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AK Steel Raising Carbon Steel Prices

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AK Steel Holding Corporation (AKS - Free Report) declared that it will raise the current spot market base prices for all carbon flat-rolled steel products by at least $50 per ton. The price hike is effective immediately with new orders.

Last month, AK Steel released its first-quarter 2013 results. The Ohio-based company posted a narrower loss in the quarter, aided by lower raw material costs.

AK Steel posted a net loss of $9.9 million (or 7 cents a share) in the quarter compared with a loss of $11.8 million (or 11 cents a share) a year-ago. The loss per share is narrower than the Zacks Consensus Estimate of a loss of 12 cents.

AK Steel saw a decline in raw material costs, mainly for iron ore, coal, carbon scrap and coke in the reported quarter. It had a lower LIFO credit of $6 million in the quarter compared with a LIFO credit of $12.4 million a year ago.

Revenues fell 9.2% year over year to $1,369.8 million in the reported quarter due to lower shipments to carbon spot market and missed the Zacks Consensus Estimate of $1,403 million.

Average selling price dropped 7% year over year to $1,062 per ton 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. Shipments fell 2.7% year over year to 1,289,200 tons due to lower shipments to the carbon spot market.

AK Steel plans to release a detailed guidance for the second quarter in Jun 2013. The company has a planned maintenance outage at the Middletown Works blast furnace in the second quarter.

As a result, AK Steel expects to incur maintenance outage costs of roughly $21 million in the second quarter compared with $1 million in the first quarter of 2013, reflecting an increase to its costs. AK Steel anticipates that these enhanced maintenance costs in the second quarter would be mostly offset as a result of lower cost in other areas, primarily raw materials.

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 currently maintains a Zacks Rank #3 (Hold).

Other companies in the steel industry worth considering are Usinas Sider , Angang Steel Company Ltd and LB Foster Co. . All of them hold a Zacks Rank #2 (Buy).

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