AK Steel Corporation is an American steel company whose predecessor, Armco, was founded in 1899 in Middletown, Ohio. Today, the company's corporate headquarters is situated in West Chester, Ohio, (a suburb of Cincinnati) after having moved from Middletown, Ohio, in August 2007.[3]

AK Steel Holding Corporation (NYSE:AKS) is a fully-integrated manufacturer of steel, including flat-rolled carbon, tubular products, and electrical and stainless steels. AK Steel Holding has seven steelmaking and finishing facilities in Indiana, Pennsylvania, Kentucky, and Ohio, while AK Tube LLC, a subsidiary, has operations in Indiana and Ohio[1]. AK Steel's operations also include European trading companies that buy and sell steel products.

Business Overview

Business & Financial Metrics[2]
In 2009, AKS incurred a net loss of $74.6 million on revenues of $4.08 billion. This represents a turnaround from 2008, when the company earned $4.0 million on $7.64 billion in revenues.

Business Segments
AKS operates in a single business segment which produces carbon and steel products.[3]

Key Trends & Forces

Steel Industry’s Cyclical Nature: The U.S. Steel industry is traditionally very cyclical and closely connected to the overall state of the general U.S. economy. A significant downturn in the U.S. economy may lead to a noteworthy decline in the demand of steel products.[4]

Contract v Spot Pricing: Sales in the steel industry usually fall within two categories: fixed price contracts typically renegotiated twice a year, or spot market transactions. Depending on a collection of different variables that affect the state of the steel industry (steel prices, prices for raw materials, supply and demand, etc.), both can be beneficial or detrimental to the company that uses them.

It is estimated that 70-80% of AK Steel’s revenues are based on fixed price contracts (the company does not publish exact information). This is advantageous when spot market prices decline over the duration of the contract, and contracts have been negotiated in the company’s favor.

Prices of Essential Raw Materials The profitability of the steel sector is closely tied to the prices of necessary raw materials. Considering the steel industry, these materials include (but are not limited to) iron ore, coal, coke, oxygen, chrome, nickel, silicon, molybdenum, zinc, limestone, carbon, stainless steel scrap, etc. Depending on the holdings of each firm, drastic changes in the prices of these raw materials can have profound effects on revenues and profits[5]. .


Workplace safety is essential to the sustainability of any corporation, its workforce and
the families that rely on its employees. At AK Steel, the company’s value proposition
starts, first and foremost, with an unrelenting commitment to employee safety. With a
total recordable injury rate of 0.25
for the full-year 2009, AK Steel’s
safety performance was about
eight times better than the steel
industry average, according to
OSHA-required data provided to
the American Iron and Steel
Institute (AISI) by its reporting
member companies.
Since receiving the inaugural
Green Cross for Safety Medal
from the National Safety Council
in 2000, AK Steel has earned
significant recognition from
industry trade associations and
government agencies for its safety
performance throughout the years.
2009 Safety Highlights
 The company’s Ashland coke plant received the Max Eward Safety Award from
the American Coke and Coal Chemicals Institute for the fifth consecutive year.
The award recognized the men and women at the plant for operating the safest
cokemaking facility in America. The recognition marked the 12th time in the past
13 years that an AK Steel coke plant has received this award.

