Steel Companies and 2Q15 Earnings: How Are They Managing?
(Continued from Prior Part)
Steel companies’ performance
As we’ve already seen, most steel companies reported higher 2Q15 shipments. Now let’s look at how these steel companies performed in 2Q15.
Steel companies posted a fall in unit production costs in 2Q15. However, the common theme in earnings conference calls for most steel companies is that lower steel prices have more than offset the benefits from lower input prices.
Lower steel prices
AK Steel’s (AKS) average selling price in 2Q15 was $931 per ton, down ~6.8% per ton from 1Q15. Nucor’s average steel selling prices also fell 8% during this period.
Steel Dynamics’ (STLD) average steel selling prices fell $101 during the quarter, while the company’s average scrap cost came down by only $57 per ton during the quarter. Together, Steel Dynamics and Commercial Metals (CMC) form ~9.7% of the SPDR S&P Metals and Mining ETF (XME).
U.S. Steel’s Flat-Rolled segment
The average realized prices of U.S. Steel’s Flat-Rolled segment fell ~9.5% in 2Q15 compared to the previous quarter. You can see this in the above graph. The average selling prices of U.S. Steel’s Tubular segment, however, rose marginally during the quarter.
But higher selling prices couldn’t help, as U.S. Steel’s Tubular segment operated at a capacity utilization ratio of 15% in 2Q15. The company’s Tubular segment posted a massive loss of $717 per ton in 2Q15.
Average steel selling prices in ArcelorMittal’s NAFTA (North American Free Trade Agreement) segment fell ~8.8% in 2Q15. On a consolidated basis, ArcelorMittal’s (MT) average steel prices fell less than 5% in 2Q15. Steel prices in Europe (VGK), which is MT’s biggest market, were largely stable during the quarter.
In the next part of this series, we’ll look at the net impact of lower steel prices and falling raw material costs on steel companies’ 2Q15 earnings.
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