Recently, AK Steel Holding Corp. (AKS) announced the fourth installment of a price increase for its carbon steel products. The company raised spot market prices for its carbon steel products by $40 per ton, effective with all new orders for September and October shipments. This adds to a hike of $40 per ton for hot rolled products and $50 per ton for cold rolled and coated products announced in the beginning of July.

AK Steel has lately taken several steps including price increases that convey its optimistic outlook on the steel industry. Recent developments in the sector that range from possible growth in Chinese demand to stability in the auto industry after the bankruptcy of General Motors and Chrysler LLC are factors behind this optimism.

In the second quarter, AK Steel posted a narrower loss of $47.2 million, or 43 cents per share, compared to a loss of $73.4 million, or 67 cents, in the preceding quarter.

AK Steel expects shipments for the third quarter to increase 27% to 940,000 tons over second-quarter levels. Moreover, the company anticipates breakeven operating profit in the third quarter, which would represent an improvement of about $70 million, or about $100 per ton, sequentially.

We recommend the shares of AK Steel as Neutral with a target price of $19.

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