Will U.S. Steel Stock Regain Momentum?

X: United States Steel logo
United States Steel

The shares of United States Steel Corporation (NYSE: X) are reporting a correction after observing a strong rally in early 2022. As the Russia-Ukraine war continues to trigger volatility in global energy markets, EIA has projected the Brent benchmark to trend lower in 2023 – indicating a likelihood of a rise in discretionary spending in the coming years. Given U.S. Steel’s strong presence in the developed economies with a wide product portfolio, its financials are likely to improve from rising demand. We highlight the historical revenue trends in U.S. Steel’s revenues across key operating segments in an interactive dashboard analysis.

U.S. Steel is the leading steel producer in the country

In 2021, U.S. Steel reported 16 million tons of total steel production against a total capacity of 26.2 million tons. Geographically, North America and Europe account for 80% and 20% of total revenues, respectively. With a product portfolio including hot-rolled steel, cold-rolled steel, and coated steel, the company caters to a wide customer base in the U.S. and Europe. In 2021, the company’s exposure to Automotive, Construction, Distribution, Packaging, Appliances, and Other markets was 19%, 18%, 43%, 9%, 9%, and 2%, respectively. Europe and North America’s apparent steel consumption is around 149 million tons and 124 million tons, respectively. Given the underlying strength in demand, an uptick in steel prices, and presence in Europe & North America – the company is likely to observe topline growth in the coming years.

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Key Market Trends

The North American light vehicle production has remained flat at 13 million units in the last two years – almost 3 million units less than the historical 10-year average. However, the American construction sector observed growth from strong housing despite lower government spending on the non-residential sector. Similarly in Europe, the construction and automotive industries account for 35% and 18% of total steel consumption, respectively. Despite the ongoing repercussions of the war, EUROFER (The European Steel Association) projects construction output to grow by 2.3% in 2022 and 1.5% in 2023. The European Automotive industry observed a slight rebound of 4% in 2021 – indicating an underlying strength in demand and likelihood of recovery as macroeconomic uncertainties ease. (related: Is Freeport-McMoRan Stock A Buy?)

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Returns May 2022
MTD [1]
YTD [1]
Total [2]
 X Return -21% 2% -27%
 S&P 500 Return -5% -18% 76%
 Trefis Multi-Strategy Portfolio -8% -23% 202%

[1] Month-to-date and year-to-date as of 5/13/2022
[2] Cumulative total returns since the end of 2016

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