Financial performance

Sales review

The segment’s revenues from steel product sales increased significantly as a result of improved prices and volumes, by 18.7% and 12.7%, respectively. This was mainly attributable to a greater demand on the tubular market, mostly for OCTG and small-diameter line pipe, as well as stronger sales volumes for seamless pipe.

Railway product revenues surged by 33.2%, driven by a 17.1% increase in volumes, accompanied by a 16.1% increase in average selling prices. The demand for rails improved after Class I railroads finished destocking.

Revenues from flat-rolled products increased due to an upswing in prices of 19.3%, which was partially offset by a decline in sales volumes of 4.5%.

Revenues from tubular product sales grew by 48.8% year-on-year due to increases of 40.3% in volumes and 8.5% in prices. The growth in sales volumes was driven by improved demand for OCTG amid a recovery in drilling activities that was led by rising oil prices. The reduced demand for large-diameter line pipe products, which was caused by the slow pace of project approvals, partially offset the growth in revenues from tubular products.

Steel, NA segment cost of revenues

In 2017, the Steel, North America segment’s cost of revenues rose by 33.2% year-on-year. The main drivers were:

  • Raw material costs increased by 65.0%, primarily because of higher scrap prices, accompanied by increased consumption of other raw materials due to higher sales of tubular products driven by the market recovery in the reporting period.
  • Costs of semi-finished products grew by 61.2% due to higher prices for purchased semi-finished products and increased sales volumes of steel products.
  • Auxiliary material costs increased by 42.3%, as production volumes of crude steel and finished products were higher year-on-year.
  • Service costs went up 14.8%, as sales volumes increased year-on-year.
  • Energy costs grew due to higher rates and greater sales volumes of steel products.
  • Other costs were down for the reporting period, primarily due to changes in work in progress and finished goods and allowances for inventories.
Steel, North America segment revenues by product
2017 2016
US$ million % of total segment revenues US$ million % of total segment revenues Change, %
Steel products 1,774 95.2 1,350 92.2 31.4
 Semi-finished products 4 0.2 0 0.0 n/a
  Construction products Includes beams, rebar and structural tubing 159 8.5 158 10.8 0.6
  Railway products Includes rails and wheels 309 16.6 232 15.8 33.2
  Flat-rolled products Includes commodity plate, specialty plate and other flat-rolled products 427 22.9 372 25.4 14.8
  Tubular products Includes large-diameter line pipes, ERW pipes and casing, seamless pipes, casing and tubing, and other tubular products 875 47.0 588 40.2 48.8
Other revenues Includes scrap and services 90 4.8 114 7.8 (21.1)
Total 1,864 100.0 1,464 100.0 27.3
Steel, North America segment cost of revenues
2017 2016
US$ million % of segment revenues US$ million % of segment revenues Change, %
Cost of revenues 1,656 88.8 1,243 84.9 33.2
Raw materials 645 34.6 391 26.7 65.0
Semi-finished products 303 16.3 188 12.8 61.2
Auxiliary materials 148 7.9 104 7.1 42.3
Services 124 6.7 108 7.4 14.8
Staff costs 254 13.6 195 13.3 30.3
Depreciation 95 5.1 97 6.6 (2.1)
Energy 111 6.0 85 5.8 30.6
Other Primarily includes transportation, goods for resale, certain taxes, changes in work in progress and fixed goods and allowances for inventories. (24) (1.4) 75 5.2 n/a

Steel, NA segment gross profit

The Steel, North America segment’s gross profit totalled US$208 million for 2017, down from US$221 million a year earlier. While the decline was primarily caused by higher prices for scrap and purchased semi-finished products, it was partially offset by an increase in revenues due to improved market conditions.