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AK Steel steps up pursuit of automotive market

Keywords: Tags  AK Steel, James Wainscott, steel markets, market strategies, steel prices, AK Coal, Magnetation, high-end products value-added steel markets


NEW YORK — AK Steel Corp. aims to capture more market share in the automotive sector as the steelmaker continues to shift gears and focus on selling high-end products.

"The automotive market, which represents 45 percent of revenue for our full-year 2012, continues to be a bright spot for our business both in terms of carbon and specialty steel products," James L. Wainscott, chairman, president and chief executive of the West Chester, Ohio-based steelmaker, said during a first-quarter earnings call April 23. "We anticipate growth in the automotive sector with higher automotive shipments. We’ll continue to move toward richer mixes. We saw that in the first quarter, and we continue to look for more of that going forward."

AK Steel, which saw its first-quarter earnings narrow in the first three months ended March 31 (see related story, left), said that multiyear highs for housing starts and automotive unit sales will provide a boost to the steel market.

"In the first quarter of 2013, AK Steel experienced its highest level of shipments to auto customers since the first quarter of 2008. That’s progress," Wainscott said.

The steelmaker saw lower average selling prices this quarter compared with the same period in 2012, with Wainscott calling the period challenging, particularly in the spot market.

As for flat-rolled products, the company said that it did not experience the typical first-quarter bounce, adding that recent figures from the Metals Service Center Institute (MSCI) show lower inventories in March compared to the month prior on short mill lead times and service centers trying to keep inventory levels lean.

But Wainscott said increased buying activity would follow once an uptick in demand occurs.

"Pricing remains depressed. (But) I would say that this is the season, traditionally, for a pickup in pricing because of how the construction season typically picks up," he said.

A number of steelmakers recently told customers that they would no longer sell against a discounted CRU index price (amm.com, April 18), a move Wainscott supports.

"We’ve looked hard at the CRU index. The index itself, I think, we don’t have a problem with. We certainly have a problem with something that’s CRU-minus," he said. "Arguably, some of us think it should be CRU-plus given the value we bring to the marketplace."

He added that CRU-minus deals "do not accurately reflect market conditions," particularly as the approach relates to contract business.

Oversupply in the market has plagued the U.S. steel industry in recent months, Wainscott said, as AK Steel took some 100,000 tons off the market in the first quarter due to low prices.

"We make conscious decisions ... as to how many tons to take to the market based on a variety of conditions," he said. "We made a decision to take capacity offline (in the first quarter) because we didn’t particularly care for the pricing."

Sheet prices, particularly hot-rolled band, have recently faced multiweek slides due to overcapacity and soft demand. While Wainscott said the company hasn’t been "shy" about price increases this year, previous hikes helped establish a floor. He did not, however, say if AK Steel would follow them.

In addition to selling finished goods, the company is trying to control input costs, particularly as it prepares to ramp up its AK Coal Resources Inc. division, which is expected to provide the steelmaker up to 50 percent of its annual coal requirements, as well as its Magnetation LLC joint venture. Wainscott added that the Magnetation project, which is a year ahead of schedule, recently received the air permit from Indiana to operate its plant, and construction should begin very soon.

"These are important strategic steps that will provide (us) substantial cost savings," Wainscott said.


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  • Apr 24, 2013

    It will be interesting to see if the new domestic automakers will forgive AK Steel for surcharges forced on them in the past and allow them back into the fold. Good luck to them. They make a heck of a product.


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