Steel maker AK Steel (AKS) recently announced the ratification of a new 42-month labor agreement by the members of the International Association of Machinists and Aerospace Workers (IAM.TO) Local 1943. The new deal covers roughly 1,700 hourly production and maintenance employees at the company's Middletown Works plant in Ohio.
The new contract will replace the existing agreement, which was scheduled to expire on Sep 15, 2014. The agreement will be effective from Sep 15, 2014 and will expire on Mar 15, 2018. It will serve the interests of both AK Steel and Local 1943 members in a highly competitive steel market.
AK Steel’s shares rose 0.8% in the trading session following the news release. The stock is up roughly 7.5% since the announcement (based on yesterday’s close). The company’s shares have racked up a gain of around 92% over a year.
AK Steel is expected to benefit from strength in the automotive market and higher shipment of steel products to automakers. It is expected to continue to gain automotive market share, driven by continued healthy demand for its carbon and specialty steel products.
AK Steel is also investing to procure about half of its iron ore and coal requirements internally. The company’s strategic investments (in its first coal mine at AK Coal and iron ore pellet project at Magnetation) are expected to improve its cost structure and strengthen its position in the years ahead.
However, AK Steel remains exposed to macroeconomic uncertainties, stemming from lingering challenges in Europe. Oversupply in the steel industry and pricing pressure remain overhangs.
AK Steel, a Zacks Rank #3 (Hold) stock, will report its second-quarter 2014 results ahead of the opening bell on Jul 29.
Other companies in the steel industry worth considering include Universal Stainless & Alloy Products Inc. (USAP), Grupo Simec S.A.B. de C.V. (SIM) and ThyssenKrupp AG (TYEKF). While Universal Stainless holds a Zacks Rank #1 (Strong Buy), both Grupo Simec and ThyssenKrupp retain a Zacks Rank #2 (Buy).