AK Steel Losses Widen in Q4 - Company Losses $1 Billion During 2012

Net loss for 2012 was $1,027.3 million compared to net loss in 2011 of $155.6 million. Excluding pension and tax charges AK Steel had an adjusted net loss of 64.4 million for the year. Earnings were impacted by decrease in shipments and spot market selling prices along with higher coke costs that were partially offset by decreases in cost for carbon scrap, iron ore and energy.

“Sluggish economic conditions impacted global demand and selling prices for steel products during the fourth quarter and the full-year of 2012,” said James L. Wainscott, Chairman, President and Chief Executive Officer of AK Steel. “That said, AK Steel remains well-positioned to take advantage of market opportunities with its high quality, valued-added steels as the economy continues to slowly recover. Taking everything into account, we expect a significantly better first quarter and full-year 2013.”

In the AK Steel conference call Wainscott commented on the company’s strategy of vertical integration. Phase one of the AK Steel JV plant in Reynolds, Indiana has been completed and phase two involves construction of the iron ore pellet that is expected to provide 50 percent of AK Steel’s pellet needs in the future. AK Coal is progressing and by fourth quarter the company hopes to begin consuming coal provided by the facility. AK steel will have capacity to internally produce 25 percent of its own coke.

Wainscott said coal contracts have been locked in for 2013 below 2012 prices. AK Steel forecasts $100 million in savings from raw material costs. “Our deals are done and in the book so we are very confident about that number,” said Wainscott. “Raw materials, for one of the few times in recent years, have finally come our way.”

On the issue of base pricing plus raw materials surcharge, Wainscott said there is a variable price component and each contract is unique and surcharges depend on timing and volume. “Clearly, we are going after prices that can help us make a profitable return and we’ll continue to grow a profitable business,” he said. “We’ll continue also to push for the variable price mechanisms. We think that make sense.” He added customers should see a benefit from lower costs on some materials in 2013.

Wainscott said the spot market is beginning to pick up. AK Steel had three prices increases in the fourth quarter and recently announced an additional $40 per ton increase. “We want to have price quotes for our $40 per ton. We are currently getting 65:35 contract to spot market looking to continue to grow that hopefully upwards of 70 all the way to 75 or 80 percent,” said Wainscott, “Prices are trending higher, but not as quickly as we would like them going, we’re now certainly north of $600 a ton which is a better place than we’ve been recently.”

AK Steel had 20 percent increase in its business in the automotive market in 2012 and expects an even greater market share in 2013.