Why product innovations could lead to future profits for AK Steel

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AK Steel’s product innovations 

In the last part in this series, we saw how AK Steel’s (AKS) future cash requirements are expected to decrease. AK Steel’s core operations are also expected to do well. This will be led by product innovations. Steel companies spend huge amounts of money to produce newer varieties of steel. This provides steel companies with a competitive advantage.

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Product innovations will help AK Steel

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AK Steel developed a new nickel free stainless steel product. Please be aware that one of the issues surrounding stainless steel has been the unpredictability of its pricing. Since stainless steel contains nickel, stainless steel prices are impacted by movements in nickel prices. Nickel prices have been volatile over the past few months. This also impacted stainless steel prices.

AK Steel’s new product innovation “CHROMESHIELD 22” provides corrosion resistance—like stainless steel. The product is expected to meet the performance of traditionally produced nickel bearing stainless steel. The price of the product is below the stainless steel price.

One of the reasons for high stainless steel prices has been its nickel content. By making the new product without using nickel, AK Steel can decrease its manufacturing costs.

Advanced steel products

The Automotive segment accounts for more than half of AK Steel’s revenues. Automotive companies showed interest in aluminum. Aluminum helps make vehicles lighter. AK Steel is developing light weight steel products in collaboration with automotive companies. This will help AKS combat the aluminum onslaught.

Another factor that will drive AK Steel’s future prices is the lower raw material prices. We’ll discuss this in the next part of the series.

The steel industry can also be assessed through U.S. Steel (X), ArcelorMittal (MT), Nucor (NUE), and the SPDR S&P Metals and Mining ETF (XME).

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