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Middletown Works outage weighs on AK Steel results

The Middletown Works blast furnace did not return to full production capacity until this month, AK Steel executives told investors on its quarterly earnings call Tuesday.

The furnace, at AK Steel Holding Corp.’s largest steel plant, had a mechanical failure in June and was shutdown. During the down time, AK Steel was not making new steel in Middletown. The furnace came back on-line approximately three weeks later, said James Wainscott, chairman, president and chief executive officer of AK Steel, on Tuesday.

The blast furnace is the part of the mill where fuel, iron ore and limestone are heated and reduced to make hot metal.

“The furnace has run reasonably well since then, but not as well as we initially thought and it did not return to its full capacity during the third quarter,” Wainscott said.

There was a three-day outage earlier in October to address the productivity shortfall, Wainscott said.

“We believe we are now back to full production capacity on the Middletown furnace,” he said.

The Middletown outage reduced the company’s blast furnace production and led to a delay of shipments to some customers, contributing to overall lower steel shipments last quarter, AK Steel said. It also increased cost of production per ton of steel. And AK Steel was not able to realize the full benefit of price increases in the spot market for carbon steel during the July to September quarter because of delays and production limitations, officials said.

The total uninsured cost of the furnace shutdown is expected to be $20 to $23 million, said Roger Newport, AK Steel chief financial officer. Of that amount, approximately $18 million in costs has already been incurred, Newport said. The impact of the Middletown furnace outage that started in June will be felt this quarter, but to a lesser extent, he said.

AK Steel reported Tuesday a lower third quarter net loss of $31.7 million, compared to $40.4 million in the April to June quarter this year and $60.9 million a year ago.

The Butler County steelmaker narrowed its quarterly loss, but total revenues of $1.33 billion on shipments of 1,242,400 tons of steel dropped from the prior and year-ago quarters. Net sales for the same time period of 2012 were $1.46 billion on shipments of 1,363,500 tons, AK Steel said.

Lower shipments in the most recent quarter ending Sept. 30 were due to the unplanned outage at Middletown Works, as well as a seasonal reduction in shipments to the automotive market, company officials said.

AK Steel is headquartered in West Chester Twp. and operates several steel plants including its Middletown Works.

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