AK Steel Holding Corp

One of the key metrics in the steel industry is the capacity utilization rate. It represents the actual production compared to the maximum possible production.

China (FXI) exported 5.56 million metric tons of steel in December, a yearly fall of 1.9%.

Overall, it has been a mixed earnings season for steel companies.

According to the World Steel Association, 6.7 million tons of crude steel were produced in the US in November 2017 compared to 7.0 million tons in October 2017.

The AISI releases the weekly steel production figures. Steel production in the US has declined 7.2% YoY in the first five months of this year.

1Q18 earnings season is in full swing. So what should you expect for U.S. Steel?

US iron ore (or USIO) is the main driver for Cleveland-Cliffs’s (CLF) top and bottom lines.

We’ve seen significant volatility in markets this year.

AK Steel is working towards stable margins throughout the business cycle. AK Steel has deliberately lowered its exposure to spot markets (X) (CLF).

HRC (hot rolled coil), CRC (cold rolled coil), and galvanized steel imports fell month-over-month in May.

Compared to the first ten months of last year, steel imports are up by more than 35%. This is an alarming situation.

US Steel has embarked on several key projects under its Carnegie Way program to increase profitability.

In March 2018, President Donald Trump imposed a tariff of 25% on steel imports. What’s happened since?

The increased use of aluminum in vehicles is a threat for AK Steel (AKS). The automotive industry accounts for ~26% of steel consumption in the U.S.

Since investors have been frugal in valuing steel stocks, steel companies have looked at buybacks to shore up their stock prices.

AK Steel (AKS) reported adjusted EBITDA of $69.2 million in 3Q17, compared with $142 million in 2Q17 and $157 million in 3Q16.

Fearing an import deflection following the Section 232 tariffs in the United States, several regions are contemplating tariffs on Chinese steel products.

Nucor (NUE) expects its 3Q16 performance to improve as compared to 2Q16. The key driver of Nucor’s 3Q16 performance would be the reset of contracts.

Let’s first consider why investors should monitor rig counts. Well, rig counts tell you how many rigs are currently active for drilling.

With the recent imposition of anti-dumping duties, imports of tubular goods will likely decrease, helping U.S. Steel’s revenue in the tubular segment to increase.

U.S. Steel released its 2Q16 financial results on July 26, reporting a net loss of $46 million, which translates into a per-share loss of $0.32.

U.S. Steel (X) has the lowest forward valuation multiple in our coverage of steel stocks. The stock is trading at 4.97x its 2018 consensus EBITDA.

Due to an increase in electricity costs, Nucor’s energy cost per ton of steel in 3Q14 went up by almost $1 from the corresponding quarter last year.

AK Steel (AKS) is having a terrible year. Based on June 29 closing prices, the stock has lost 23.3% so far.

Analysts polled by Thomson Reuters expect AK Steel to post an adjusted EBITDA of $520 million in 2019.

AK Steel (AKS) generated free cash flow of $147.0 million in 2Q17 compared to $3.8 million in 1Q17. It generated free cash flow of $111.0 million in 2Q16.

U.S. Steel (X) expects its slab production capacity to increase by 1.0 million tons by 2020 from the current level of 10.0 million tons.

U.S. Steel shipped 3.88 million metric tons of steel in 2Q16, which represents a sequential increase of 8.2%. Its 2Q16 shipments were almost flat YoY.

Steel companies such as U.S. Steel (X), Nucor (NUE), and ArcelorMittal (MT) sell their products in the spot market or under contract sales.

Steel stocks have been consolidating for the last few trading sessions. But so far, they’re having a tepid year.

Aanalysts expect AK Steel to post adjusted earnings per share of $0.065 per share in 4Q15. In its 4Q15 guidance, AK Steel said that it expects to post a loss per share of $0.33–$0.38 in the quarter.

Despite President Trump’s tariffs on imported steel, US steel stocks—with the exception of Steel Dynamics—have sagged this year.

China’s steel and aluminum overcapacity has earned it the ire of several countries.

U.S. Steel Corporation could see an incremental rise of 1.5 million tons of steel shipments next year.

Previously in this series, we’ve compared steel companies’ 4Q17 shipments and average selling prices (or ASPs).

U.S. Steel carries a mean consensus price target $42.43, which represents a 45.2% upside over its October 9 closing price.

