CHICAGO AK Steel Corp. is considering investing in or forming a partnership to give it continuous annealing capacity to meet automotive demand for next-generation high-strength steels.
The West Chester, Ohio-based steelmaker has not yet invested in a continuous annealing line but the issue is a "big deal" for the company, chairman, president and chief executive officer James L. Wainscott said during a conference call with analysts April 22. "We are evaluatingsupply and demandwhether we can make the economics make sense and whether we could do it alone or with a partner. We are on it, and we are looking at it in very direct and concerted fashion."
Wainscotts comments about a continuous annealing line came after he said AK Steel was prepared if necessary to make "additional capital investments to serve automotive customer needs in the future." He said the company would provide more detail later in the year.
AK Steel executives earlier in the conference were peppered with questions about how the company was responding to aluminum producers advancement into the automotive sector.
Wainscott noted that automakers were looking to meet increased fuel economy standards no matter what material they might choose. "Lets be clear: We are interested in lightweighting as well," he said. "Steel is not the problem. Steel is a huge part of the solution."
While acknowledging that aluminum had made "certain inroads," Wainscott questioned whether the light metal might be garnering more media attention than automotive converts. He said that automakers "choose wisely" when selecting materials, noting that aluminum-intensive vehicles could prove to be more expensive than steel vehicles, face higher insurances costs and potentially be more difficult to repair. "Were not completely sold on all of the aluminum buzz," he said.
Wainscott also swatted away the notion that steel might be playing catch-up to the light metal, pointing to next-generation high-strength steels that could offer similar weight savings to aluminum at a lower price. "We continue to work closely with our automotive customers on the steels that they currently need and, importantly, on the steels that they will need on future platforms," he said. "We are not behind the curve. ... We are on, if not ahead of, it."
One analyst asked whether stronger and lighter steelseven assuming aluminum does not gain market sharecould hurt AK Steels sale volumes, given that vehicles using them would require less steel overall. But Wainscott also brushed aside that concern, citing expected growth not only in car and light truck sales but also growth in North American light vehicle production capacity, referring specifically to BMW AGs plans to boost production in Spartanburg, S.C.
Munich-based BMW has announced plans to invest $1 billion at the plant between 2014 and 2016 as it looks to increase production to 450,000 cars per year (amm.com, March 28).
"America is really the place to be to make vehicles. And as that growth continues, well be there," Wainscott said. He also pointed out that demand growth in the light vehicle sector has largely come from trucks and sports utility vehicles, which historically have consumed more steel per vehicle than passenger cars.