AK Execs Report Strong Earnings, Strong Views on Trade

“Our first-quarter 2018 operating performance benefited from a favorable pricing environment and solid demand across most end markets, including automotive,” said Newport. Results were tempered by the unplanned outage at AK’s Middletown Works in January.

AK Steel executives touted the company’s research and development of more advanced high-strength steels for the auto industry and more electrical steels for the power grid and for batteries in electric and hybrid vehicles. “We remain optimistic about 2018, as we expect automotive and other key end use markets to remain strong. The collaborative efforts between Precision Partners, AK Tube and our AK Steel technical and research teams are gaining traction at key automotive customers,” Newport said.

Ford’s decision to curtail U.S. production of passenger cars including the Taurus and Focus should not hurt AK, said Newport. In fact, those platforms will be replaced with the larger Ford Ranger pickup and Bronco SUV, “so we expect that to be an overall positive trade.”

The company expects even better market conditions in the second quarter. Shipments of carbon and stainless steels, as well as tubular and stamping products, will benefit from the ongoing demand from automotive, as well as increased shipments to distributors, converters, infrastructure and manufacturing markets.

Commenting on the second-quarter outlook, AK expects flat-rolled shipments to improve by 5-7 percent. The average selling price per flat-rolled ton is forecast at about $1,075 in the second quarter, compared to $1,045 in the first quarter.

The steelmaker continues to assess its idled Ashland Works Hot End and has made no decisions about bringing the production back on line. “We remain concerned about the continued global oversupply of steel and the impact bringing on additional capacity would have on the highly competitive commodity markets,” said Kirk Reich, AK Steel president and COO.

Responding to an analyst’s question, Newport said he had no insights into what President Trump would announce the next day, the May 1 deadline, regarding the steel tariffs. [The administration extended the exemptions for an additional 30 days to allow more time for negotiations.]

“We believe the tariff should go into place even during the negotiations period. There shouldn’t be a grace period,” Newport said. “What’s really key is to make sure whatever the deadline ultimately becomes, an adequate remedy is put in place to address the underlying problem, which is the national security of our country, economic growth in our country, along with the global steel oversupply.”

Pointing to the grain-oriented electrical steel market, AK executives noted that the Section 232 trade action has not slowed GOES imports but has prompted a massive dumping of electrical steel in the U.S. South Korea has imported more GOES products in the last three months than it did in its higher five-year period from 2012 to 2016. GOES imports in the first quarter are estimated to be nearly 2.5 times that of last year. “It seems readily apparent that this tremendous surge of imports is the result of a concerted effort of certain players to beat the Section 232 tariffs,” Reich said.

“Our hope is that the Department of Commerce will recognize and address this situation as the U.S. negotiates deals with countries seeking exceptions to the steel tariffs,” he added.