AK Steel CEO: Still Much to be Done for U.S. Steel Sector Woes

Researched by Industrial Info Resources (Sugar Land, Texas)--The chief executive of AK Steel Holding Corporation (NYSE:AKS) (West Chester, Ohio), said Tuesday that while tightening regulations and positive trade cases had helped ease some of the difficulties with foreign competition in the U.S. steel market, there was still some way to go to return the market to solidity. AK Steel reported a net loss of $62.4 million for the fourth quarter of 2016, compared to a net loss $145.4 million in fourth-quarter 2015. Industrial Info is tracking $103 million in capital and maintenance projects involving AK Steel.

AK Steel and other U.S. steelmakers have brought about several trade cases against foreign countries, accusing them of unfairly dumping steel onto U.S. markets and rerouting steel to avoid tariffs.

In the company's fourth-quarter 2016 earnings conference call, Chief Executive Officer Roger Newport said, "During 2016, we continued our fight to ensure fair trade in the steel industry in the United States. I will not make excuses, nor will I apologize for the filing of our trade cases. We must have a level playing field and our trade laws must be enforced. We recognize that achieving fair trade is an enormous task for any administration, and we appreciate the hard work of the Department of Commerce and an international trade commission on the trade cases. In 2017, we will work with the new administration, including the Department of Commerce and the U.S. trade representative, in task with ensuring free and fair trade."

Newport went on to discuss electrical steel, which is used in electrical components and infrastructure. "There's been added pressure on domestically produced electrical steel products caused by higher import levels. As a result, the only other domestic producer of electrical steel was forced to shut down their electrical steel operations and exit the market in 2016. This resulted in the loss of additional steel jobs in America. we believe the electrical steel situation is an issue of national security that needs to be addressed so that the United States does not become solely dependent on obtaining electrical transformers and/or their steel components from China or other foreign countries for our critical electrical infrastructure."

A trade case AK Steel filed against China in 2016 for the alleged dumping of stainless steel is expected to resolved by the first quarter of this year. As with other steelmakers, AK Steel asserts that China continues to circumvent trade laws by routing steel shipments through Vietnam. "We intend to work with the new administration to develop more holistic solutions to the import problems in the United States, where successful trade cases seem to simply drive increased imports from other foreign countries that were not named in the cases," said Newport.

AK Steel's net sales for the quarter were $1.42 billion compared to net sales of $1.54 billion in fourth-quarter 4Q15. The company pointed to its decision to reduce commodity steel sales to the distributor and convertor sales markets, as well as some softening in the automotive market for the decline. Newport discussed the future of the automotive market during the call. "As we look at 2017, most industry sources are predicting a minor decline in North American automotive production rates of about 1% to 3% compared to 2016, but this comes after the all-time record year of 2016," he said. "So even if such a decline would indeed materialize, we would still anticipate another solid year in the automotive market. we remain focused on growing our core automotive business and we expect some modest shift in product and customer mix as we transition off of certain platforms and transition onto others."

Among the AK Steel projects being tracked by Industrial Info is the $15 million planned maintenance program at the company's steel works in Middletown, Ohio. The program includes two 4- to 10-day shutdowns of the hot strip mill during the course of the year, as well as various other 1- to 2-day area and equipment shutdowns to perform scheduled maintenance throughout the year. MPW Industrial Services Group Incorporated (Hebron, Ohio) is acting as contractor on the project.

On the capital side, the company is planning approximately $3 million in improvements on its two basic oxygen furnace at its Dearborn, Michigan, works this year. The project involves installing various equipment and performing repairs and upgrades to improve furnace operations. The program is expected to carry over into next year.

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