10 Updates

U.S. Steel Expected To Report Flat Year-Over-Year Results Despite Higher Prices

Jan 28 2014, 7:21am CST | by

U.S. Steel will announce its fourth quarter earnings on Tuesday, January 28. We expect the company to report no significant growth in profits, if any. This is because while the pricing environment...

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26 weeks ago

U.S. Steel Expected To Report Flat Year-Over-Year Results Despite Higher Prices

Jan 28 2014, 7:21am CST | by


U.S. Steel will announce its fourth quarter earnings on Tuesday, January 28. We expect the company to report no significant growth in profits, if any. This is because while the pricing environment for steel was slightly better in the fourth quarter, we expect lower shipments year-over-year. The results for the first nine months in 2013 showed a 5% drop for flat-rolled steel and a 9% for tubular steel sales by volume, and we expect the company to have fared no better in the fourth quarter on this front./>

While the U.S. Steel stock price surged in late December and early January, it has subsequently undergone a significant correction. We think that the rally was driven by a surge of positive sentiment due to lower expected raw material prices, the expected cost reductions from Project Carnegie and expectations of strong economic growth in the U.S. going forward. However, in our view, the structural factors in the industry remain unchanged and challenges remain the same as before. Therefore, there seem to be no material positive triggers on the horizon at the moment.

See Full Analysis of U.S. Steel Here

Challenges In Tubular Steel Continue

The rising tide of imports into the U.S. has prompted U.S. Steel and other major producers to ask for duties on imported oil and tubular country goods which are supposedly being sold at unfairly low prices. This has prompted the U.S. Commerce Department to launch an investigation into alleged unfair trade practices being followed by exporting countries. Imports of OCTG steel from the nine countries under investigation (India, Vietnam, Philippines, Thailand, Taiwan, Turkey, Saudi Arabia and Ukraine) totaled $1.8 billion in 2012. The quantity has more than doubled since 2010, owing to rising U.S. oil and natural gas production which is increasing demand for OCTG steel. Given the high price realizations from OCTG grades of steel and the fact that they account for 15% of its revenues, U.S. Steel has a significant stake in ensuring a favorable outcome from the investigation. However, the probe is likely to take time to complete and the company’s tubular steel business is likely to continue facing challenging business conditions in the meantime.

Irrespective of the present status of the case, we expect the performance of the tubular steel segment to have been negatively impacted in the fourth quarter. In addition to imports, other factors such as increased market supply by domestic producers, announcements by other companies of further capacity addition and the ability of oil and gas companies to function better with lower number of rigs will contribute negatively to this division’s performance. In the third quarter, these factors had forced U.S. Steel to record an impairment of $0.8 billion at its Texas plant which produces tubular steel. Also, oil and gas companies typically spend less in the fourth quarter as they attempt to remain within budgeted annual capital expenditure.

Impact Of Other Factors

U.S. Steel has been placing a lot of faith in its Project Carnegie initiative to make its operations more efficient and reduce costs across the board. The savings are expected to be worth $75 million this year which we think won’t impact profitability significantly this year. The gains may get compounded over the next few years but until then, we don’t see this as a material factor impacting profitability.

China’s steel production capacity has reached about 800 million tonnes this year which is negative for prices. While the government is now belatedly attempting to cut down this capacity by shutting down polluting units and the availability of credit has somewhat tightened, we will have to wait and watch how the situation unfolds over the next few quarters.

There are other positives going for the company in the forthcoming quarters. These include lower coke prices, self-reliance for iron ore and replacement of coke by natural gas at some plants. However, these won’t confer an advantage over rivals if iron ore prices in global markets decline as is being expected in anticipation of a supply glut and if the permission to export liquefied natural gas on a large scale leads to higher gas prices. Even if natural gas prices remain low, any short-term advantage is likely to be negated by rivals adapting their operations to use gas instead of coke.

In the earnings conference call, we would like to hear a status update in the ongoing case against steel imports, the management’s strategy to deal with a likely shift to aluminum by automotive manufacturers and the expected cost savings from Project Carnegie next year and beyond.

We have a price estimate of $19 for U.S. Steel, which represents a 25% downside to the current market price.

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Source: Forbes Business

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was ...
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Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
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Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Raky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Mini ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last mont ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Mohamed ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an al ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansar ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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