On Tuesday, West Chester, Ohio-based AK Steel reported its fifth straight quarterly loss, noting substantial price volatility in the carbon flat rolled market. In Q3, AK Steel reported a net loss of $60.9 million, compared to a net loss of $3.5 million in Q3 2011. Net sales for Q3 2012 were $1.463.5 billion on shipments of 1,363,500 tons, compared to net sales of $1.585.8 billion on shipments of 1,368,800 tons for Q3 2011 and net sales of $1.538.4 billion on shipments of 1,335,800 tons for Q2 2012. For the first nine months of 2012, the company reported a net loss of $796.9 million. For the corresponding 2011 period, the company reported net income of $38.3 million.
The company said its average selling price for the third quarter of 2012 was $1,073 per ton, a 7 percent decrease from both Q2 2012 and Q3 2011. The lower average selling price for Q3 compared to Q2 was primarily due to lower spot market prices for carbon steel products, reduced raw material surcharges and a lower value-added product mix.
"Challenging domestic and global economic conditions continue to weigh on shipping volumes and prices," said James L. Wainscott, Chairman, President and CEO of AK Steel. "Additionally, while we expect to enjoy lower raw material costs in the future, we are still working through some higher cost raw material inventories."
Further, AK Steel said during the conference call that it anticipates yet another loss in Q4. While a Q4 tax charge will negatively impact earnings, AK executives said that "we're talking about a loss even before the tax."
As a result of the ongoing pricing volatility, AK Steel discussed plans to further increase its stake in the contract market, although Wainscott said that it's "not our intent to exit the spot market, but we'll be concentrating on growing our contract business." Currently AK Steel contract to spot business ratio is 60-40, but the company is working up to an 80-20 mix.
AK's Wainscott also explained that early last week, the company saw a substantial increase in order entry rates for carbon steel flat rolled products, and the company took more orders on Monday last week than in the whole previous week.
He also briefly commented on the ThyssenKrupp USA sale, saying that they are interesting assets to "a lot of folks, including AK Steel" and "under the right circumstances, we could have an interest, too."