AK Steel's Ashland Blast Furnace Back in Full Operation

Steel maker AK Steel (AKS) said that it has completed the reline of the hearth at its Ashland Works blast furnace in Kentucky. The blast furnace has also been put back into full production.

The resumption of operation at Ashland Works follows a roughly four weeks of planned outage for maintenance work. The outage was previously planned to occur in 2015, but took place earlier to address certain operational issues.

The outage started in late Oct 2014 and was completed in 27 days, ahead of the company’s forecast of 28 days. The blast furnace is now operating at its full production capacity that is considerably higher than pre-outage levels. AK Steel has also completed other routine maintenance works on the blast furnace.

While the blast furnace is now back in full production, AK Steel’s results in the fourth quarter of 2014 are expected to be dragged down by the outage. The company’s production, shipments, operating costs and margins are expected to be impacted by the outage.

However, AK Steel said that it has taken the necessary steps, including purchase of additional slabs and increasing production at other plants, to mitigate the impact of the outage to its customers.

AK Steel, in November, said that it expected to make capital spending of around $20 million and take charges of roughly $30 million related to the outage and the resultant lower production levels in the quarter. The company has now stated that the outage involved capital investments of roughly $19 million and other associated costs of around $31 million.

AK Steel is expected to benefit from strength in the automotive market and higher shipment of steel products to automakers. In addition, the acquisition of the Severstal Dearborn plant is expected to boost the company’s future earnings and improve its credit profile and liquidity.

However, AK Steel is exposed to weak steel industry fundamentals. Oversupply in the industry and pricing pressure remain as overhangs.

AK Steel is a Zacks Rank #3 (Hold) stock.

Some other stocks worth considering in the steel space include United States Steel Corp. (X), Nucor Corp. (NUE) and Mechel OAO (MTL) with all retaining a Zacks Rank #2 (Buy).

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