July 24, 2013
Blast Furnace Outage Leads to Quarterly Loss for AK Steel
An unexpected outage at AK Steel's primary steelmaking facility contributed to a net loss of $40.4 million for the West Chester, Ohio-based mill in the second quarter. The red ink follows on a $9.9 million loss in the previous quarter. The company’s second-quarter performance was still a significant improvement on the $724.2 million lost during the same period last year, however.
Net sales for the second quarter of 2013 totaled $1.40 billion on shipments of 1.3 million tons, compared to net sales of $1.54 billion on shipments of 1.4 million tons for the year-ago second quarter. Both sales and tons shipped were basically flat from the first quarter.
For the first six months of 2013, AK Steel reported a net loss of $50.3 million on sales of $2.77 billion. This compares to a net loss of $736.0 million on sales of $3.05 billion in the first half of 2012.
“Excluding the costs associated with blast furnace repairs, both planned and unplanned, AK Steel’s second-quarter results represented improvement over first-quarter 2013,” said James L. Wainscott, chairman, president and CEO of AK Steel during the company’s quarterly conference call with analysts and investors.
In June, the company’s Middletown, Ohio, blast furnace was taken offline, the result of a mechanical failure in the charging furnace. Repairs were completed a few weeks later, and the facility had returned to 90 percent production by the end of July. The outage will continue to be felt in the company’s volumes during the third quarter, primarily in spot-market sales in hot-rolled, cold-rolled and coated products. “We should recover nicely from that as we look out into the fourth quarter,” Wainscott said.
The slightly lower shipments for the second quarter were primarily due to declines in the carbon spot and electrical steel markets, partially offset by increased shipments to the automotive market. AK Steel enjoyed its best quarter of shipments to the automotive market since the third quarter of 2007. Automotive grew to 50 percent of AK Steel’s revenues through the first half, up from 45 percent in 2012.
The company’s average selling price for the second quarter was $1,061 per ton, an 8 percent decrease from the second quarter of 2012 but flat with the first quarter. The spot-market price for hot-rolled steel declined to $560 per ton, the lowest pricing level since the fourth quarter of 2010. Since then, the company has announced two carbon steel increases that were realized, and a third in mid-July to $650 per ton. Lead times have also extended for the company’s flat-rolled products.
Wainscott said a number of factors contributed to the improved spot-market pricing environment in recent weeks, including AK’s outage. Another key driver was service center flat-rolled inventories, which declined for the fifth straight month to their lowest level in two years, down to an adjusted 2.1 months of supply on hand. Scrap pricing also has been on the rise.
“Those are really positive trends for spot-market pricing. It’s a combination of our event and those other items that have bolstered pricing,” Wainscott said.