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Chart in Focus: U.S. Steel’s Tubular Segment in 3Q17

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U.S. Steel’s Tubular segment

Previously, we looked at U.S. Steel’s (X) Flat-Rolled Products segment’s 3Q17 financial performance. Now let’s look at the Tubular Products segment’s 3Q17 performance. 

This segment supplies the energy sector (XLE) (TS). Nucor (NUE) and ArcelorMittal (MT) also have some exposure to the energy industry.

3Q17 performance

U.S. Steel’s Tubular segment shipped 185,000 tons of steel in 3Q17 compared to 103,000 tons in 3Q16. Its shipments have risen on a sequential basis for five consecutive quarters, and its 3Q17 shipments were the highest since 1Q15.

The Tubular Products segment’s average selling price (or ASP) rose to $1,433 per ton in 3Q17 compared to $1,234 per ton in 2Q17. However, the segment’s per-unit production cost also rose from $1,395 per ton in 2Q17 to $1,471 per ton in 3Q17.

Despite higher costs, U.S. Steel’s Tubular segment delivered positive EBITDA[1. earnings before interest, tax, depreciation, and amortization] in the quarter. This is the first quarter since 1Q15 when the segment has posted a positive EBITDA reading.

Outlook

The Tubular segment has reported incremental improvement in earnings for the last many quarters as can be seen in the graph above. However, the import penetration levels in the OCTG (oil country tubular goods) space is still quite high. 

According to U.S. Steel, imports comprised more than 50% of OCTG apparent demand in 3Q17. However, we’ve seen a decline in the OCTG supply chain inventory from its peak in 2016. Looking at U.S. Steel’s guidance, the Tubular segment could generate a nearly break-even EBITDA in 4Q17.

In the next article, we’ll see how U.S. Steel Europe fared in 3Q17.

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