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AK Steel’s 1Q18 Guidance: Analysts Were Annoyed

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AK Steel’s 1Q18 guidance

In the previous part, we discussed AK Steel’s (AKS) 2018 guidance. The company provided the guidance during its 4Q17 earnings call. In this part, we’ll look at AK Steel’s 1Q18 guidance. We’ll discuss why some analysts were annoyed.

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Average selling prices

During AK Steel’s 4Q17 call, Jaime Vasquez, AK Steel’s CFO, said, “We estimate that our first quarter flat-rolled steel shipments will be marginally higher compared to the fourth quarter of 2017.” AK Steel expects a 15% sequential increase in its automotive shipments. However, it expects its shipments in the distributor markets to fall as a result of an outage at its Middletown Works plant. He also said, “We expect that our average flat-rolled steel selling price per ton in the first quarter will be up marginally compared to the fourth quarter of 2017.”

Some analysts were annoyed

Several analysts were annoyed at AK Steel’s 1Q18 ASP (average selling price) guidance. First, spot steel prices have recovered ~$100 per ton from their 4Q17 lows. AK Steel talked about higher contract pricing in its automotive contracts. Also, AK Steel expects higher automotive shipments in 1Q18. Higher shipments should lead to a higher ASP. Automotive steel shipments are usually at a higher ASP compared to spot commodity-grade shipments in the distributor markets (RS). Other steel companies including ArcelorMittal (MT), U.S. Steel Corporation (X), and Nucor (NUE) also supply steel to the automotive sector.

AK Steel’s “marginally higher” guidance for the 1Q18 ASP appears to be on the lower side considering the factors mentioned above. Next, we’ll see what AK Steel had to say about its ASP guidance in response to analysts’ questions.

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