generated adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $272.0 million in 3Q16. According to the company’s annual guidance, it expects to generate adjusted EBITDA of ~$175.0 million in 4Q16.
ArcelorMittal (MT) also expects its EBITDA to fall in 4Q16 on lower US steel prices and rising coking coal prices.
What has changed?
However, we should note that this guidance was provided before the US presidential election. We’ve seen some upward traction in US spot steel prices over the last week. Higher raw material prices, rising Chinese steel prices, and the impact of a Donald Trump presidency could help US steel prices (XME) in the near term.
Although steel companies’ performances could still fall in 4Q16 compared to the sequential quarter, they might improve in 1Q17.
One key question is whether a Trump presidency will revive the US steel industry. To explore this more, read Why Donald Trump Could Be a Game Changer for US Steel Companies.
You can also visit our Steel page for ongoing updates on this industry.