AKS - Sector: Basic Materials --- Industry: Iron & Steel

[setravis]

I could see...
this making a double from here, maybe close to a triple?

Day's Range: 15.57 - 16.56
52wk Range: 11.34 - 25.12
Volume: 13,493,462
Avg Vol (3m): 8,883,470
Market Cap: 1.81B
P/E (ttm): N/A
EPS (ttm): -1.17
Div & Yield: 0.20 (1.30%

Technicals
Most Actives
Percentage Gainer

Last Price Quote is:
6.41%above 13-day EMA
6.11%above 50-day EMA
RS Rating: 33 


Quality
At AK Steel, our official policy is to take a planned approach to continuous improvement of our products, processes and services in order to meet or exceed our customer's expectations 100% of the time. As a result of our commitment to quality, our carbon and specialty steel customers consistently rate AK Steel Number One in overall customer satisfaction, quality and delivery, according to independent customer surveys. And, as a testament to the level of quality produced by the employees of AK Steel, the company is a member of the steel industry's prestigious list of "World Class Steelmakers," as reported by World-Steel Dynamics, a leading steel industry information service.

Productivity
As a world leader in the production of flat-rolled carbon, stainless and electrical steel products, AK Steel operates the most flexible facilities in the steel industry – and that places us among the very best at adapting to ever-changing market conditions and customer needs. From casting to coating, AK Steel continues to set new productivity records across virtually every area of its operations. In fact, the company's Middletown Works holds the world-record for consecutive heats of carbon steel continuously cast on either a single-strand or double-strand caster. And, AK Steel's Rockport Works is a recipient of the U.S. Senate's Productivity Award.

AK Steel Announces First Quarter 2011 Earnings Date
West Chester, OH, March 15, 2011—AK Steel (NYSE: AKS) said today it plans to release its first quarter 2011 financial results before the opening of trading on the New York Stock Exchange on Tuesday, April 26, 2011.

AK Steel will also provide live listening access on the Internet to its earnings conference call to be held at 11:00 a.m. Eastern Time on April 26, 2011.  Access to the webcast will be available from the home page of the company's website at www.aksteel.com.  The webcast will be archived on the company's website following the call until May 3, 2011 and will be accessible from the home page.

Below are the 6 month, 1 year, 2 year and 3 year charts...

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Steel Industry Outlook - March 2011

The global Steel industry is rather concentrated in structure, with a few producers accounting for the lion's share of sales. ArcelorMittal (NYSE: MT - News) is the world's largest steel company, with projected crude steel production of 90.6 million tons in 2011.

Steel products can be classified into four broad categories: flat steel products, long steel products, scrap and semi-finished products. Flat products include plates, hot-rolled strip and sheets, and cold-rolled strip and sheets. The long steel product category comprises wire rods, beams, reinforced bars and merchant bars. The products under both these categories are rolled from steel slabs, which are considered as unfinished or semi-finished products that are generally not sold.

Historically, the automotive and construction markets have remained the largest consumers of steel, absorbing more than half of total steel produced. Large automakers such as General Motors (NYSE: GM - News), Ford Motor Company (NYSE: F - News), Toyota Motor Corporation (NYSE: TM - News) and Honda Motor Company (NYSE: HMC - News) depend upon the steel industry. Other steel consuming industries include manufacturers of appliances, agricultural implements, converters, containers, energy, electrical equipment and industrial machinery.

Production

World crude steel production resumed growth 2009 on the back of a moderate rise in demand and the resumption of work at idled facilities. China has emerged as a major producer and consumer of steel, accounting for roughly half of total global steel production. Chinese steel consumption continued to grow through the global economic downturn as its economy only modestly decelerated from its multi-year growth trajectory. Growth in Chinese consumption is expected to remain a key driver for the global steel industry for a number of years to come.

According to the World Steel Association (WSA), world crude steel production was 119 million metric tons (mmt) in January 2011, an increase of 5.3% from January 2010. In 2010, world crude steel production reached a record 1,414 mmt, up 15% year over year.

China's crude steel production for January 2011 was 52.8 mmt, up 0.5% year over year. Japan produced 9.7 mmt of crude steel in January 2011, up 10.7% year over year. South Korea experienced an increase of 24.2% from January 2010, producing 5.6 mmt of crude steel in January 2011.

The US produced 6.8 mmt of crude steel in January 2011, an increase of 9.4% year over year. Brazilian crude steel production in January 2011 was 2.8 mmt, 3.8% higher than January 2010.

