Steel Mills
AK Steel Has Best Q3 Since 2008
Written by Sandy Williams
October 25, 2016
AK Steel’s efforts to focus on higher value products, cut costs and reduce exposure to commodity products has resulted in a net income of $50.9 million and the company’s best third quarter since 2008. Adjusted EBITDA margins improved to 10.8 percent from 7 percent a year ago.
“De-emphasizing commodity products and introducing new products, such as our recently announced NEXMET™ line of next-generation advanced high strength steels, are examples of our ongoing work to differentiate ourselves in the market today and for the future, and to drive long-term shareholder value,” said CEO Roger Newport.
Net sales decreased 15 percent year over year to $1.45 billion and shipments decreased 24 percent to 1,425,900 tons due to the intentional reduction in volume of commodity products.
AK Steel expects fourth quarter shipments to be relatively flat due to seasonal slowdown in automotive shipments offset by higher sales to the distributor/converter market. Average selling prices are expected to be moderately lower.
Maintenance outage costs of $25 million will be recorded in Q4 resulting from maintenance at the Dearborn and Butler melt shops and down time for installation of new equipment at Dearborn to expand AHSS capabilities.
AK Steel said in the earnings call that there are no plans at this time to expand production at its coal division. “Probably not this year,” said Newport, “it depends on where met coal prices go and long-term stability in that market.” AK Steel has the capacity and flexibility to expand with modest investment to open a new mine and buy new equipment. The target was to mine a million tons of coal per year and AK Steel is currently at about a third of that target. The coal assets will “eventually advantage us, whether next year or in the future” said Newport.
AK Steel has reduced its exposure to the spot market to 90 percent contract and 10 percent spot. About 60 percent of its contracts are auto. The contracts are staggered and helps reduce volatility, said Newport. Contracts generally move in the same direction as spot pricing but less dramatically.
AK Steel is excited about the new developments it is introducing in advanced high strength steels. Eventually the products being introduced today (NEXMET 440, 1000 and 1200) will replace products that have been in the market for years, but right now it a way for AK Steel to sell differentiated products, be first in the market and still be able to participate in the market they have, said Newport. “This is our foray into how we fight the intrusion of aluminum and other products.” The products perform the lightweighting that aluminum is known for but for a much better cost and without the need for OEMs to invest capital to change their systems.
Newport said AK Steel will continue to fight against unfair trade such as the circumvention of Chinese steel through Vietnam to avoid duties. “Our goal remains the same in all of our trade actions. We expect a level playing field, and we expect the United States Government to enforce our trade laws. We will continue to do everything in our power to ensure that this happens in the future.”
Sandy Williams
Read more from Sandy WilliamsLatest in Steel Mills
August US mill shipments slip but still higher than last year
The American Iron and Steel Institute reported a decline in the monthly shipments of US mills from July to August.
TransPod, Algoma, Supreme Steel linkup anchors Canadian steel in high-speed transit build
The three Canadian companies have announced a strategic partnership to support the development of an ultra-high-speed transit line from Edmonton to Calgary.
Metallus, USW agree to tentative four-year labor deal
Metallus and the United Steelworkers (USW) have agreed to a tentative four-year labor contract.
ArcelorMittal Dofasco resumes cokemaking after emergency maintenance
The Canadian steelmaker reported on Sept. 30 that “urgent maintenance” was needed in its coke plant off-gas systems. The work required coke oven gas from the No. 2 coke plant to be flared for most of that week.
AISI: Raw steel production ticks back down
US raw steel output declined last week after increasing the week prior, according to the latest data from the American Iron and Steel Institute (AISI). Output has see-sawed from week to week since mid-August. Still, it has remained historically strong over the past four months and has held near multi-year highs since June. Domestic mills […]