Steel Mills
ATI Reports Challenging Third Quarter
Written by Sandy Williams
October 20, 2015
Allegheny Technologies reported a challenging flat rolled market in their third quarter results. Flat rolled sales were $358 million, down from $511 million in Q2 and $561 million in 2014. ATI’s lockout of USW workers resulted in 25 percent lower shipment volume during the quarter.
Total ATI sales for the quarter were $833 million resulting in a net loss of $144.6 million.
ATI has been operating with salaried and temporary employees since the lockout of USW workers in August. After an initial drop in production, rates have improved and, in some cases, are exceeding output and safety expectations. The melt shops at Brakenridge and Labtrobe are at operating at 90 percent of pre-work stoppage levels. Midland is idled due to market conditions.
Inventory build-up in anticipation of a possible strike by USW workers allowed ATI to meet customer demand during the lockout in third quarter. Completion of repairs on the HRPF RCS (rotary crop shear) enabled the company to seamlessly continue hot rolled production during the work stoppage.
During the ATI earnings call, CEO Richard Harshman said that there has been no progress on labor negotiations despite several meetings with a federal mediator. The contract offered to USW members is stalled over health care issues. ATI is proposing a family health care premium of $125/month in the first year of the contract that would increase to $215 month by the fourth year—well below the national average of $400/month. Employees currently pay no premium. There are no changes to pension, overtime provisions, or full day and full weak guarantees. Harshman said employee wages are among the highest in the industry.
Standard stainless steel demand is depressed due to unusually high domestic inventory due to inflow of low priced imports mainly from China and weak demand affected by falling raw material surcharges. High volume stainless steel sheet products hit record lows with the price of nickel reaching a decade low. ATI says customers are operating with low inventory to minimize exposure to falling nickel prices.
Aerospace and defense were the largest market for ATI at 39 percent of year to date sales, up 7 percent year over year.
When asked about the energy market, Harshman said he does not expect any improvement in the oil/gas industry in the first half of 2016.
Sandy Williams
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