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ALTERNAITIVE FUELS Pain at the gas pump translates into a boom for stainless


The need for alternative fuel sources is a fact of life—one becoming painfully evident as fossil fuel reserves fade while costs rise and emissions continue to tax the environment. Enter biofuels, which are energizing demand for the stainless steel used to fabricate refinery machinery and bulk storage tanks.

Specialty materials manufacturers like Allegheny Technologies Inc. (ATI), Pittsburgh, and AK Steel Corp., West Chester, Ohio, are reaping the benefits of the biofuels boom as companies that make equipment and supplies to produce ethanol and biodiesel fuels requisition material that can withstand the fuel's potential for corrosion.

ATI sees strong growth within the energy market, including ethanol, Richard J. Harshman, the company's executive vice president of finance and chief financial officer, said during a recent presentation to analysts at a Bank of America forum. Harshman noted that 22 percent of ATI's sales are to the chemical process industry/oil and gas sector, which often presents environments that are highly corrosive. The specialty alloys and metals that ATI produces work well in these cases, he said.

The same holds true at AK Steel, where the company's 300-series stainless sheet and tube are sold to the biofuels market for piping and ancillary equipment, Alan H. McCoy, AK Steel's vice president of government and public relations, said. "The emphasis on alternative fuels has created strong demand for stainless products in general. Some of these fuels can be corrosive, and stainless is well-suited for that application."

Both companies refused to quantify the volume of stainless produced for biofuels industry consumption or the level of growth seen.

"We've talked about it since last year through (the) first half of this year, particularly in the flat-rolled products segment, that sales have been benefiting from the rapid build rate of plants and storage," Dan Greenfield, ATI's directorof investor relations, said. "We haven't publicly forecast what's going forward."

ATI and AK rely on various information sources to gage future industry needs.

"We have people in the United States and all over the world watching the market very closely," Greenfield said. "They are connecting the dots and doing triangulation, talking with customers and industry experts about alternative energy, biofuels, etc."

AK Steel's management looks at economic data from a number of sources, McCoy said. "The stainless market is so diverse that we really end up looking at a broad spectrum of the economy in general. With regard to public policy, we keep an eye toward how that could affect our future business."

There are a number of federal and state government mandates relating to ethanol.

In 2005, for example, President Bush committed his national energy policy to developing alternative fuel sources to reduce America's dependence on foreign energy sources. The American Petroleum Institute (API), Washington, also cited several examples—Minnesota and Hawaii currently have statewide ethanol mandates in effect; legislatures in Illinois, Michigan, Oregon and Pennsylvania are considering bills that include ethanol mandates; and ethanol mandates will take effect in Missouri and Washington next year. The API also said that Louisiana and Montana have ethanol mandates with triggers contingent upon in-state ethanol production volumes, and Iowa and Kansas have laws imposing tax penalties on retailers if renewable fuel quotas are not met.

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