Steel Mills

ATI Seeks Fair and Free Trade Under Trump
Written by Sandy Williams
January 23, 2017
Allegheny Technologies Inc. reported fourth quarter sales of $796 million and net income of $10 million.
Flat rolled sales increased 13.2 percent year-over-year in Q4 2016 to $18.9 million, but the segment posted an operating loss of $0.8 million, improved from a loss of $120.1 million in Q4 2015. Quarter results were impacted by “weak market conditions, very low base-selling prices and raw material surcharges, and the effects of lower operating levels following the mid-August 2015 work stoppage,”said ATI.
ATI has suffered four consecutive years of loss in the flat rolled products segment. At the end of 2015, after a strategic review, ATI reduced exposure to commodity stainless steel sheet and exited the grain-oriented electrical steel business. Difficult labor negotiations, beginning in mid-2015 and lasting through to Q1 2016, resulted in a seven-month work stoppage. A new agreement was finally reached, the flat-rolled products management was restructured and salaried positions were reduced. The segment was expected to be profitable in fourth quarter but instead ended near break-even.
Said chairman, president and CEO Rich Harshman, “As we look at the next several years, the Flat-Rolled Products segment is positioned to benefit from growth in high-value products, including the benefits from the STAL expansion [a China stainless steel joint venture with Baosteel] as well as improved business conditions in key markets, including oil and gas, chemical process industry, hydrocarbon process industry, defense, capital goods, and we believe the seemingly renewed focus on the importance of U.S. manufacturing.”
Harshman added, “In the oil and gas market we are seeing some early signs of improving demand from our customers, not yet a trend, but indicative of a market that has nowhere to go but up. At $50 a barrel, sentiment has improved and we have seen an increase in order quotation requests. Actual orders have picked up modestly at this point. Most customers remain cautions. Some large products such as pipelines have begun to move forward after being put on hold for the last several years. At this time, our visibility into this important market is limited and our order backlog remains soft, but we are seeing signs of cautious optimism.”
(SMU note: The Trump administration today cleared the way to revive the Keystone XL pipeline and approve the Dakota Access pipeline.)
The new administration and how it may impact business was a topic of discussion during the earnings call and how the trade-related initiatives might impact ATI.
Said Harshman, “We’ve been fairly consistent for a very long time that in our view that what needs — the primary focus should really be on enforcing the existing trade agreements that are in place, including the requirements of being a participant in the WTO. And I think that that has not happened quite frankly, regardless of who has been in the White House over the past 12 years or longer.
Harshmann added that ATI is pleased about the decision to withdraw from the Trans-Pacific Partnership. “We spent a lot of time looking at and analyzing TPP, and did not think that it was a good, fair trade agreement for American manufacturers. And so we support that. I think that any time that trade is discussed we’re not advocating protectionism. What we have always advocated going back to before my predecessor, actually going back 30 years, to Dick Simmons when he was the leader — the chairman and CEO of Allegheny Ludlum, is when you talk about trade and you talk about global trade there are two F-words when you talk about trade, and it’s fair and free, so there’s two.
“And I think in many cases the advocacy of free trade did undermine, especially, U.S-based manufacturers. And we think that the change in tone and the recognition of that is important. I think it’s a journey. I don’t think that that happens overnight. I don’t think that that’s going to be a big impact on the first quarter or maybe even the first half or maybe even 2017. But I think from a long-term strategy standpoint I think it is a very positive development for American manufacturers.”
When asked about talk of taking away tax breaks on imports of raw materials, Harshman said he expects a “thoughtful analysis” of trade agreements and laws that are put in place so that they grow the U.S. economy and not harm it, noting that some manufacturers have to import raw materials that are not produced in the U.S.

Sandy Williams
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