U.S. Steel Corp (X) - Get United States Steel Corporation Report shares jumped higher Monday as investors tracked the impact of Europe's energy crunch on regional producers that could slow exports into the United States over the coming months.
Spain's Sidenor suspended production at its plant near the Basque capital of Bilbao until at least the end of the year Monday, citing a sharp rise in electricity and power prices -- triggered by a 250% year-to-date surge in natural gas -- it said made operations there financial unviable.
The move followed a warnings from Britain's industry lobby, U.K. Steel, which cautioned that "with winter approaching, demand for gas and electricity will rise, and prices could get higher, which will make it impossible to profitably make steel," leading to shutdowns and price hikes in the domestic market.
U.S. Steel shares were marked 4.9% higher in late-morning trading Monday to change hands at $21.72 each, a move that would extend their year-to-date gain to around $30%.
The U.S. market remains the most attractive destination for European steel exports, despite the 25% tariff imposed by President Donald Trump in 2018. Domestic producers, such as U.S. steel, could benefit from a slowdown in European imports -- as well as the opening of markets overseas that followed the removal of steel tariff "rebalancing" measures by the European Union last spring -- if the energy crunch extends into the final months of the year.
That, in turn, could offset concerns that capacity additions -- including U.S. Steel's plans for a $3 billion mill that will start producing in 2024 -- will test the 'higher-for-longer' thesis (for broader steel prices) as the government moves to finalize its multi-trillion stimulus bill.
Overall, U.S. mills -- including U.S. Steel -- have produced 71.4 million tons of crude steel so far this year, according to data from the American Iron and Steel Institute, a 20.26% increase from the same period last year. Average capacity utilization is now at 81.1%, up from just 66.8% over the same period last year.
U.S. Steel said it expects adjusted current quarter profits of around $2 billion, a 50%-plus increase from the prior period, adding it's reduced its overall debt by around $2.7 billion so far this year, excluding that linked to its 2019 acquisition of Big River Steel.