The year 2010 witnessed double-digit growth from all the major steel-producing countries and regions. The EU (European Union) and North America had higher growth rates due to the lower base effect from 2009 while Asia and the CIS (Commonwealth of Independent States) recorded relatively lower growth.

Growth Trends

With the global economy in a recovery mode since late 2009, the steel industry should continue on its recent improvement trend. However, given its economic sensitivity, we expect global steel demand to improve only gradually, in line with the recovery in the user industries, especially automotive and residential construction. According to World Steel Association ("worldsteel), steel demand in the U.S. was down 41.6% in 2009 at 57.4 million tons. However, with the economy in recovery mode, the industrial sector is expected to drive an increase of 5.3% in steel demand.

The steel industry has recorded high growth rates in both production and consumption over the past few years, benefiting from soaring steel demand in the automobile and construction sectors before the recession. Moreover, cost effective and highly efficient steel-making technologies have lifted the demand for US steel in the Middle Eastern and Asian countries.

Worldsteel expects steel demand in India to grow 13.7% in 2011, following a growth of 7.7% in 2009. The EU steel demand is expected to increase by 4% in 2011 and 2012 driven by the restocking of inventory. Spain and Italy saw a significant fall in steel production with the breakdown of their construction market.

In the short term, local steel demand in Japan will be lower as the country's carmakers have suspended production following the earthquake. However, the need for reconstruction of earthquake-devastated areas offers the steel industry significant hope. In the medium term, steel demand will likely surge.

India's steel demand is expected to grow by 13.6% in 2011. With 68 mmt of apparent steel use in 2011, India will become the third largest consumer of steel in the world after China and the US. India's steel use will be 32% above its 2007 level.

However, WSA expects the Chinese steel consumption to decelerate in 2011 as China tries to ease back on its own economic boom. Globally, WSA anticipates steel demand to rise 5.3% to 1.34 million tons in 2011.

Nearly 55% of Nucor Corporation's (NYSE: NUE - News) steel sheet volumes are under long-term price contracts, which should help it to navigate the slow economic recovery and maintain near-term profitability. Nucor is also striving to find innovative and cost-efficient ways to produce steel. The company's Castrip technology will structurally lower its cost of production and lead to meaningful long-term savings.

Commercial metals company AK Steel Holding (NYSE: AKS - News) reported strong fourth-quarter 2010 results. For first-quarter 2011, AK Steel expects a 7% sequential increase in the first quarter of fiscal 2011, leading to 1,450,000 tons and approximately 8% increase in its average per-ton selling price. The expected increase is attributable to the anticipated higher contract and spot market prices and better product mix.

On the other hand, one of the largest and most diversified producers of specialty materials in the world, Allegheny Technologies Incorporated (NYSE: ATI - News) recorded a net income of $15.1 million, or 15 cents per share in the fourth quarter of 2010, falling significantly short of last year's $37.8 million, or 36 cents per share. Fourth-quarter results were impacted by a $19.5 million LIFO inventory valuation reserve charge and $20.4 million in start-up and idle facility costs, which reduced earnings by 26 cents per share.

Industry Capacity

The global steel industry is capital intensive, cyclical, highly competitive and has historically been characterized by overcapacity. Capacity utilization rates were, however, low (around 60%) at the beginning of 2009, in response to the much softer demand. With steel demand picking up in the latter half of the year, world crude steel capacity utilization ratio in January 2011 was 75.6%, up from 73.3% in December 2010.

Steel makers continue to add capacity besides resuming operations at the idled facilities, inspired by the expected rebound in steel industry in the longer term.

Price Trends

The steel industry has long witnessed volatility in prices with a large spot market. Steel prices rose steadily for most of 2008, after which there was a downtrend. Lower prices had an adverse effect on steel producers, who recorded lower revenues and margins, and had to write down finished steel and raw material inventories.

The period witnessed major steel producers slashing production to minimize inventory accumulation. The U.S. Steel Corporation (NYSE: X - News), the fifth-largest steel producer worldwide, slashed production by almost 62% during the second quarter of 2009, while Korean steel maker POSCO (NYSE: PKX - News) cut production by about 15%. This was the first time in its history that POSCO was forced to adopt such a measure, which is a proof of the adverse operating environment.

Although steel prices have been stabilizing since the latter part of 2009, it is significantly below the pre-crisis level. We believe that a sustained recovery in steel prices remains uncertain in the backdrop of sluggish economic activity.

