Steel Mills

AK Steel: Two Sided Coin

February 16, 2014

There are always two sides of a coin. When looking at AK Steel, buyers are seeing a mill aggressively offering hot rolled at the lower end of the SMU HR pricing range while, at the same time, fully annealed cold rolled and galvanized are on an inquire only basis. Steel Market Update has received mixed messages as to the reasons for the problems on CR and coated. One theory is that the mill took more contract business than they could absorb – especially after having problems with their blast furnace at Middletown during the summer of 2013.

The combination of catching up on orders affected by the outage, along with building inventory for their new contracts taken later in the year, has screwed up what is otherwise known as a normally on-time mill. The second theory is the mill is having production problems at Ashland and can’t seem to ever catch up.

Whatever the case, AK Steel is having an impact on the market. Steel Market Update spoke to a number of AK customers who advised us that the mill has been pushing orders out (CR & coated) with one large service center stating their lead times are effectively out 6 months based on their most recent promise dates:

“AK is definitely having issues. They are re-promising orders we ordered in January out to June, essentially a 6 month lead time. They are mostly having issues on Galvanized. They told us they are outsourcing some of their galvanized to try to alleviate the situation. Their coated lead times are mid to late June.”

A second large service center told SMU:

“Understand they are still having production and shipment issues – CR/CTD products are inquire only. HR seems better; prices falling to the low end of your HR range.”

A third service center told us:

“Most orders are running at least 4-6 weeks late. They haven’t made any significant improvement in delivery performance since the bell issue last June. They are asking for customers to reduce contract volumes and are extending lead times/promise dates on new orders to avoid issues.” This service center went on to tell us, “’perfect storm’ behind prior to June outage. Lost additional days, did not catch up in the fall due to strong auto order flow, picked new 2014 contracts and is currently rebuilding auto inventories after December reductions. Or, something like that. I hear Ashland is problematic, a cracked hood? They have good and bad days.”

AK Steel is one mill we need to watch carefully as they resolve (or don’t resolve) their issues on cold rolled and coated. Hot rolled is another matter as the mill has more supply (due to arrival of outside slab inventory) and, according to SMU sources, the mill has the ability to roll more HRC than they currently have orders for.