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What Could Lead U.S. Steel’s Volume Upside in 2017?



Volume upside

U.S. Steel Corporation (X) has three segments: Flat Rolled, Europe, and Tubular. In this article, we’ll discuss which of these segments could offer a volume upside in 2017.

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U.S. Steel’s Europe segment is operating near full capacity. This effectively means that investors should not expect much volume upside from this segment in 2017.

ArcelorMittal (MT) gets ~50% of its revenues from Europe while AK Steel (AKS) and Nucor (NUE) get most of their revenues from the US market.

Tubular segment

U.S. Steel’s Tubular segment supplies the energy sector. The segment’s volumes have nosedived while losses have surged as a result of the slowdown in the energy sector. Talking about the Tubular segment, U.S. Steel’s CEO, Mario Longhi, said during the company’s 4Q16 earnings call, “We believe we have hit bottom for sure.”

We’ve started to see a slight revival in US rig counts. Having said that, we should not expect big upsides from U.S. Steel’s Tubular segment, at least in 2017.

Flat rolled

U.S. Steel has idle capacity in Granite City. However, the company might not look at restarting the capacity in the near term. During its 4Q16 earnings call, U.S. Steel said that the company can ship 5% incremental volumes this year from its running facilities. However, the final volumes could depend on the underlying demand scenario and import penetration.

Meanwhile, Nucor (NUE) and Steel Dynamics (STLD) reported significant increases in their 2016 steel shipments. In the next article, we’ll see how both companies look for 2017.


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