After the imposition of Section 232 steel and aluminum tariffs last year, several observers warned that we could see a spike in downstream imports.

China is the world’s largest steel consumer, steel producer, and steel exporter. It dominates the global steel markets probably like no other country ever has.

Previously in this series, we looked at China’s steel demand indicators. It’s also important for investors to look at the supply side of the equation.

In November 2015, the United States imported 2.1 million metric tons of steel products—a YoY decline of 36%. What’s more, in November, US steel imports fell to a four-year low.

Integrated miners like U.S. Steel and ArcelorMittal use primarily iron ore, whereas minimills like Nucor and Steel Dynamics rely more on steel scrap.

In this series, we’ll see what investors could expect from Cliffs Natural Resources’s (CLF) 1Q17 results, which are scheduled to be released on April 27, 2017. CLF underperformed the other global iron ore miners in 1Q17.

Due to trade cases, the US steel industry has turned into a virtual island largely immune to global steel prices—at least in the short term.

Bank of America Merrill Lynch has raised its 2017 hot rolled coil steel forecast to $700 per ton. The brokerage also upgraded U.S. Steel (X) from a “neutral” to “buy.”

Despite its cost headwinds, U.S. Steel (X) expects to post EBITDA of $1.3 billion in 2017.

The World Steel Association expects global steel demand to grow by only 2% in 2014.

Steel executives have been regularly blaming the steep rise in US steel imports as the main reason for their woes. Last year, three companies presented their cases before members of Congress.

Strong steel demand should turn into higher revenues for U.S. steel companies. However, rising imports have impacted steel demand.

U.S. Steel (X) lowered its 2018 EBITDA guidance due to the recent correction in spot steel prices.

Today, J.P. Morgan (JPM) upgraded Cleveland-Cliffs (CLF) stock from “neutral” to “overweight.” Here’s why.

US steel imports As noted previously, US steel imports fell sharply last month. Hot rolled coil imports fell 5.6% YoY (year-over-year) to their lowest level since February 2017. Whereas cold rolled coil imports fell 7.7% YoY, they rose month-over-month. Imports of HDG (hot dipped galvanized) steel fell sharply in December. Nucor (NUE), AK Steel (AKS), […]

AK Steel (AKS) is still marginally above its 2015 lows. But it’s still among the worst performing steel companies in 2015.

Lower leverage ratios give Worthington a lot of opportunities to expand its business. The company’s cash flow is also in good shape.

Almost all of the iron ore miners are cutting costs, which is driving the cost curve down. This will put additional pressure on prices.

During AK Steel’s second-quarter earnings call, analysts could be closely watching the company’s ASP (average selling price) guidance.

Too much steel production leads to an oversupply of steel. This leads to more competition, and in turn, to a correction in steel prices. Over the past several years, global markets have seen a glut in steel markets.

If the Trump administration moves forward on the proposed infrastructure investments, it could boost US steel demand.

The imports probe might not hurt China much. In contrast, the US could get involved in a trade dispute with friendly nations.

AK Steel’s mean consensus target price of $2.92 represents a potential upside of 11.9% over its closing price on March 8.

Cleveland-Cliffs’ reduced its sales and production volume guidance for 2017 from 19.0 million tons to 18.5 million tons.

Although global steel prices have weakened this year, steel bulls expect the probe into steel imports to provide some sort of relief for US steel plays.

The GDP figures in the second quarter raised fears about the European Union’s sustainability growth. The ECB recognized the severity of the situation.

Last week was mixed for steel stocks—they followed different trajectories. With gains of 6.6%, AK Steel (AKS) was the biggest gainer.

Almost 60% of U.S. Steel’s US flat steel sales are either spot or have monthly or quarterly resets and would enjoy the benefits of higher spot steel prices.

Steel Dynamics (STLD), the third largest US-based steel producer after Nucor (NUE) and U.S. Steel (X), is expected to release its 3Q17 earnings on October 18.

Analysts expect United States Steel to post revenues of $2.98 billion in 2Q17. It posted revenues of $2.72 billion in 1Q17 and $2.58 billion in 2Q16.

Last week started on a positive note for most steel stocks, with most seeing upward price action on Monday. But sentiments were mostly negative after that.

