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Lower Steel Prices Hurt AK Steel’s 2Q15 Profits

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Lower steel prices

AK Steel’s (AKS) 2Q15 profits were negatively impacted by lower steel prices. Steel prices across the globe have plunged as Chinese steel exports are near record highs. AK Steel’s average selling price in 2Q15 was $931 per ton, down $68 per ton from 1Q15. AK Steel has one of the highest average steel selling prices as compared to its peers like ArcelorMittal (MT) and Nucor (NUE).

Nucor currently forms 5.16% of the SPDR S&P Metals and Mining ETF (XME) and 2.67% of the Materials Select Sector SPDR ETF (XLB).

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Lower raw material costs

Lower steel prices were offset to some extent as raw material prices have also come down over the last six months. Prices of iron ore, steel scrap, and coal have corrected, which has brought down the unit production costs for steelmakers. You can read more about the recent trend in prices of these materials in our monthly steel indicator series.

However, the fall in steel prices has been much more severe as compared to the correction in raw material prices. This has had a negative impact on AK Steel’s 2Q15 profits, as the previous chart shows.

AK Steel’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) fell to $47.6 million in 2Q15 from $64.5 million a year ago. Adjusted EBITDA per ton also fell to a dismal $26 per ton in 2Q15.

However, AK Steel has expressed hope that its EBITDA per ton could increase in the coming quarters. We’ll discuss why AK Steel is optimistic about its future profitability in the next part of the series.

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