Key Highlights from Steel Companies’ 3Q15 Earnings
Shipments are a key driver of steel companies’ performance. Generally, shipments depend on demand from end consumers as well as any portfolio actions undertaken by the company. However, for steel companies, shipments have been negatively impacted by the higher amount of steel imports despite decent end user demand. Let’s see how different steel companies’ shipments shaped up in 3Q15.
The above graph shows the quarter-over-quarter change in different companies’ steel shipments. As you can see, all of the companies in our coverage, with the exception of AK Steel (AKS), reported fewer shipments in 3Q15—compared to 2Q15. Please note that we haven’t compared the YoY (year-over-year) figures. Both AK Steel and Steel Dynamics (STLD) acquired steel plants last year. So, looking at the YoY figures would show a steep rise in these companies’ shipments.
ArcelorMittal (MT) showed the biggest quarter-over-quarter fall in shipments in 3Q15. However, this is partially due to seasonal weakness in Europe—ArcelorMittal’s biggest market. Meanwhile, even on a YoY basis, ArcelorMittal’s shipments fell more than 2%.
AK Steel’s shipments
Roger K. Newport, AK Steel’s CFO, said during the company’s 3Q15 earnings call that “Our improved shipments quarter-over-quarter were primarily the result of increased shipments to the automotive market.”
Please note that more than half of AK Steel’s shipments are to the automotive sector. AK Steel’s CEO, James L. Wainscott, said during the company’s 3Q15 earnings call that “while no market is perfectly nor permanently insulated from import pressures, safe to say that the automotive sector has historically been served by domestic producers.”
It’s important to note that timely delivery and quality are important to automotive customers like Ford (F). This is why automobile companies tend to mainly order from domestic steel producers. Allegheny Technology (ATI) is another leading supplier to the automotive industry. Currently, Allegheny Technology forms 0.09% of the Wisdom Tree MidCap Dividend ETF (DON).
In the next part, we’ll see how different steel companies’ average selling prices played out in 3Q15.
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