QUOTE AND NEWS
Forbes  Aug 23  Comment 
In recent trading, shares of AK Steel Holding Corp. (NYSE: AKS) have crossed above the average analyst 12-month target price of $4.79, changing hands for $4.80/share. When a stock reaches the target an analyst has set, the analyst logically has...
Benzinga  Aug 22  Comment 
Citi has started coverage of AK Steel Holding Corporation (NYSE: AKS) with a Neutral rating and $5.40 price target, which represents a potential upside of about 16 percent from the current levels. Analyst Alexander Hacking noted that AK Steel...
SeekingAlpha  Aug 19  Comment 
newratings.com  Aug 10  Comment 
WASHINGTON (dpa-AFX) - AK Steel (AKS) said that members of the United Auto Workers (UAW), Local 3303, have ratified a two and a half year labor agreement covering about 1,200 hourly production and maintenance employees at the company's Butler...
Motley Fool  Aug 6  Comment 
Nucor's strong financial results show up in its history of top-notch margins, which flow directly to the bottom line -- and your pocketbook.
Motley Fool  Jul 27  Comment 
The steelmaker's turnaround efforts are working.




 

AK Steel Holding Corporation (NYSE:AKS) is a fully-integrated manufacturer of steel, including flat-rolled carbon, tubular products, and electrical and stainless steels. AK Steel Holding has seven steelmaking and finishing facilities in Indiana, Pennsylvania, Kentucky, and Ohio, while AK Tube LLC, a subsidiary, has operations in Indiana and Ohio[1]. AK Steel's operations also include European trading companies that buy and sell steel products.

Business Overview

Business & Financial Metrics[2]

In 2009, AKS incurred a net loss of $74.6 million on revenues of $4.08 billion. This represents a turnaround from 2008, when the company earned $4.0 million on $7.64 billion in revenues.

Business Segments

AKS operates in a single business segment which produces carbon and steel products.[3]

Key Trends & Forces

Steel Industry’s Cyclical Nature: The U.S. Steel industry is traditionally very cyclical and closely connected to the overall state of the general U.S. economy. A significant downturn in the U.S. economy may lead to a noteworthy decline in the demand of steel products.[4]

Contract v Spot Pricing: Sales in the steel industry usually fall within two categories: fixed price contracts typically renegotiated twice a year, or spot market transactions. Depending on a collection of different variables that affect the state of the steel industry (steel prices, prices for raw materials, supply and demand, etc.), both can be beneficial or detrimental to the company that uses them.

It is estimated that 70-80% of AK Steel’s revenues are based on fixed price contracts (the company does not publish exact information). This is advantageous when spot market prices decline over the duration of the contract, and contracts have been negotiated in the company’s favor.

Prices of Essential Raw Materials The profitability of the steel sector is closely tied to the prices of necessary raw materials. Considering the steel industry, these materials include (but are not limited to) iron ore, coal, coke, oxygen, chrome, nickel, silicon, molybdenum, zinc, limestone, carbon, stainless steel scrap, etc. Depending on the holdings of each firm, drastic changes in the prices of these raw materials can have profound effects on revenues and profits[5]. .

Exposure to Other Industries: The U.S. steel industry is gradually becoming further specialized in certain markets within the general steel market. As a result, steel producers are becoming increasingly reliant on the state of their specialized markets.

AK Steel focuses much of its production towards the U.S. automotive sector and the stainless and electrical steel markets. In recent years, the U.S. automotive industry has been experiencing multiple challenging years, while the stainless steel market has lately been undergoing significant pressures[6]. .

Globalization of the Steel Industry: The U.S. steel industry is increasingly being forced to compete with foreign companies, particularly China. China is expected to become a net exporter of steel in the very near future, placing further pressure on domestic producers. The American Iron and Steel Institute (AISI) has reported that applications for the import of steel has been continually increasing.

Competition

AK Steel's operations are focused in the United States whereas some of its larger competitors have a larger international presence. When compared to its closest competitors, AK Steel has significantly more fixed price contracts versus spot market sales. This can either work to the company's advantage or disadvantage given certain changing variables such as steel prices. Furthermore, AK Steel’s sales productions are focused towards the U.S. automotive and stainless steel markets, making its success related to the success of those industries. AKS is in a relatively less favorable position concerning the acquisition of raw materials because its closest integrated steel competitor, US Steel (X), has significant self-sufficiency concerning |iron ore and metallurgical coal; on the other hand, AK Steel does not have the same level of these materials [7]. Also, AKS has more significant pension obligations and post-retirement liabilities than its competitors, although the company has successfully been working to decrease them.

The company's most significant competitors are:

References

  1. AKS 2006 10K, Item 1, pg. 1
  2. AKS 2009 10-K pg. 13  
  3. AKS 2009 10-K pg. 52  
  4. AKS 2006 10K, Item 1a, pg. 6
  5. AKS 2006 10K, Item 1a, pg. 7
  6. AKS 2006 10K, Item 1a, pg. 6-7
  7. AKS 2006 10K
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