U.S. Steel (
) recently announced its plans to partner with Surface Enhancement
Technologies (SET), a part of the Lambda Technologies Group, to
improve the quality of its tubular steel products. The improved
tubular products would see a wider range of applications and has
the potential to add significant value to U.S. Steel by increasing
the shipment figures for the company in the years to come. The
company competes with international steel giants
like ArcelorMittal (
), BaoSteel, Posco (
), Nippon Steel and ThyssenKrupp.
price estimate for U.S. Steel
stands at $60.17
, roughly 7% ahead of its current market price.
U.S. Steel and its Tubular Steel Operations
U.S. Steel is an integrated steel producer of flat-rolled and
tubular products with major production operations in North America
and Europe. It is currently the tenth largest steel producer in the
world with an annual raw steel production capability of 31.7
The company's tubular division produces and sells seamless and
electric resistance welded (ERW) steel casing and tubing, standard
and line pipe and mechanical tubing steel products. Most of these
products are sold to customers in the oil, gas and
petrochemical markets. U.S. Steel has an annual production
capability of 2.8 million tons of tubular steel as a part of its
tubular division, which is less than 10% of its total steel
The Agreement Will Boost the Competitiveness of U.S.
Steel's Tubular Division…
U.S. Steel has been granted an exclusive permit by SET to use
its patented Low Plasticity Burnishing (LPB) technology, which can
improve the performance and extend service life of various tubular
products. Moreover, the implementation of LPB in existing products
does not require any changes to the material or design, allowing
for quick and inexpensive integration of the processes.
Interestingly, LPB technology can also be used with other alloys
like titanium and aluminum besides steels, which opens up
additional opportunities for U.S. Steel as it can provide LPB
processing services to other companies. LPB is currently in use in
the aerospace, nuclear and medical industries.
… Which in Turn Will Add Substantial Value to the
The direct impact of this agreement would be seen as an increase
in the shipment figures for U.S. Steel's tubular division in the
years to come.
We had initially estimated that the division's steel shipments
would grow by about 7% annually to reach just under 2 million tons
by 2013. But if the improved quality of tubular steel is able to
boost the annual growth figure to 9%, this could rise to 2.2
million tons by 2013. This marks a more than 5% upside for the
company's stock - taking its price estimate to almost $64 implying
almost 15% upside.
See our full analysis for U.S. Steel