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AK Steel Reaches Another Labor Deal

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Steel producer AK Steel Holding Corporation (AKS - Free Report) announced the ratification of a 4-year labor agreement by the members of the United Auto Workers Local 3044 (UAW). The new contract will cover roughly 195 hourly production employees at the company's Rockport Works plant located on the Ohio River in southwest Indiana.

This new contract, which was ratified by UAW, will be effective from Sep 30, 2013, on the expiry of the existing labor agreement. The new contract will expire on Sep 30, 2017. AK Steel stated that this new contract is beneficial for the Rockport Works to serve the valued customer with superior quality and productivity.

On Aug 16, AK Steel signed a labor agreement with the members of the United Steelworkers (USW) Local 1865 union. The agreement will hold good for 18 months and will cover more than 800 hourly production and maintenance steel operations employees at the company’s Ashland, Ky., works.

The agreement will succeed an existing one that expires on Sep 1. The new one will be effective from Sep 1, 2013, and will expire on Mar 1, 2015. The agreement is in the best interests of both AK Steel and Local 1865 members.

Over the past few months, we have seen metals and mining companies entering into labor agreements. Specialty steel manufacturer Universal Stainless & Alloy Products Inc. (USAP - Free Report) , metal alloys maker Haynes International Inc. (HAYN - Free Report) and mining company Cliffs Natural Resources (CLF - Free Report) are the other companies which signed labor contracts since March this year.

AK Steel incurred loss per share of 15 cents per share in the second quarter of 2013, lower than the Zacks Consensus Estimate of a loss of 35 cents.

Revenues fell 8.7% year over year to $1,404.5 million in the reported quarter due to lower shipments to carbon spot and electrical steel markets. It missed the Zacks Consensus Estimate of $1,414 million.

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 remain concerned about the challenging operating backdrop in overseas markets, softness in the construction market and the weak steel pricing environment. Moreover, maintenance outage associated with the Ohio blast furnace will weigh on its third quarter results.  

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

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