U.S. Steel Corporation (X) announced that its tubular products subsidiary, U. S. Steel Tubular Products, Inc., has entered into an agreement with Surface Enhancement Technologies (SET), part of Lambda Technologies Group to improve the quality of its tubular steel products.
With this agreement U.S. Steel has been bestowed exclusive permit by SET to use its patented low-plasticity burnishing (LPB) technology, which can both improve the performance and extend the service life of various tubular products.
Applying the LPB technology to the already existing products would not require any changes in the design or material of the products, thereby enabling inexpensive integration of the processes.
LPB can also be applied to a wide variety of alloys, including titanium, aluminum, nickel-based alloys and steels, and is currently in use in the aerospace, nuclear and medical industries. This is also an advantage for U.S. Steel as the company can provide LPB services to other companies. LPB is currently used in the aerospace, nuclear and medical industries.
The agreement will also increase the shipment for U.S. Steel’s tubular segment. Lambda and U.S. Steel’s expertise and innovation will help solve the technical issues faced by them.
Lambda Technologies Group is an innovative company having a premier materials research laboratory with a world-class engineering and production enterprise dedicated to the development and optimization of surface treatments to improve component performance.
Pittsburgh, Pennsylvania-based United States Steel Corporation is a leading steel manufacturer in the U.S. and the fifth largest in the world. It produces and sells steel mill products – including flat-rolled and tubular products – in North America and Europe.
U. S. Steel Tubular Products Inc., a subsidiary of United States Steel Corporation, is the largest tubular products manufacturer in North America, with a total annual production capacity of 2.8 million net tons.
In January 2011, U.S. Steel released its fourth quarter financial results. U.S. Steel reported a net operating loss of $1.62 per share, wider than the Zacks Consensus Estimate loss of $1.12. The loss also widened from $1.58 reported in the fourth quarter of 2009. Revenue of United Steel in the quarter improved 28% year over year to gross $4.3 billion and surpassed the Zacks Consensus Estimate of $4.2 billion.
The Tubular segment reported an operating profit of $96 million, an increase from $39 million from the year-ago quarter. Management expects Tubular operations to continue to post profit. It expects a marginal improvement in shipments. Average realized transaction prices are expected to be in line with the fourth-quarter levels as announced price escalations begin to take effect during the quarter.
U.S. Steel’s fourth-quarter results suffered due to weak price realization and sub-optimal utilization rates. However, its operating results are beginning to reflect the benefits of the gradual economic recovery in North America and Europe.
The company also benefits from its focus on value-added products such as cold-rolled and coated carbon steel. We favor U.S. Steel’s leverage to rising steel prices and demand and believe it offers a good opportunity. Strong earnings drivers such as, backward integration into iron ore sourcing and attractively priced coking coal contracts for 2011, combined with higher realized prices beyond 1Q11 augur well for 2011.
The company competes with international steel giants like ArcelorMittal (MT), BaoSteel, Posco, Nippon Steel and ThyssenKrupp.
Currently, United Steel has a short-term (1 to 3 months) Zacks #2 Rank (Buy) and a long-term Neutral recommendation.
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