Steel Industry Shows Profits - Global Trade Magazine
  December 24th, 2017 | Written by

Steel Industry Shows Profits

Sharelines

  • The steel industry has rebounded since 2016, with steel prices and global steel use on the increase.
  • The current steel rebound is mainly driven by cyclical factors.
  • US protectionism is among the political and economic risks that could negatively affect the steel industry.

United States Department of Commerce data released in October showed that the US steel industry posted a combined net income of $864 million in the second quarter of this year, up from a net profit of $515 million in the first quarter. US Steel, for example, turned a profit of $261 million in the second quarter, up from a loss of $181 million in the first. All six of the companies included in the Commerce report—AK Steel, Carpenter Technology, Commercial Metals, Nucor, Steel Dynamics and US Steel—reported quarterly gains. Since the beginning of 2009, the six steel companies have collectively reported net earnings for 20 quarters.

Several major steel producers reported their third-quarter and nine-month results in recent days and most of them had good news to tell. The steel industry has been on the rebound this year, although a recent report questions how long that will last.

Nucor’s earnings through the first nine months of this year were the highest for the same time period of every year since 2008. Nucor’s January-to-September earnings of $948.4 million were 33 percent above the $636.6 million it earned for the first nine months of 2016. The company’s net earnings of $268.5 million in the third quarter were down from $323.0 million in the second quarter and from $305.4 million in the the third quarter of last year.

“Nucor’s disciplined strategy for profitable growth is working,” said CFO Jim Frias during the company’s recent earnings call for analysts and journalists. “Although illegally traded imports remain at unacceptable levels, we are encouraged by the cumulative benefits of the US steel industry’s successful trade cases.”

ArcelorMittal, a global steel concern based in the Netherlands, also reported favorable nine-month results. “Market conditions are favorable,” said Lakshmi Mittal, the company’s chairman and CEO. “The demand environment remains positive.”

ArcelorMittal’s steel sales for the first nine months of 2017 increased by 19.5 percent to $51.0 billion, compared with $42.7 billion for the same period last year. Higher average steel selling prices, which were up over 20 percent, was cited by Mittal as the number-one reason for the improved performance. The company’s North American footprint includes production facilities in Indiana and Mexico, the latter recently receiving a new $1-billion investment from the company.

For the first nine months of 2017, AK Steel reported net income of $117.9 million compared to $54.6 million in the corresponding nine months of 2016, an increase of 116 percent.  Adjusted earnings for the first nine months of 2017 were also up. The company reported a net loss of $5.8 million for the third quarter, which included $13.1 million in costs related to an acquisition and refinancing long-term debt. AK’s sales increased three percent during the quarter.

United States Steel Corporation reported third quarter net earnings of $147 million, an increase of 188 percent over third quarter 2016 net earnings of $51 million. “Our third quarter results were modestly better than we expected,” said president and CEO Dave Burritt. “Our results for the first nine months of 2017 improved over the first nine months of 2016.”

A recent report from Atradius, the global trade credit insurer noted that “the steel industry has rebounded since 2016,” with steel prices and global steel use on the increase.

But Attradius threw some cold water on the current business climate when it warned that “the current steel rebound is mainly driven by cyclical factors, while fundamental structural issues remain.” The increased threat of protectionism in the United States, China’s economic downturn, Brexit, and capital outflows from emerging markets are among the political and economic risk factors that could negatively affect the industry.

“Should any of these risks materialize,” the report concluded, “it could immediately lead to another downturn in regional or global steel demand.”