China is the world’s largest steel producer, consumer, and exporter. Last year, we saw a steep rally in Chinese steel prices.

AK Steel (AKS) reported its third-quarter earnings on October 25 after the markets closed. The company reported revenues of $1.74 billion.

China released its April trade data on May 8. The data weren’t received well by investors. Asian markets were trading lower in early trade.

U.S. Steel Corporation (X) saw a flurry of downgrades last month. Credit Suisse downgraded the stock from “neutral” to “underperform.”

Of the 19 analysts surveyed by Bloomberg, none rates Nucor as a “sell.” Nucor has a “buy” rating from ten analysts while nine rate the stock as a “hold.”

Cleveland-Cliffs (CLF) is scheduled to release its 3Q17 results before the US market opens on October 20. In this series, we’ll look ahead to CLF’s earnings and management call.

The 1Q17 earnings season for US-based steel companies is almost over. Steel Dynamics released its 1Q17 earnings on April 19, 2017.

Cleveland-Cliffs (CLF) will release its second-quarter results before the market opens on July 20.

During the second-quarter earnings call, U.S. Steel Corporation raised its 2018 EBITDA guidance to $1.85 billion–$1.90 billion.

China is the biggest steel consumer. It accounts for almost half of global steel consumption. The slowdown in Chinese steel consumption isn’t a healthy sign for global steel markets.

Cleveland-Cliffs (CLF) stock is trading at $12.80 per share. Its year-to-date gain through October 1 is 77.0%.

AK Steel (AKS) has gained more than 15% from its 2018 lows. However, AK Steel is still down 17.3% YTD (year-to-date).

Of the three forms of cash flow, operating cash flow is the most important for a company. Let’s explore the trend in various steel companies’ cash flow metrics in 2Q15.

Steel companies were trading above their long-term trading multiples between February and June this year. This was due to the sharp rally in this sector.

Earlier this year, China announced capacity cuts in order to curtail its excess steel. The same commitment has been reiterated by China several times.

Nucor has been increasing its presence in the automotive sector over the last couple of years.

U.S. Steel Corporation (X) produces steel in blast furnaces and uses coking coal and iron ore (CLF) as raw material.

Cliffs Natural Resources’ results for 4Q16 were hugely positive and beat the market expectations by a wide margin.

During its 2Q16 call, AK Steel (AKS) pointed to a “significant rise” in CRC steel imports from Turkey, Vietnam, and Australia.

AK Steel (AKS) has been among the worst-performing steel stocks (MT) (STLD) in 2017 with year-to-date losses of more than 46% as of May 17.

According to data released by the American Iron and Steel Institute, US steel production fell 4.9% YoY (year-over-year) in the week ended September 24, 2016.

Spot steel prices in the US (DIA), especially in the flat-rolled segment, have risen over the last month.

Tata Steel is exiting its UK operations after years of losses. But ArcelorMittal gets ~50% of its revenues from Europe, leveraging it to European steel.

AK Steel expects its 2Q17 average selling prices to be “marginally higher” compared to 1Q17. However, AK Steel could witness higher costs in 2Q17.

By analyzing how steel industry indicators are shaping up, you can get a sense of how steel companies could perform beyond the current quarter.

AK Steel and U.S. Steel are expected to post a loss in 2Q15. U.S. Steel’s earnings have been hit because its tubular segment hasn’t been doing well.

US steel has seen a change in fortunes this year. Trump’s win has been a positive catalyst for the industry.

Today, Jefferies analyst Seth Rosenelf raised the target price for Cleveland-Cliffs (CLF) from $11 to $13 while maintaining a “buy” rating on the stock.

Cleveland-Cliffs (CLF) has witnessed a turnaround of sorts in the last four years.

U.S. Steel expects its pro forma net income to increase by $0.16 per diluted share for the first half of 2014 as a result of deconsolidation of Canadian operations. The company has also decided not to invest further in its iron ore facilities.

Cleveland-Cliffs (CLF) released its Q2 earnings on July 20. Its EPS was $0.76, beating the consensus estimate of $0.53 by 43.4%.

During the 3Q16 earnings call, markets will wait for updates from ArcelorMittal on its negotiations with automotive customers.

ArcelorMittal suspended its dividend program in 2015 in response to tough market conditions. ArcelorMittal looks on track to reinstate its dividend in 2018.