AK Steel Raises Stainless Steel Prices - Analyst Blog

AK Steel Holding Corporation AKS will hike its stainless steel product prices, with effect from Jul 6. The company will increase the price for automotive grades by $40 per ton, and for non-automotive grades by $200 to $300 per ton, depending on the product. Surcharges will be applicable to its wide range of stainless steel products.

Prior to this, on Apr 15, AK Steel increased the 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 raised 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 was effective with shipments from May 4, 2014.

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.

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.

Recently, AK Steel announced its outlook for the second quarter of 2014. The company expects to posts a net loss in the range of 19 to 23 cents for the quarter, which is a considerable improvement from the loss of 63 cents per share reported in the first quarter of 2014.

AK Steel expects adjusted loss to be in the range of 2 to 6 cents per share. This excludes a loss of 17 cents per share that reflects mark-to-market losses on derivatives, which are expected to be about $23 million for the quarter.

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

Some other stocks worth considering in the steel space include Universal Stainless & Alloy Products Inc. USAP, Grupo Simec S.A.B. de C.V. SIM and ThyssenKrupp AG (TYEKF). While Universal Stainless has a Zacks Rank #1 (Strong Buy), Grupo Simec and ThyssenKrupp hold a Zacks Rank #2 (Buy).