abhishreshthaa

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Pest Analysis On AK Steel Corporation : 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




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 once 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]. .

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.
 
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