Tag: ATI

Stainless MMI: Demand, prices to increase in 2021; ATI exits standard stainless sheet product market

The Stainless Monthly Metals Index (MMI) increased by 6.0% this month, as ATI issued a major announcement and China ups its stainless imports from Indonesia. ATI exits stainless steel commodity […]

This Morning in Metals: In NAFTA Talks, U.S. Seeks Stricter Auto Content Rules

This morning in metals news, NAFTA renegotiation talks continued with the U.S. aiming to tighten automotive content rules in favor of North American-made metals, Allegheny Technologies Incorporated (ATI) commented on […]

Don’t Count on ATI to Supply Commodity Stainless This Year

As we continue to republish our highest-rated posts of the year during the holidays, we look back at the February announcement that Allegheny Technologies, Inc., exited the commodity stainless steel business.

Knowing what we now know, and considering that stainless prices have recovered and entered a bull market, you do have to wonder if ATI made the right call. Our Katie Benchina Olsen will continue to cover the latest developments for both ATI and the stainless market in the new year. — Jeff Yoders, editor

For the foreseeable future, Allegheny Technologies, Inc. (ATI) is out of the flat-rolled stainless commodity business as well as the grain-oriented electrical steel (GOES) market.

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ATI will be focusing on global markets with high barriers to entry. As we reported last month, ATI is reducing its exposure in commodity products by idling its Midland, Pa., plant, a commodity stainless facility, and its Bagdad GOES production facility in Gilpin Township, Pa.

[caption id="attachment_76580" align="aligncenter" width="550"]ATI's Brackenridge facility is the future and commodity stainless is its past. Source: ATI ATI’s Brackenridge facility is the future and commodity stainless is its past. Source: ATI[/caption]

Earlier this week, ATI reported in its earnings call a net loss of $378 million for 2015 as compared to a net loss of $2.6 million in 2014. ATI’s flat-rolled products business segment is to blame for the staggering losses. Operating losses for flat-rolled products were $242 million for 2015. For this reason, Rich Harshman — ATI’s chairman, president, and CEO — stated that ATI is taking “rightsizing actions” to return the segment to profitability as quickly as possible and “execute our strategy for sustainable long-term profitable growth.”

ATI is “simplifying and streamlining” its flat-rolled operations by focusing on optimizing its Brackenridge, Pa., facility which houses the hot-rolling and processing facility, a $1.2 billion investment. ATI is seeking to better focus its efforts on the products and global markets that require and value the company’s technical and manufacturing capability leadership.

Flat-Rolled Products

Harshman emphasized that it made no sense to continue to produce products which were not providing positive contribution margins.

“The future restart of the Midland and GOES operations respectively will depend on future business conditions and ATI’s ability to earn an acceptable return on invested capital on products produced at these operations,” he said.

ATI is also committed to reaching a “fair and competitive labor agreement” with the United Steel Workers of America. ATI’s union workers have been locked out since August as the company negotiates a new labor contract for all of its operations.

Harshman said the objective is to have a cost structure and enhanced product mix that enables ATI’s flat-rolled products to be a profitable and more competitive business. ATI expects to return its flat-rolled segment to profitability by the middle of 2016 by focusing on its specialty coil and plate products enabled by the hot-rolling and processing facility. These products are 48-inch-wide, nickel-based alloy sheet; titanium and titanium-alloy products and specialty alloy products; and engineered and precision-rolled strip products.

Market Impact

What market segments are going to be impacted by ATI exiting the commodity stainless market? ATI stated in the earnings call that it would be exiting the automotive exhaust systems market. AK Steel already provides the lion’s share of the stainless exhaust systems market, anyway, which is dominated by 409, the most humble of stainless steels.

Between AK Steel and North American Stainless (NAS), automotive exhaust systems manufacturers will be well-supplied in 2016. Although ATI is exiting exhaust systems applications, they expect growth in automotive, high-temperature applications which use nickel-based alloys and specialty alloys produced at the aforementioned hot-rolling and processing facility in Brackenridge.

ATI will be reducing its presence in food service equipment, construction and mining, as these are applications that utilize commodity stainless steel alloys. ATI met its 2015 bill of materials commitments for commodity stainless steel alloys, but did not quote any bills of materials for 2016 as the base price has eroded too much, and a contributing factor was uncertainty created by the lockout.

Service centers and original equipment manufacturers were forced to lock in base prices for all or part of 2016 with NAS, Outokumpu Coil Americas, and AK Steel, supplemented with some import products that have always been in the US flat-rolled stainless market.

Market Reentry? When? If Ever?

