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In just three weeks time, AK Steel Holding Corporation (AKS - Analyst Report) has decided to hike carbon steel products prices yet again. The company will raise carbon flat-rolled steel products’ current spot market base prices by at least $40 per ton. The price revision is effective immediately with new orders.

The Ohio-based company, on May 23, 2013, announced a price increase for the same by a minimum $50 per ton.

From the steel industry perspective, steel prices are generally volatile owing to the highly cyclical nature of the global steel industry.

While rising raw material prices would trigger a hike in steel prices, it is often challenging to pass on the hike to consumers. Further, overcapacity, excess of cheaper Chinese steel imports, economic conditions and shift toward other substitutes significantly impact steel prices.

AK Steel’s average selling price dropped 7% year over year to $1,062 per ton in the first quarter of 2013 on account of lower spot market prices for carbon steel products, brought about by a decline in raw material surcharges and lower selling prices for electrical steel products globally.

However, average selling price increased 5% sequentially due to a higher value-added product mix and higher carbon spot market prices, partially offset by lower selling prices for electrical steel products globally. Shipments fell 2.7% year over year to 1,289,200 tons in the quarter due to lower shipments to the carbon spot market.

AK Steel is expected to benefit from the strength in the automotive market and higher shipment of carbon steel products to automakers. The company is also investing to internally procure about half of its iron ore and coal requirements. However, we are concerned about its high cost structure, the challenging operating backdrop in overseas markets, softness in the construction market and the weak steel pricing environment.

AK Steel will release its second-quarter 2013 results before trading begins on Jul 23.

AK Steel currently holds a Zacks Rank #3 (Hold).

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. , Shiloh Industries Inc. and Angang Steel Company Limited (ANGGY). While both Kobe Steel and Shiloh Industries hold a Zacks Rank #1 (Strong Buy), Angang Steel retains a Zacks Rank #2 (Buy).
 

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