U.S. Steel Corporation- An overview
Q1 2023 Heads-up - "Stronger Market Momentum/more bullish for 2023 performance"
Introduction
The steel industry is one of the most important sectors in the global economy. Investing in the steel industry can be a lucrative opportunity for investors looking to diversify their portfolios. The U.S. Steel Corporation, also known as U.S. Steel, is one of the largest steel companies in the United States, making it a potential investment opportunity for those interested in the steel industry.
U.S. Steel Corporation was founded in 1901 and has become one of North America's largest integrated steel producers. The company produces a wide range of steel products, including flat-rolled and tubular products for the automotive, construction, and energy industries. With its strong market position and diversified product portfolio, U.S. Steel Corporation has become a leading player in the steel industry.
One of the key opportunities for investing in U.S. Steel Corporation is its strong market position. The company has a diverse range of products that serve several industries, including automotive, construction, and energy. This diversification makes the company less dependent on any one industry and allows it to withstand market fluctuations.
Demand for steel may increase in the years ahead, not only for the Build Back Better program of the US administration but also for the wider car industry, now transitioning to manufacture electric vehicles.
The proposed investments in infrastructure, clean energy, and manufacturing by the U.S. administration could increase demand for steel products. The focus on domestic sourcing could further benefit U.S. Steel Corporation. However, to fully profit from the program, U.S. Steel must ensure it can meet its product demand.
The growth in demand for steel presents a significant opportunity for U.S. Steel Corporation to expand its market share and increase revenue. This makes U.S. Steel an interesting stock play.
In the past few years, the U.S. Steel Corporation has faced challenges in recent years, particularly due to the impact of the COVID-19 pandemic on demand for steel. However, the company has taken steps to improve its financial performance through cost-cutting measures and improving its liquidity position.
Recently March 16th, 2023, U.S. Steel (X) President David Burritt gave a positive Q1 heads-up and expects a stronger market momentum for 2023. Some highlights from his update:
"We are increasingly more bullish for 2023 performance. Our Flat-rolled segment order book reflects wide-ranging demand improvement. Our Mini Mill segment’s order book is also improving, and its cost structure continues to normalize, as anticipated, by absorbing higher priced metallic purchased at the onset of the Ukraine war. In Europe, demand has improved and coupled with our focus on continuous improvement; we saw a positive EBITDA return in February. In Tubular, we expect another quarter of improving EBITDA performance as seamless pipe prices and order entry remains healthy in the first quarter.
David Burritt further mentioned: "Our high return strategic projects remain on-time and on budget. The Gary pig iron project already contributes to the Mini Mill segment’s normalizing cost structure. The Big River Steel non-grain-oriented electrical steel line is expected to be commissioned this summer. Our balance sheet strength, strategic investments with returns that significantly exceeded our cost of capital, and continued direct returns to stockholders create value today and tomorrow."
Looking at the 30-year stock market performance since the early 1990s, my forecast for 2023 foresees quite some volatility ahead. From a fundamental point of view, I do not expect U.S. Steel to outperform the stock market in 2023. However, the technical analysis of the Steel industry and the words from U.S. Steel’s President may be a guide for some optimism and perhaps some tradeable opportunities along the way.
The premium subscribers can further read the analysis in the below post.
In this post, I will also show the premium subscribers what W.D. Gann wrote about U.S. Steel in the early 1900s and how his analysis still seems to apply 100 years later. Further, I extend the analysis to the price of Steel and Iron Ore, the basic raw material, to get an overall picture of the steel production industry and what may affect the U.S. Steel Corporation share price.