Factors Affecting Steel Prices

Chinese Imports: The steel industry is also affected by fluctuations in steel import–export and tariffs. China is the largest steel producer globally, and balances its domestic production and consumption, which is an important factor in global steel prices. Consumers in the U.S. are importing cheaper steel from China, which is forcing domestic steel producers to sell at lower prices, and even at a loss, sometimes. To this end, the U.S. government has been imposing anti-dumping duties on the Chinese steel imports.

Economic Sustainability: Concerns about the sustainability of economic recovery and question marks about China's growth momentum come into play in the pricing equation. This relatively uncertain Chinese outlook, coupled with a still tentative recovery in the developed world, is expected to weigh on prices.

Threat from Substitutes: Steel has many substitutes like aluminum, which replaces it in the automotive markets. Cement, composites, glass, plastic and wood are also used as steel substitutes. This significantly influences market prices and demand for steel products.

Raw Material Trends

The key input for steel production is iron ore. Apart from this, coking coal and coke, scrap, electricity and natural gas are also used as inputs in steel production. The raw materials industry is highly concentrated with only three major players -- Vale (NYSE: VALE - News), Rio Tinto and BHP Billiton (NYSE: BHP - News) -- having significant pricing power. The risk lies in further consolidation among raw material suppliers. For instance, the announced iron ore joint venture between mining companies BHP Billiton and Rio Tinto would further increase the pricing power of both the suppliers.

Steel makers would face higher production costs if suppliers shift to sales based on spot prices from the long-term fixed price contract system, as spot prices for most of the raw materials, especially iron ore, remained high from 2006 through 2008. In 2009, iron ore prices, which are linked with London Metal Exchange prices, were about 28% to 33% below the benchmark prices.

Iron ore prices remained volatile during most of 2010 and are expected to rise sharply in 2011. ArcelorMittal's iron ore and coal mining projects have been a key focus in recent years and this focus is only expected to intensify in the medium term, as the company has a goal to secure 100 million tonnes of iron ore supply from its own mines and under strategic long-term supply contracts on a cost-plus basis. As part of this strategy, in January 2011, the company announced the acquisition of Baffinland, which holds a substantial undeveloped iron ore deposit in the Canadian territory of Nunavut.

Consolidation

Mergers and acquisitions (M&A) have remained an important growth strategy in the steel industry. M&A activities prevent additional steel capacity, providing production efficiency and economies of scale. The biggest example is Mittal Steel's acquisition of Arcelor in 2006 and their merger in 2007. The Tata Steel and Corus merger in 2008 is another good instance of industry consolidation. The industry is likely to see more M&A activity in the coming years as the industry players prepare themselves for a recovery in the long run.

Zacks Recommendation

Steel demand in the emerging markets outside China is expected to grow strongly in 2011. In China, the government's expansionary economic policies, easy credit and construction initiatives have thus far sustained demand. But with China attempting to rein in its overheated property sector and engineer a soft landing for its economy, steel demand will most likely soften noticeably in the coming months. This relatively uncertain China outlook, coupled with a still tentative recovery in the developed world, is expected to weigh on prices.

In the short term, we are neutral on steel manufacturers like AK Steel Holding Corporation, Steel Dynamics Inc. (NasdaqGS: STLD - News) and Allegheny Technologies Incorporated.

AK Steel's cost structure is higher than its peer group due to a greater reliance on external supply of raw materials such as carbon scrap, purchased slabs, iron ore and purchased coke. Iron ore is the key raw material in steel manufacturing operations.

However, industry giants with integrated business models like U.S. Steel Corp. and ArcelorMittal have an edge over their peers. Both steel makers have substantial captive sources of iron ore and coal and source about 75%–80% of their coke and iron ore requirements from owned and/or operated facilities. U.S. Steel returned to profitability in fiscal 2010 on improving business conditions.

We expect Nucor Corp. to exhibit strong profitability driven by long-term contracts, cost reduction efforts and a dominant acquisition strategy.

Zacks Investment Research

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AK Steel: Small-Cap Winner
AK Steel Holding...was a notable gainer among small-caps Tuesday, jumping 4% to $16.27 after Steve Cohen-managed hedge fund SAC Capital Advisors disclosed a 4.8% stake in the company. The deal makes Cohen one of the largest shareholders in the company, the Associated Press noted. 

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AK Steel EPS Rises Four-Fold...

Zacks Equity Research, On Tuesday April 26, 2011, 5:10 pm EDT

AK Steel Holding Corporation (NYSE: AKS) posted its first quarter results delivering an EPS of 8 cents compared with 2 cents during the year-ago quarter and striding ahead of the Zacks Consensus Estimate of a loss of a cent.