Even if the 304 base price reaches $0.50 per lb., will ATI reenter the commodity market considering the price of nickel? ATI stated in its earnings call the December 2015 base price was around $.45 per lb., making the net 304 price under $0.84 per lb. Even with the January base price increase, the January alloy surcharge makes the net 304 price around $0.82 per lb. Does the $0.50 per pound 304 base price even make sense when surcharges are so low?

Using the February 2016 alloy surcharge, the net price of 304 at ATI’s desired base price of $0.50 per lb. is $0.8321 per lb. That is a stark difference from 2014’s base price of $0.60 per lb. and an average surcharge of $0.78 per lb., making the net price $1.38 per lb.

NAS and Outokumpu Coil Americas appear to be the only American-made choices for nickel-bearing commodity stainless steels. Not only has ATI exited the commodity stainless market, AK Steel has also been limiting its participation in the chrome nickel market.

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Imports are drying up, as well, as net prices are now at levels that are below many import mills’ cost of production. With the threat of anti-dumping lawsuits looming last year, traditional import mills into the North American market are steering clear. Combined with service center destocking and last year’s plummeting nickel prices, imports have started to decline. Even when the market improves, don’t count on Midland’s capacity to come back onstream. ATI has made it clear that Brackenridge takes precedence over Midland. The next question is whether ATI can move Midland’s direct-roll anneal and pickle line, which is the commodity workhorse and the 60-inch-wide cold-rolling mill.

ATI Reports Larger Loss Than Expected, Won’t Reopen Plants

ATI Reports Larger Loss Than Expected, Won’t Reopen Plants

Allegheny Technologies, Inc. shares tumbled 15% Tuesday after the Pittsburgh-based specialty metals producer reported a larger than expected third quarter loss and missed analyst revenue estimates as well.

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The company lost $530.8 million, or $4.95 per share, vs. a loss of $144.6 million, or $1.35 per share, in the year-ago quarter. Sales fell 7% to $770.5 million. Analysts had expected the company to report an adjusted loss of 10 cents per share and revenue of $822 million.

ATI also announced the permanent closing of the idled Midland stainless steel melt shop and finishing operation in Beaver County, Pa.

It also permanently closed its Bagdad plant in Gilpin, Pa., whichemployed about 225 people. It produced grain-oriented electrical steel prior to the start of the six-month lockout of union workers in August 2015. Midland employed around 250 workers.

“The decision helps provide clarity to some of the people who had hoped that there would be a restart,” ATI spokesman Dan Greenfield said.

In December, the company announced it was mothballing both facilities with the possibility that they would reopen if market conditions for those products improved.

Free Download: The October 2016 MMI Report

Richard Harshman, ATI’s chief executive officer, said that has not happened. He announced the move as part of the company’s third-quarter earnings statement.

ATI Posts a Narrower Loss, Promises Earnings Growth Next Year

ATI Posts a Narrower Loss, Promises Earnings Growth Next Year

Allegheny Technologies, Inc. reported sales were up 7% for the second quarter over the year before, increasing to $811 million, with the company reporting an overall net loss largely due to its recent work stoppage.

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ATI CEO, President and Chairman Richard Harshman described reason for cautious optimism to an uptick in orders in the aerospace market — both in engine components and airframes — and lowered capital expenditures in the near future ATI continues to ramp up production at its $1.2 billion Brackenridge, Pa., flat-rolled stainless production facility.

Aerospace Growth

“Commercial aerospace market sales increased another 3% compared to the first quarter of 2016,” Harshman said. “Sales to the aerospace and defense market continued to drive ATI’s results, representing over 50% of total 206 sales. Our aerospace market is being driven, in large part, by the growth of ATI’s next generation mill products, forgings and castings.”

Harshman and other ATI executives described the nickel and titanium alloys — and powders that ATI sells for additive manufacturing — it provides to the defense and aerospace markets as the future of the company. Harshman also said the business momentum ATI is experiencing “certainly the best it’s been in quite a while.”

Flat-Rolled Products

While flat-rolled stainless products are clearly not ATI’s future, ATI officials said the flat-rolled products division improved financially in Q2. According to the earnings report, officials expect the division to be “modestly profitable” in the fourth quarter. This opened up the possibility of ATI considering reopening its Midland, Pa., production facility. ATI officials had previously said the plant won’t return to production until the flat-rolled market improves.

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“In our FRP segment, our second quarter results demonstrate that we are making progress in our journey toward a consistently profitable business, during a period of continuing low raw material prices, global stainless steel sheet and strip overcapacity, and uncertain end market demand,” Harshman said.

