West Chester, Ohio-based AK Steel reported Tuesday a net loss of $59.2 million for Q3 2010, compared to net income of $6.2 million, for the same quarter last year.
Net sales for the third quarter of 2010 were $1,575.9 million on shipments of 1,465,800 tons compared to sales of $1,041.1 million on shipments of 1,047,800 nt for the year-ago third quarter. The company said its average selling price Q3 2010 was $1,075/nt, a 2 percent decrease from the $1,101 per-ton price in Q2 2010, and approximately 8 percent higher than the $994 per-ton average price realized in the third quarter of 2009. The company reported an operating loss for the third quarter of 2010 of $102.5 million, or $70/nt, compared to an operating profit of $15.3 million, or $15/nt, for the third quarter of 2009.
During its quarterly conference call AK Steel said that it has agreed with two of its three primary iron ore suppliers that the requirements for the establishment of the annual benchmark price of iron ore for 2010 have been met. That 2010 benchmark is an increase of 98.65 percent over the 2009 benchmark, and is higher than the 65 percent increase the company had previously estimated for the first half and for its Q3 guidance. The third primary supplier of iron ore to the company has not acknowledged yet that an annual benchmark price has been established. Instead, that supplier continues to seek a price increase in excess of the 98.65 percent annual benchmark price.
The company's third quarter 2010 financial results reflect the year-to-date impact of the higher iron ore price, which increased the company's third quarter operating loss by approximately $76.0 million, or $52/nt. Excluding the effect of the change in the price of iron ore, the company's operating loss in the third quarter was approximately $26.5 million, or $18/nt.
During the question-and-answer portion of the conference call AK was asked directly their opinion on how the company will be able to hold onto the auto market, which has continually been a "sweet spot" for AK, with Thyssen-Krupp (TK) getting more competitive in pricing. AK representatives admitted that TK getting more aggressive in "their" market has had a "depressing effect on pricing," but remained confident in AK, concluding that "we're number one in quality delivery, and service...why would [customers] want to move to TK?"
"The combined impact of significantly higher iron ore costs and the accelerated blast furnace maintenance obscured the solid year-over-year performance turned in by AK Steel employees," said James L. Wainscott, Chairman, President and CEO of AK Steel. "Nonetheless, a stubbornly reluctant economic recovery and soaring raw material costs will continue to challenge us in the near term."