AK Steel Fighting Back Against Foreign Steel Imports

Shipments increased in second quarter on strength of automotive sales and the addition of shipments from Dearborn Works. Second quarter shipments totaled 1,811,700 tons, up from 1,750,500 tons in Q1 and 1,397,500 a year ago.

For the first six months of 2015, AK steel reported a net loss of $370.3 million which included an impairment charge of $256.3 million on Magnetation LLC. Average selling price for the first half was $965 per ton down from $1,096 in the same period of 2014.

In its outlook comments, AK Steel said it expects improved results for third quarter and the second half due to higher shipments, improved pricing and lower operating costs. The mills have been running at 78-79 percent capacity but are expected to increase to the low 80s in Q3, and mid-80s by the end of year. Automotive demand is expected to remain strong.

Imports are also expected to decline in the second half of the year due to impending steel industry trade cases which should bolster steel prices. AK Steel was among five steel companies filing a trade case today against unfairly traded cold rolled steel from Brazil, China, India, Japan, South Korea, Netherlands, Russia and the United Kingdom.

“Imports that have been flooding our shores drove selling prices down by more than $200/ton compared to prices just 9-12 months ago,” said CEO James Wainscott. “Even with the benefit of lower raw material prices and cost cutting measures, this unfair erosion of our market is very difficult to overcome, especially in the short run.”

“As for a third carbon steel case covering hot rolled products,” he added, “let me just say, stay tuned.” Another case, for which data is being gathered, will be on stainless steel sometime in the future. The recent trade legislation passed by Congress and signed into law by the president will make injury easier to determine and help to resolve cases quicker said Wainscott.

Wainscott was pleased with the results from the Corrosion resistant flat rolled steels (galvanized, Galvalume), noting prices on that product have already begun to rise. AK Steel is expecting carbon steel prices to improve in the second half of this year.

“With steady demand and slightly declined imports, pricing has bounced off the bottom and is now experiencing an upward trend,” said Wainscott. “Our first $20 per ton price increase that was announced on April 30 has been fully realized, and our second $20 increase announced on June 15 continues to gain traction in marketplace. As import levels and service center inventories decline, which is the current trend, and as more trade actions occur and take effect, we anticipate further strengthening of carbon steel spot market prices in the third quarter and throughout the second half of 2015.”

Wainscott noted during the conference call that AK Steel has no remaining expiring labor agreements in 2015 unlike competitors ATI, US Steel and ArcelorMittal. “No doubt the parties are hard at work to hammer out new deals that will likely occur soon,” said Wainscott, “but should of any of our customers find themselves in need of more great quality carbon or specialty steel products, let me simply say AK Steel is here to meet your needs.”

Wainscott said that the company is disappointed in its results for the quarter and is in the midst of a critical evaluation of the business as it seeks restore profitability. “This isn’t about fear mongering or creating uncertainty, this is about recognizing that something like 90 percent of steel companies on earth are losing money and we are among them and that can’t go on indefinitely. “

“One of the things we ultimately have to determine here,” said Wainscott, “is whether the recent downturn is indeed another cyclical downturn or if it is a secular move that would result in some actions that would be distasteful but required in the in long run.”

Wainscott noted that with AK Steel having both BFs and EAFs and a product mix that includes carbon steel, electrical steel and stainless there are opportunities for savings to look at.