Our price estimate for U.S. Steel (X) stands at $60.17, roughly 15% ahead of market price. The company competes with international steel giants like ArcelorMittal (MT), BaoSteel, Posco (PKX), Nippon Steel (OTC:NISTY) and ThyssenKrupp (OTCPK:TYEKF). Below we recap U.S. Steel’s full year 2010 results and examine how these numbers affect the road ahead for the company.
Understanding U.S. Steel’s Performance in 2010
U.S. Steel reported revenues of $17.4 billion for 2010, an almost 60% increase from the $11 billion recorded in 2009. These figures are still below the peak of $23.8 billion in 2008 – before the steel industry felt the brunt of the global economic recession. The operations for the year, however, failed to generate a profit with $111 million in operating loss reported. But the fact that losses were in excess of $1.6 billion in 2009 shows that the company is recovering from the after-effects of the downturn.
Also, U.S. Steel managed to ship more than 22 million tons of steel in 2010, almost reaching its shipment figures of 24 million tons in 2008. It is interesting to note that the company’s revenue per ton of steel vs. iron ore shipment in 2010 has not increased much from 2009. The average price for flat-rolled steel increased from $651 in 2009 to $675 in 2010. In fact, tubular steel generated only $1494 per ton in 2010, compared to the $1755 per ton in 2009 – a drop of almost 15%
U.S. Flat-Rolled Steel Average Price per Tonne
(Chart created by using Trefis' app)
The Road Ahead for U.S. Steel
The steel industry’s emergence from the shadows of the global recession is evident. We strongly believe that the company’s flat-rolled steel operations in the U.S. will continue to be its biggest source of value in the years to come. This conclusion is based on the fact that, with an imminent recovery in the global demand for steel, and the expected economic growth among developing countries like China, India and South Korea, steel prices will be pushed higher in the future.
Moreover, with the company running at only 70% of its capacity right now, there also exists ample opportunity to leverage its reserve capacity to meet the increasing demand for steel in the years to come.
U.S. Steel is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. It is currently the tenth largest steel producer in the world, with an annual raw steel production capability of 31.7 million tons.
Disclosure: No positions