NEW YORK AK Steel Corp. plans to restart its Middletown, Ohio, blast furnace July 18, just three and a half weeks after an unexpected mechanical failure caused the producer to idle the facility, according to sources familiar with the matter.
The repairs have reportedly been moving ahead of schedule and the mill will be taking scrap ahead of time, three market sources said. The bell has been replaced and the furnace will likely achieve full operation within a week of restarting, they added, which falls in line with the West Chester, Ohio-based steel producers earlier predictions that the repairs would be completed in July (amm.com, June 24).
An AK Steel spokesman declined to comment, but said the company will provide an update on the plant during its second-quarter earnings call July 23.
The steel sheet market has seen strong upward momentum in recent weeks thanks to three rounds of successful price hikes, particularly due to supply being taken offline because of the unplanned outage at Middletown.
The steelmaker had indicated before the completion of the repairs that it would utilize its Butler, Pa., works electric-arc furnace and its Ashland, Ky., works blast furnace, along with purchasing merchant slabs, to service its customers.
Buyers indicated, however, that by losing out on the 2.3-million-ton-per-year Middletown facility, which represents about 40 percent of AKs total U.S. capacity, the mills lead times would extend very quickly, causing tightness in the market.
With the furnace returning earlier than some had thought, sources questioned whether the sheet price increases would continue.
"Will the (recent) price increases be hurt by this? They definitely will. Capacity that was lost is now being brought back, and thats why the mills went from $31.50 (per hundredweight) to $32.50 (per cwt) in the latest round," one Midwest service center source said. "Its come back a lot faster than anyone thought. And with (the labor contract at Essar Steel Algoma Inc.) being settled and supply coming back online, I think the price increases could be relatively short-lived."
However, others pointed out that overall steel production levels in the U.S. market have changed little even though AK Steel took capacity offline for several weeks.
During the first week of Middletowns idling, U.S. raw steel output slipped to 1,822,000 net tons from 1,881,000 tons a week earlier, but has since returned to late-June levels as it closed the week ended July 6 at 1,876,000 tons. As such, some believe that other mills have capitalized on the outage by bringing more tons into the market.
"We already think AK coming back online will pressure prices," one trader said. "Looking at the numbers, other mills have seemingly picked up the slack because theres been no shortfall in production. The question, though, is at what point do steel mills start making deals again because they want orders so badly. Lead times will then start falling back and there will be more material again."
But buyers noted that a slight uptick in business activity and demand will keep prices steady despite the furnaces return.
"I think there will be some people who slow down a little bit on their thought process, but I still maintain this thing has legs through October. From a market standpoint, theyre largely still out of the spot market until October," a second Midwest service center source said. "The market is still strong, and the automotive and construction sector is still strong. Ultimately, lead times are out, and thats the kicker."