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U.S. Steel’s Dilemma in 2019

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Jan. 31 2019, Updated 3:35 p.m. ET

U.S. Steel 

In this part, we’ll discuss U.S. Steel’s (X) 2019 guidance and discuss the implications for investors. The company expects its 2019 flat-rolled shipments to rise to 11.5 million tons from 10.5 million last year. However, the company’s Europe shipments are expected to fall to 4.0 million tons–4.2 million tons—down from 4.5 million tons last year. Tubular shipments are expected to increase slightly this year.

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U.S. Steel expects higher costs in 2019. The company sealed its 2019 annual fixed price met coal contracts at $20 per ton higher than last year. In U.S. Steel’s Europe operations, it sees a $20 million higher cost for purchased carbon credits. U.S. Steel also expects higher planned outages in Europe in 2019. The company’s US flat-rolled operations should also witness higher downtime as it progresses on its asset revitalization plan. The company signed a new labor contract last year that should also lead to higher costs.

Lower steel prices

US steel prices have come off their 2018 highs, which should depress steel companies’ earnings in 2019. AK Steel (AKS) also expects its 2019 earnings to be lower compared to 2018. U.S. Steel appears to have a dual dilemma in 2019. The company’s earnings could take a hit from lower steel prices (CLF). The company also faces higher costs.

US steel companies (XME) (NUE) still seem to enjoy President Trump’s support. Read Will Trump’s Steel Tariffs Fail Like Bush’s Tariffs for a detailed analysis of the Section 232 tariffs.

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