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    AK Steel shares slump after Citi downgrade

    Associated Press – Fri, Feb 10, 2012

    NEW YORK (AP) — Shares of AK Steel Holding Corp. slumped Friday after a Citi analyst cut his rating on the steel maker, saying the company has been unsuccessful in its attempts to raise prices for stainless steel.

    Demand for stainless steel also seems weak, said analyst Brian Yu. A measure he uses to track demand, service center shipments, has "plateaued" in recent months, he said.

    If demand doesn't bounce back in the first half of the year, steel makers will have a tough time setting higher prices. So a pricing recovery for the industry could take "multiple quarters," Yu said.

    AK Steel counts stainless and electrical steel as one division, which makes up 36 percent of its revenue. Its stainless steel is used in appliances, food equipment, tools and knives and other types of products.

    The carbon steel business, makes up about 60 percent of AK Steel's revenue, is "in better shape" than the stainless steel, said Yu. The steel is closely tied to the manufacturing and construction markets, so increasing manufacturing and auto production, and a potential recovery in construction, will support demand and prices, he said.

    The end of 2011 was challenging for the steel industry. Customers held back on making large purchases because of uncertainty about the economy. But many companies saw a turnaround in demand late in the quarter as the U.S. economic outlook improved.

    Yu cut the West Chester, Ohio, company's rating to "Neutral" from "Buy." He cut his earnings predictions for each of the next three years and lowered his price target for the company by $3 to $9.

    A spokesman for AK Steel didn't immediately return a call seeking comment.

    AK Steel shares dropped 40 cents, or 4.6 percent, to $8.21 Friday morning.

     

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