AK Steel Holding Corporation (AKS - Analyst Report) will hike prices of commodity sheet and strip, pipe and tube sheet and strip as well as specialty sheet and strip through a discount reduction of 2 percentage points. The company will raise prices of all other stainless steel products, including automotive exhaust sheet and strip by $40 per ton.
The price hike for all stainless steel products will be effective with shipments from May 4, 2014. Surcharges will remain applicable on all stainless steel products of AK Steel.
Prior to this, on Mar 14, AK Steel had raised prices for all of its stainless steel products, effective with shipments from Apr 1, 2014. Price increases for stainless steel products were achieved through a discount reduction of 2 percentage points and all products using net prices including automotive exhaust products, by adding 2 cents per pound on the existing prices.
From the steel industry’s perspective, steel prices are generally volatile owing to the highly-cyclical nature of the global steel industry. Rising raw material prices have a direct impact on steel prices. Furthermore, overcapacity, a glut in cheaper Chinese steel imports, economic conditions and shifts toward other substitutes significantly impact steel prices.
This was what affected steel prices in 2013. The oversupply of steel due to imports from China in the market outstripped demand. The situation in Europe and tempering growth in Asia added to this and kept prices in check. The lower steel prices affected margins of major steelmakers including ArcelorMittal (MT - Analyst Report) , United States Steel Corp. (X - Analyst Report) and Nucor Corp. (NUE - Analyst Report) for the major part of the year.
A sustained decline in steel prices will materially affect margins of steel companies. However, the recovery in pricing is expected to be driven by a reviving economy, stabilization in the Euro-zone and a rebound in construction activity in the developing countries, particularly in China, India and South Korea.
According to the first-quarter 2014 outlook provided by AK Steel, it expects its average selling price to rise roughly 6% to about $1,095 from $1,031 per ton in the fourth quarter of 2013 due to a richer shipment mix of value-added products.
Also, the company expects to incur loss in the range of 44 cents to 49 cents per share in the first quarter mainly due to higher energy costs and an unplanned outage at its Ashland Works blast furnace. Due to the outage, AK Steel expects its steel shipments to decline 10–12% sequentially to about 1,250,000 to 1,275,000 tons in the first quarter of 2014.
AK Steel is slated to release its first-quarter 2014 results on the Apr 22 before the market opens. The Zacks Consensus Estimate for the quarter is currently pegged at a loss of 43 cents.
AK Steel currently holds a Zacks Rank #3 (Hold).
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