Philip Gibbs, a Vice President, Equity Research Analyst with KeyBanc Capital Markets, says the oil & gas sector accounts for about 10% of direct steel consumption in the United States, and perhaps a bit more if energy-related infrastructure is included. He says United States Steel Corporation (X) is among the companies with the most significant exposure to oil & gas drilling companies.
“Historically, US Steel has generated 30% to 40% of their EBITDA generation from that market,” Gibbs says. “And they’ve concurrently announced layoffs along with many other participants in the market.”
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Gibbs says the energy market has also suffered as a result of a high level of imports, which have continued through the first quarter of 2015. However, he expects to see some positive developments later this year.
“So energy markets have been hit by the macro downturn/spending, and they’ve also been hit by imports,” Gibbs says. “We believe both of these trends should stabilize some time later this year and in 2016 as we get a better picture on what production is going to be moving forward.”
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