AK Steel anticipates operating loss in Q4

Wednesday, 26 October 2011 02:49:59 (GMT+2)

After reporting a net loss of $3.5 million in Q3, West Chester, Ohio-based AK Steel said that it expects to incur an operating loss in Q4 as a result of the anticipation of lower spot prices and higher operating costs. Beyond Q4 though, Wainscott explained that the company remains optimistic, at least in part because recent history in the last couple years has shown prices reaching a bottom in Q4 only to trend back up in Q1 and Q2 of the following year.

Additionally, there is a limit to how far prices can fall considering that "market prices must align with the very high cost of raw materials." But prices have been especially volatile as of late and demand continues to be uncertain, resulting in customers "backing away from forecasting." Wainscott also noted that hot rolled band prices "approached $900/net ton" earlier in the year, only to "lick at the heels of $600/net ton" in the current spot market.

But when asked about the fact that a number of steelmaking furnaces have been taken out of production in Europe recently, but not in North America, Wainscott concluded that such a move is "an individual company decision," and AK Steel adjust production based on orders. "It's very difficult to flip a switch and turn a furnace on or off," said Wainscott, but AK Steel will continue to run at a lower level of capacity for some time.

Because of the lack of near-term visibility in terms of pricing and demand, AK Steel also announced Tuesday that it is changing its company practice of providing upcoming quarterly guidance at the start of the quarter, at least for the time being. AK Steel will instead provide Q4 guidance later in the quarter.

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