Net sales as reported by the company were $1,581.1 million on the shipments of 1,423,100 tons versus $ 1,405.7 million and  1,385,800 tons in the prior-year quarter. It however, missed the Zacks Estimate of $1,609 million. The improvement in the shipments was mainly due to higher pricing which increased 9% on a year over year basis to $1,109 per ton.

Shipments

Value-added shipments including stainless/electrical, Cold-rolled and Tubular product increased to 224.4, 344.8 and 34.2 tons respectively, compared with 212.1, 281.8 and 28.7 tons, respectively in the year-earlier quarter. However, shipments of coated product came down to 621.8 tons from 635.2 tons in the year-ago quarter.

Non value-added shipments including Hot-rolled decreased to 161.1 tons from 193.7 tons in the year-earlier quarter. On the contrary, non value-added shipments including secondary products increased to 36.8 tons from 34.3 tons in the prior-year quarter.

Cost and Margins

Cost of sales as reported by the company was 1,459.5 million versus $1,243.6 million in the year-earlier quarter. Selling and administrative expenses increased mildly to $55.4 million from $ 54.2 million in the year-ago quarter.

Operating income as reported by the company came down drastically to $19.5 million from $57.6 million in the prior-year quarter. Consequently, operating margins also tumbled 300 basis points year over year to 1% in the quarter.

Financial Position

Cash and cash equivalents reduced to $54.1 million as of March 31, 2011 versus $216.8 million as of December 31, 2011.  Long-term debt of the company decreased marginally to $650.5 as of March 31, 2011 versus $650.6 million as of December 31, 2011.

The debt-to-capitalization ratio of the company stood at 51% as of March 2011 versus 50.2% as of December 31, 2010 and 38.4% as of September 30 2010.

Cash from operating activities was an outflow of $197.4 million compared with an outflow of $107.2 million at the end of first quarter of fiscal 2011.

Outlook

According to management shipments in the second quarter of fiscal 2011 are expected in the range of 1,500,000 and 1,550,000 tons, indicating a strong increase over the first quarter shipments. The company also anticipates its average per-ton selling price to be 7% higher compared with the first quarter. The operating profit is expected to be approximately $65 per ton for the second quarter of fiscal 2011.

Our Take

AK Steel is uniquely positioned to focus on products with high margins. Electrical steel continues to be the company's strongest product line, with demand recovering in the U.S. and abroad, though at a slower rate. AK Steel is operating its plants at above 80% capacity and is well positioned to serve the end markets when the demand rebounds.

However, higher input costs, particularly iron ore, is eroding margins of the company. Iron ore pricing concerns have led to a negative outlook for steel manufacturers. A K Steel currently retains a Zacks #1 Rank (short-term Strong Buy rating).

Ohio-based AK Steel Holding Corporation is a leading producer of flat-rolled carbon, stainless, electrical steel and tubular products. It operates 7 steel-making and finishing plants in Ohio, Pennsylvania, Indiana and Kentucky.

The basic raw materials required for the steel manufacturing are iron ore, coal, coke, chrome, nickel, silicon, manganese, zinc, limestone, and carbon and stainless steel scrap. Natural gas, electricity and oxygen are the sources of power for steel manufacturing operations. The company competes with companies like Nucor Corporation Common Stock (NYSE: NUE - News) and Steel Dynamics Inc. (NasdaqGS: STLD - News).


AK STL HLDG CORP (AKS): Read the Full Research Report

NUCOR CORP (NUE): Read the Full Research Report

Zacks Investment Research

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AK Steel posts surprise 1Q profit...
shares rose 6.40% after the West Chester, Ohio-based company said its first-quarter profit more than quadrupled from the year-ago period. The company's stock has risen 29% over the past five months, from its closing price on Nov. 26 to its current selling price.

According to a morning note by Mark Parr, an analyst with KeyBanc Capital Markets, AK did well to manage those higher raw materials costs during the quarter. The company, he wrote, "is getting back to basics, with solid operational execution beginning to be revealed."

Day's Range: 16.32 - 17.07
52wk Range: 11.34 - 19.81
Volume: 17,438,678
Avg Vol (3m): 8,942,360
Market Cap: 1.87B
P/E (ttm): N/A
EPS (ttm): -1.17
Div & Yield: 0.20 (1.20%)

Technicals
Most Actives
Percentage Gainer

Last Price Quote is:
7.36%above 13-day MA
8.20%above 50-day MA
RS Rating: 84