Why ATI is Bullish on High-Performance Materials, Aerospace

Allegheny Technologies, Inc., reported in its first quarter earnings call this week that its high-performance materials and components segment sales were up. Sales were $493 million in the first quarter, up approximately 8% compared to the fourth quarter of 2015. 73% of segment sales were to the aerospace and defense market.

Free Download: The April 2016 MMI Report

Operating profit increased by nearly 40%, compared to the fourth-quarter 2015. Segment operating profit was 5.9% of sales.

New Generation of Jet Engine Parts

ATI’s product mix improved through increased sales of next-generation jet engine advanced materials. Sales of nickel-based alloys and specialty alloys increased by 8%, and sales of titanium and titanium alloys increased by 17%. Sales of ATI’s precision forgings increased 15%, driven nearly exclusively by growing demand for jet engine components and airframe forgings.

[caption id="attachment_56272" align="aligncenter" width="499"]StuartsF35_500 ATI is very pleased with its sales of airframe and jet engine materials.[/caption]

“Our differentiated products here include proprietary and unique alloys, as well as products that few others can make,” ATI CEO and President Richard Harshman said, “such as ATI 718+ alloy, Rene 65 alloy, ATI 720 alloy large billets, plasma arc-melted titanium alloys, powder metals, titanium aluminides, as well as hot-die forgings, isothermal forgings and titanium investment castings.”

PAM Power

ATI is currently the only qualified plasma arc melt producer of titanium alloys used for jet engine rotating parts.

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PAM is the preferred process for titanium alloys used in jet engine rotating parts for much of the industry.

“ATI has the most powerful open-die press forge in the industry, which enables fine-grained structure in complex nickel-based super alloy billet and the billetizing of powder alloys,” Harshman said. “ATI is one of only two independent and integrated qualified producers of nickel super-alloy powders and isothermal forged parts.”

Allegheny Technologies: Specialty, Aerospace Transition Starting to Pay Off

Allegheny Technologies: Specialty, Aerospace Transition Starting to Pay Off

Allegheny Technologies, Inc., hosted its first quarter earnings call yesterday morning and reported higher earnings for many of the specialty metal markets it serves, while admitting it has not yet “right-sized” its flat-rolled products business. ATI booked a net loss of $101 million ($0.94 cents per share), a loss that was less than most analysts anticipated.

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Revenue for the first quarter fell 33% year-over.year to $758 million.

[caption id="attachment_76580" align="aligncenter" width="550"]ATI's Brackenridge facility is the future and commodity stainless is its past. Source: ATI ATI executives noted during yesterday’s conference call and webcast the company’s Brackenridge production facility is only open three days, with three shifts each day. ATI would like to increase production there. Source: ATI[/caption]

“Our High Performance Materials and Components segment is well positioned for profitable growth over the next five years, driven primarily by strong and growing demand from commercial aerospace,” ATI CEO Richard Harshman said. “We are committed to making the tough decisions to return our flat-rolled products segment to sustained profitability. This requires the business to be repositioned and restructured and to be more focused on differentiated products that have higher technical barriers to entry and serve markets that are global with attractive long-term growth prospects.”

Aerospace Products

Harshman and ATI’s executive team reported that the commercial aerospace market, which ATI has pursued as a growth market for the last two years, was starting to show dividends.

“ATI sales to the aerospace and defense markets grew 12% in the first quarter of 2016, compared to the fourth quarter 2015,” Harshman said. “Breaking that growth rate down by specific end markets, sales to the commercial aerospace market grew approximately 20%, with jet engine sales growth of nearly 15% and airframe sales growth of nearly 30%.”

Quarterly Numbers

The overall sales total of $758 million was up 3% over the fourth quarter of 2015, even though it was down year-over-year. High-performance materials and components sales were $493 million, up 8% over Q4 2015. Flat-rolled product sales, though, totaled $265 million, down 6% over Q4 2015. Harshman and the other ATI executives blamed the long work stoppage that ATI weathered for more than 8 months and said that production would increase with United Steelworkers personnel back on the job. ATI attributed $26 million of pre-tax costs to the work stoppage and labor contract return-to-work provisions.

Free Download: The April 2016 MMI Report

ATI also booked a $9 million for severance packages from recent flat-rolled products layoffs.

ATI Lays Off More Than 250 Salaried Employees in Flat-Rolled Products

Allegheny Technologies, Inc. recently announced the elimination of more then 250 salaried employees in its Flat Rolled Products operations. ATI’s salaried workforce in the FRP segment will be reduced by approximately one-third by the end of June.

