How U.S. Steel Managed to Buck the Falling Trend in 4Q16 Shipments



4Q16 shipments

As noted previously in this series, Nucor (NUE) and Steel Dynamics (STLD) each reported a sharp yearly increase in their respective 4Q16 steel shipments while reporting a sequential decline. In this article, we’ll look at the key drivers of different steel companies’ 4Q16 shipments.

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Nucor and Steel Dynamics

Steel production in the US rose on a yearly basis in 4Q16. US steel production had a sharp fall in 4Q15 as steel companies curtailed their production in response to falling steel prices. Notably, spot hot-rolled coil prices fell below $400 per short ton in 4Q15, which prompted steel companies to cut the production of commodity-grade steel products.

The steep yearly increase in Nucor’s and Steel Dynamics’s 4Q16 steel shipments is due to lower spot sales in 4Q15. The sequential decline both companies’ 4Q16 steel shipments is due to weak seasonal demand in the United States (DIA) (DOW).

AK Steel’s (AKS) 4Q16 steel shipments fell 14.7% on a year-over-year basis. They’ve fallen steeply over the last few quarters after the company deliberately cut its exposure to spot commodity-grade products. Lower auto build rates in 4Q16 also negatively impacted AK Steel’s 4Q16 shipments.

U.S. Steel

In U.S. Steel Corporation’s (X) case, we saw a sequential increase in steel shipments due to two reasons. Firstly, U.S. Steel’s 4Q16 consolidated steel shipments were helped by its Europe operations, where shipments rose 14.1% compared to the sequential quarter.

Secondly, the increase in shipments comes from a slightly lower base in 3Q16. We should remember that U.S. Steel faced unplanned outages in 3Q16. As a result of these outages, the company’s 3Q16 steel shipments were negatively impacted by 125,000 tons.

In the next article, we’ll see which companies can offer a shipment upside in 2017.


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