Prices, tariff concerns fuel ATI stock drop
Shares of Allegheny Technologies Inc. tumbled by as much as 8 percent when the market opened Tuesday as the Pittsburgh specialty metals producer warned of “significant” impacts of low raw materials prices in the coming months and as U.S. tariffs weigh on a joint venture with a Chinese company.
The company expects prices for nickel and ferrochrome, two metallic materials used in stainless steel manufacturing, to dip in the next three months, resulting in “significant negative operating profit impact” in the company’s flat rolled products business segment, executives said in a thirdquarter earnings call.
Despite the expected impact, the flat rolled products segment
should still be profitable, said Richard Harshman, ATI’s chairman and CEO, who will retire at the end of the year.
“We anticipate continued strong underlying market conditions to power our fourth-quarter results in both business segments, and we will manage through raw material and seasonal impacts,” Mr. Harshman told analysts.
Another concern is ATI’s joint venture with China’s Tsingshan Group, the world’s largest stainless steel producer, to process stainless steel slabs at the recently reopened Midland plant in Beaver County.
Just weeks after the venture was announced in March, the Trump administration slapped 25 percent tariffs on steel imports. Allegheny Technologies has asked the U.S. Commerce Department officials to exempt the joint venture from those penalties, which the company has said threatens 100 mill jobs that pay on average $125,000 each.
On Tuesday, the company said it expects to get a ruling on that request by the end of the year.
In the meantime, the Midland mill is breaking even while operating at 35 percent to 40 percent of its target of 300,000 metric tons of imported slabs annually, said Bob Wetherbee, head of the company’s flat rolled products division who is slated to take over the CEO role on Jan. 1.
“We are importing slabs, and we are paying ... the tariff,” Mr. Wetherbee said on the call. “We have reconfigured the business to be neutral during this period of tariffs.”
He added, “We all recognize we’re in uncharted water in terms of how the tariffs will play out. But we’re committed to that joint venture for the longterm.”
ATI reported profits of nearly $51 million, 37 cents per share, in the third quarter, compared with a net loss of about $121 million, or $1.12 per share, in the third quarter of 2017. Earnings slightly missed the 39 cents a share expected by Wall Street analysts surveyed by Zacks Investment Research.
After the rough opening on Tuesday, ATI’s stock almost fully recovered during the afternoon. At the closing bell, share prices were down threetenths of 1 percent at $26.75.