Free Download: The April 2016 MMI Report

ATI will record a $9 million severance charge in its first quarter 2016 results. Rich Harshman — ATI’s Chairman, President and CEO — said the job cuts were “another step in our journey to return the FRP business to profitability as quickly as possible, and to execute our strategy for sustainable, long-term, profitable growth.”

Flat-Rolled Future

ATI expects the FRP business segment will be modestly profitable by the second half of 2016. The workforce reduction will generate an annualized cost savings benefit of over $30 million beginning in the third quarter of 2016.

[caption id="attachment_76580" align="aligncenter" width="550"]ATI's Brackenridge facility is the future and commodity stainless is its past. Source: ATI ATI’s Brackenridge facility is the future and commodity stainless is its past. Source: ATI[/caption]

ATI’s FRP business segment was to blame for ATI’s staggering losses last year. Operating losses for the division were $242 million for 2015, as we reported in February.

ATI has already reduced its exposure to commodity stainless products by idling, in January, its Midland, Pa., plant. By the end of this month, its grain-oriented electrical steel (GOES) production facility in Gilpin Township, Pa., will be idled.

ATI’s workforce reduction is part of its strategy for creating, “a smaller, more agile, streamlined, cohesive FRP business that will focus on products and markets with significant technical barriers to entry.”

Specialty Products

The return to FRP’s profitability hinges on the division focusing on its specialty coil and plate products, enabled by the hot-rolling and processing facility in Brackenridge, Pa. The products are 48-inch-wide, nickel-based alloy sheet; titanium and titanium-alloy products and specialty alloy products; and engineered and precision-rolled strip products.

ATI’s Harshman admitted the difficulty of a U.S.-based company to compete in the global commodity markets citing global overcapacity in commodity stainless steel sheet and GOES.

“The restructuring and right-sizing actions we are taking, while painful for our employees and our company, are necessary to help secure the future of ATI Flat Rolled Products,” he said.

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U.S. base prices have improved this year, strengthened by anti-dumping actions that resulted in import duties on cold-rolled Chinese stainless steel. Nickel has been hovering around a much narrower band in 2016, which also helps mitigate losses at the mill level. With the settlement of ATI’s labor dispute, I expect ATI to play a greater role in stainless sheet in the second half of this year now that base prices have improved from the late-2015 low point.

USW Approves Agreement With ATI on New, 4-Year Contract

USW Approves Agreement With ATI on New, 4-Year Contract

2,200 Allegheny Technologies Inc.-employed members of the United Steelworkers union approved a new, four-year contract with the specialty steelmaker yesterday ending a 6-month lockout. The margin of approval was reported as 5 to 1 among the employees at ATI plants in six states.

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The Pittsburgh Tribune-Review has reported the the terms of the deal as such:

A $3,500 signing bonus will be paid over the life of the contract with $1,500 paid immediately, no payment in 2017, then $1,000 payments in 2018 and 2019. Workers who retired or found other employment during the lockout will receive a pro-rated share of the first-year bonus payment. These sighing bonuses are lower than the lump-sum payments offered by ATI before the lockout.

Medical Coverage

100% medical coverage paid by the company will be eliminated. Establishment of a co-insurance plan in which the company pays 90% of the cost and employees pay 10% after meeting deductibles will be created. The deductibles of $300 for an individual and $600 for a family, and out-of-pocket expenses of $1,500 for an individual and $3,000 for a family, are the same as those under the old contract. Dental and vision benefits would remain the same.

USW Profit Sharing

A profit-sharing plan, something the company successfully fought to eliminate in a previous contract, will be established. The plan would be based on quarterly profit instead of annual profit. It would start with a profit threshold of $12.5 million, of which the union would receive 2%, or $250,000, to be split among USW members. The amount would climb to 3% or $750,000 for $25 million in profit; 4% or $1.5 million for $37.5 million; and a maximum of 6.5% for $56.25 million, with a cap of $3.75 million

The union also agreed to allow the use of outside contractors by the company — something that happened during the lockout — with a provision that states: “The company does not intend for this proposal to result in any active employee losing their employment.”

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The National Labor Relations Board, which had filed an unfair labor practices complaint against ATI, still must approve the deal but both the union and ATI have said the withdrawal of the complaint by the union was a condition of the agreement.

“We are pleased that the agreement was ratified,” said Dan Greenfield, vice president investor relations and corporate communications of ATI. “Actual timing for employees to return to work is subject to the NLRB (National Labor Relations Board’s) approval of the Union’s request to withdraw its pending charges and the outstanding complaint.”

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