Market’s Not Getting Burned by AK Fire…Yet

AK Steel estimates melt shop operations at the Middletown, Ohio, mill will resume in eight to 10 days. While repairs and cleanup are under way, AK will utilize production from its melt shops at Dearborn Works and Butler Works to support customer needs.

“We do not currently expect any material impact on shipments to our contract customers, including our automotive customers. However, we anticipate that the outage will reduce our sales to the commodity carbon spot market,” said the company in a press release on Monday.

Most service center executives observed that it’s too soon to predict how AK’s production outage will affect the market. “I would expect it to impact spot buyers more so than contract buyers,” said one source. “It should mainly be felt by the auto supply chain. The spot business AK claims to have is largely service centers for automotive. So, when the disruption materializes, it should be in auto,” said another distributor.

Other mills will probably step up to take advantage of the AK’s outage. “It might push other mills’ prices higher since they will have to fill the gap, but I’m not worried at the moment,” said another executive.

“Prior to the fire, I would have not expected the mills to announce any additional price increases. However, with the fire disrupting the market, I now anticipate we’ll see something in early February or sooner,” predicted another service center exec. “If AK returns to operation quickly, I have a feeling they will attempt to recover lost profits, and others will follow. Or other mills will take advantage of AK’s situation with a price increase in next few weeks.”

He added: “AK always seems to have a problem during strong markets, so I’m not surprised by the timing of their misfortune.”