 Employees at AK Steel’s Middletown Works, Zanesville Works and AK Tube in
Walbridge, Ohio received safety awards from the Ohio Bureau of Workers’
Compensation Division of Safety and Hygiene.
 AK Tube in Walbridge, Ohio and Columbus, Indiana were recognized by the
Fabricators & Manufacturers Association, International for their outstanding
safety performance.
 AK Tube in Columbus, Indiana became re-certified as a Star site in the
Department of Labor’s Voluntary Protection Program in 2009. The Star
designation signifies that the plant’s safety programs go above and beyond
OSHA requirements.
5.42
3.63
2.64
2.33
1.97
0.36 0.36
0.22 0.28 0.25
0.00
2.00
4.00
6.00
2005 2006 2007 2008 2009
AISI
AK St eel
Total Recordable Injury Rate – OSHA 300 Log
AISI Reporting Companies Sustainability Report 2010 3
Governance and Ethics
AK Steel’s key values of safety, quality and productivity are the foundation of its
business – while character and integrity are the pillars of its success. The corporation
strives to hold itself to the highest ethical standards in order to serve the long-term best
interests of all of its stakeholders.
The Board of Directors of AK Steel are guided by the company’s Corporate Governance
Guidelines, which reflect best practices in governance. Examples of the Board’s
commitment to good governance include the following:
 Nine of ten Directors are independent, as defined by the New York Stock
Exchange Rules;
 Each Board committee is comprised entirely of independent Directors;
 Each member of the Board of Directors is elected annually;
 Each Director must be elected by a majority vote; and
 Each Director is subject to stock ownership guidelines.
These guidelines continue to position AK Steel among
America's most prominent corporations. In fact, AK Steel
topped Directorship magazine’s 2010 list of the “Best
Governed Companies” – recognition that speaks volumes
about the commitment and leadership of the Board.
A key component of AK Steel’s Corporate Governance
Guidelines is its Code of Business Conduct and Ethics.
This serves as a blueprint for making the right decisions in the best interests of the
company, its customers and shareholders. Among other items, AK Steel’s Code of
Business Conduct and Ethics addresses conflicts of interest, corporate opportunities,
confidentiality, fair dealing, protection and proper use of company assets, compliance
with laws, rules and regulations, insider trading and the reporting of any illegal or
unethical behavior. As a requirement, all salaried employees of AK Steel must
complete annual training and certification with respect to the company’s Code of
Business Conduct and Ethics.
In accordance with SEC requirements, the company also maintains an additional Code
of Ethics that provides specific guidance to AK Steel’s principal executive, financial and
accounting officers in the performance of their duties, particularly with respect to:
 Full and accurate financial disclosure of material information concerning the
company’s compliance with applicable laws, rules and regulations, and
Best Governed
Company
Directorship magazine
2010 Sustainability Report 2010 4
 Maintaining the company's financial records in accordance with applicable
accounting policies and generally accepted accounting principles.
Additional information regarding AK Steel’s corporate governance is available on the
company’s website at www.aksteel.com.
Environmental Stewardship
American manufacturers contribute to both the sustainability of the economy and the
environment. As a member of an industry that leads the global steel sector in voluntary
emissions reductions and energy conservation, AK Steel focuses on operating in an
environmentally responsible manner. The company takes a proactive approach to
environmental management by following its comprehensive environmental policy.
AK Steel’s Environmental Policy
 Commit the necessary resources to comply with all applicable environmental
laws, regulations, permits and agreements to which AK Steel subscribes;
 Reduce environmental risks through operating practices and emergency
preparedness programs;
 Encourage recycling, recovery and reuse of residual materials, as well as the
reduction and prevention of emissions and releases to the extent demonstrated
feasible;
 Participate in efforts with respect to the development and implementation of
environmental laws and regulations;
 Evaluate on a routine basis compliance with applicable environmental laws and
regulations; and

 Strive for continual improvement in the effectiveness of its environmental
management efforts.
In addition, all AK Steel plants have received ISO 14001
environmental management certification, and the
company employs a full-time environmental staff to
manage environmental compliance throughout the
corporation.
The company also invests heavily in equipment to help
meet its environmental objectives. For example, from 2003 through 2009, AK Steel
spent approximately $78 million on environmental capital projects and approximately
$790 million to operate and maintain the company’s environmental controls\

Exposure to Other Industries: The U.S. steel industry is gradually becoming further specialized in certain markets within the general steel market. As a result, steel producers are becoming increasingly reliant on the state of their specialized markets.

AK Steel focuses much of its production towards the U.S. automotive sector and the stainless and electrical steel markets. In recent years, the U.S. automotive industry has been experiencing multiple challenging years, while the stainless steel market has lately been undergoing significant pressures[6]. .

Globalization of the Steel Industry: The U.S. steel industry is increasingly being forced to compete with foreign companies, particularly China. China is expected to become a net exporter of steel in the very near future, placing further pressure on domestic producers. The American Iron and Steel Institute (AISI) has reported that applications for the import of steel has been continually increasing.

Competition

AK Steel's operations are focused in the United States whereas some of its larger competitors have a larger international presence. When compared to its closest competitors, AK Steel has significantly more fixed price contracts versus spot market sales. This can either work to the company's advantage or disadvantage given certain changing variables such as steel prices. Furthermore, AK Steel’s sales productions are focused towards the U.S. automotive and stainless steel markets, making its success related to the success of those industries. AKS is in a relatively less favorable position concerning the acquisition of raw materials because its closest integrated steel competitor, US Steel (X), has significant self-sufficiency concerning |iron ore and metallurgical coal; on the other hand, AK Steel does not have the same level of these materials [7]. Also, AKS has more significant pension obligations and post-retirement liabilities than its competitors, although the company has successfully been working to decrease them.


The company's most significant competitors are:

US Steel (X)
Nucor (NUE)
Steel Dynamics (STLD)
Allegheny Technologies (ATI)
Carpenter Technology (CRS)
 
Last edited:
Top