AK Steel Updates Third Quarter 2010 Outlook
09/16/2010 - AK Steel has revised its outlook for the third quarter of 2010 to an operating loss of approximately $20 per ton, partly due to an acceleration of planned maintenance work at its Ashland (KY) blast furnace.
AK Steel has revised its outlook for the third quarter of 2010 to an operating loss of approximately $20 per ton. This compares to the company’s original third-quarter guidance for an operating profit of $15 per ton, originally issued on July 27, 2010 along with the company’s second quarter 2010 earnings results.
Nearly half of the lower expected financial results for the third quarter can be attributed to acceleration of planned maintenance work at its Ashland (KY) blast furnace. The company said it is now planning to take an 11-day maintenance outage on its Ashland blast furnace, beginning approximately September 20, 2010. Furnace conditions prompted the company to move up the outage, which was previously planned for the first half of 2011.
In addition to acceleration of the Ashland blast furnace outage, the company also anticipates that raw material and operating costs will be higher in the third quarter, and that there will also be a modest increase in the costs associated with an environmental remediation project.
AK Steel also noted that to date, the industry has not yet established an annual global benchmark price for iron ore for 2010. In the absence of such a global benchmark price for 2010 iron ore purchases, the company used an assumed 65% increase from the 2009 benchmark price for purposes of its second quarter 2010 financial results and third quarter outlook.
The company said that while it cannot reliably predict a 2010 global iron ore benchmark price, the company now believes that the year-over-year increase in any such benchmark, if and when it is established, likely will be higher than 65%. Any increase in the benchmark beyond 65% would further impact anticipated third quarter earnings.
AK Steel reiterated its position that every five percentage points of variation (up or down) from its assumed year-over-year benchmark iron ore price increase of 65% would impact the company's third-quarter 2010 results by approximately $11 million, or approximately $7 per ton.
AK Steel produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, appliance, construction and electrical power generation and distribution markets. The company employs about 6200 men and women in Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pa.; Ashland, Ky.; Rockport, Ind.; and its corporate headquarters in West Chester, Ohio.
AK Tube LLC, a wholly owned subsidiary of AK Steel, employs about 300 men and women in plants in Walbridge, Ohio, and Columbus, Ind. AK Tube produces carbon and stainless electric resistance welded (ERW) tubular steel products for truck, automotive and other markets.
