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AK Steel’s Selling Prices Have Fallen Less than Its Peers’

A Comparative Analysis of the Steel Industry

(Continued from Prior Part)

Average selling prices

Steel prices are a key driver of steel companies’ earnings. Simply put, steel companies’ revenues are steel shipments multiplied by average steel selling prices.

We looked at different steel companies’ steel shipments earlier in this series. Now, we’ll look at their average steel selling prices. We’ll also explore why steel selling prices vary between steel companies.

Average steel prices vary

ArcelorMittal (MT) has the lowest average steel selling prices in our coverage list. The company gets more than half of its revenues from Europe, where steel prices are lower as compared to the United States.

AK Steel (AKS) had the highest average steel selling prices in 2Q15 in our universe of stocks, as can be seen in the graph above. AK Steel gets more than two-thirds of its revenues from value-added products. Moreover, ~75% of its sales are to contract customers. Prices in contract sales are generally less volatile as compared to spot sales.

AK Steel’s average steel selling prices have fallen less as compared to most other steel companies. However, the company could see lower steel prices in the coming months, as it has increased its exposure to spot market sales.

U.S. Steel Corporation’s (X) average steel selling prices in 2Q15 were slightly higher as compared to Nucor (NUE) and Steel Dynamics (STLD). The company is a leading supplier of tubular steel products, which sell at a much higher price as compared to standard steel grades.

However, U.S. Steel’s tubular shipments have fallen steeply over the last year, pulling down the company’s average steel selling prices. Meanwhile, Steel Dynamics and Nucor had similar steel selling prices in 2Q15.

Currently, Steel Dynamics forms 0.62% of the iShares S&P Mid-Cap 400 Value ETF (IJJ).

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