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Could U.S. Steel’s Tubular Segment Achieve Break Even?

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Tubular Products operations

Previously, we looked at U.S. Steel’s (X) Flat-Rolled Products segment’s 2Q17 performance. Now let’s look at the Tubular Products segment’s 2Q17 performance and the outlook for the second half of 2017. The Tubular Products segment supplies to the energy sector (AKS). ArcelorMittal (MT) and Nucor (NUE) also have some exposure to the energy industry (XLE).

The Tubular Products segment, which was once the company’s crown jewel, has posted negative EBITDA (earnings before interest, tax, depreciation, and amortization) for nine consecutive quarters.

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2Q17 performance

  • U.S. Steel’s Tubular segment shipped 180,000 tons of steel in 2Q17 compared to 144,000 tons in the previous quarter. Shipments have now risen for four consecutive quarters, and 2Q17 shipments were the highest in more than two years.
  • The Tubular Products segment’s average selling prices (or ASP) rose to $1,234 per ton in 2Q17 compared to $1,097 per ton in 1Q17.
  • Higher ASP coupled with more shipments helped the segment narrow its losses. It posted EBITDA of -$16.0 million in the quarter compared to -$42.0 million in the sequential quarter.

Guidance

U.S. Steel expects its Tubular Products segment to post EBITDA of -$50.0 million in fiscal 2017. The segment has generated EBITDA of -$58.0 million in the first half of the year. Looking at guidance, the company expects its Tubular Products operations to be near EBITDA break-even in the second half of the year. However, its glory days could still be far in the future for the once money-minting operation.

The U.S. Steel Europe segment continued its good run in 2Q17. In the next part of this series, we’ll see how the segment performed in 2Q17.

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