U.S. Steel Corp shares increased by 2% in Q1 2016, as it topped market predictions, secure in the knowledge that the company sees an improving landscape, and is confident that the current quarter will appear even stronger. U.S. Steel earned $199 million in the first quarter, and adjusted for one-time items the company earned 77 cents a share, while revenue dropped to $4.5 billion, from $5.2 billion a year ago, with analysts expecting adjusted EPS of 45 cents a share on sales of $4.3 billion. This positive news is in keeping with the end of 2015, when shares of U.S. Steel Corp. closed almost 8% higher for the year, fuelled in part by strong Q4 2015 sales figures.
One particular asset cited as a reason for the strength of U.S. Steel Corp.’s Q1 reports is the increase in demand for steel from the construction and automotive markets. The domestic construction sector is said to be driving the push for steel as a result of renewed interest in the substance, with steel stocks feeling the strain, as producers have been pressured by weaker global steel prices, pushing U.S. Steel to produce more and compounding the upward growth trend. Equally, the automotive industry is booming with growth, constantly breaking sales records and increasing the push for steel. This key industrial metal has compelling growth prospects for the future, thanks to its closely linked construction and automotive sectors and their pushes for more and more steel for their products.
This increase in steel prices has helped steel companies prosper, leading to better cash flows and improving balance sheets across the sector. Low-interest rates are naturally encouraging this since they are getting more projects online to create new funding opportunities. Imports are important to the steel sector, and higher U.S. steel prices have been discouraging the buying of foreign-made steel thanks to new tariffs and lower overall foreign investment.
U.S. Steel is the leading integrated steel producer in North America, with facilities in the United States, Canada, and Slovakia, along with multiple locations through Europe. With hopes of leading the world in high-quality steel production, U.S. Steel said it is “positioned well for the future.” “Our 3Q 2016 increment should be stronger than our 2Q 2016 increment and significantly stronger than the first quarter” management spoke positively of the outlook, furthering the growth of steel investment.
The steel industry is leading the way in growth at present, outplacing the others by quite some margin. Crane asset management company, Manitowoc, reported a slowdown in demand for mobile cranes, along with Terex, and crane company Sparrows Group, resulting in yet another loss for Crane. Other crane companies are following suit, something that will be making the oil and gas crane segment watch closely to see whether it is also affected. However, autos grew by 50% in Q1 due to an increase in demand for large transmission pipes, which has caused delays.
All of this bodes well for growth in the steel industry, and as renewable industries in the U.S surge, further intensifying interest in steel frameworks and materials. “Global steel industry executives are generally cautiously optimistic that the current pickup in global demand might signal a period of expansionary action,” said Gregory Ludkovsky, Head of Corporate Research at steel group ArcelorMittal. As soon as U.S. Steel recorded impressive Q1 2016 results, the stock started to rise, and it will surely affect future investments, such as a dam in Colombia, and government contracts in the United States depending on the outcome of the upcoming election.
