| Falling Crude Prices Are the Biggest Headwind Facing U.S. Steel | |
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U.S. Steel Corporation's 2Q15 Earnings: Investor Highlights (Continued from Prior Part) Falling crude prices
In the previous part of this series, we discovered that declining steel imports over the last couple of months bodes well for steel companies including ArcelorMittal (MT) and Steel Dynamics (STLD). Most steel companies reported greater steel shipments in 2Q15. Meanwhile, steel demand from the energy sector has been quite subdued.
The steel products used by the energy industry (XLE) are also known as oil country tubular goods, or OCTG. U.S. Steel Corporation (X) is the biggest supplier of OCTG products in North America.
Lower energy capex
The above chart shows the total US rig count, based on weekly data released by oilfield services firm Baker Hughes. The rig count has fallen by more than 55% since November. But recently, the rig count has shown signs of stabilizing at current levels.
Energy exploration companies (XOP) have slashed their capital expenditure, or capex, budgets for the current year. Energy capex isn’t expected to turn around any time soon. There has to be a sustained upward movement in crude prices before energy companies will loosen their purse strings.
U.S. Steel’s Tubular segment
U.S. Steel’s Tubular segment, which produces OCTG products, has historically been the company’s most profitable segment. But the segment generated a massive loss in 2Q15, with a negative EBIT (earnings before interest and taxes) of $717 per ton. That’s quite a lot of money to lose on a per-ton basis.
There looks to be no respite for U.S. Steel’s Tubular segment in the coming months. This is likely to continue putting pressure on U.S. Steel’s earnings.
Please visit Market Realist’s Steel page to learn more about the industry.
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United States Steel Corporation
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CODE : X |
ISIN : US9129091081 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
United States Steel is a iron and tin producing company based in United states of america. United States Steel is listed in United States of America. Its market capitalisation is US$ 6.8 billions as of today (€ 6.4 billions). Its stock quote reached its lowest recent point on March 28, 2003 at US$ 10.01, and its highest recent level on November 30, 2007 at US$ 98.85. United States Steel has 176 184 431 shares outstanding. |