AK Steel Holdings Falls Sharply After Downgrade
AK Steel Holdings (NYSE: AKS) has decreased about 13% on the session. As stated in a Wall Street Journal Article, Goldman Sachs (NYSE: GS) downgraded AKS from a Neutral to a Sell rating. Goldman Sachs may have downgraded AKS because of a highly leveraged balance sheet, having $1.1 billion in debt compared to $576 million in equity. AKS only has $42 million in cash, making it difficult to pay off debt.
According to a Wall Street Journal Article, Goldman Sachs stated, “Half way through 2012, it is becoming evident that this is shaping up to be a tough year for the steel sector, and 2H could get even tougher, especially for flat rolled products."
China's daily steel output has decreased in May, which has led to a decrease in the demand for steel. The decrease of the price of steel in China could be having a negative effect on the steel sector and a contributing factor to the low prices in flat steel. Competitors of AKS such as, United States Steel (NYSE: X), Nucor Corporation (NYSE: NUE), and Steel Dynamics (NASDAQ: STLD), have all seen losses on the day.
AK Steel Holdings is currently trading at about $5.06.
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