The writing had been on the wall for a while that the company needed to change, and now U.S. Steel (X) management is attempting to execute on an expensive “best of both” strategy in the midst of serious steel industry headwinds and while weighed down with quite a lot of debt. While the basic idea of combining electric arc and upgraded/improved blast furnace assets under the same umbrella isn’t necessarily a bad one, it’s unclear at best as to whether U.S. Steel can earn a good return on the capital they’re going to consume in trying this strategic shift.
With so much changing about the business, U.S. Steel almost looks like a binary outcome – this will either work out and the shares are worth some hard-to-quantify “quite a bit more than this”, or the plan will fail, the company will go bankrupt, and equity owners will be left with basically nothing. While a better-than-expected steel market in the next few years would absolutely boost U.S. Steel, I see too many steel companies offering decent-to-good returns with much less risk to really want to take a flyer on this in my own portfolio.
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U.S. Steel Trying To Change On The Fly, While Weighed Down With Debt And Facing Headwinds
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