AK Steel Holding Corp. agreed to pay $37.5 million to end an iron-ore pellet agreement with Magnetation LLC, which last week said it may cease operations.
AK Steel has a 49.9% stake in Magnetation, which had hoped to restructure following its bankruptcy filing in May. Grand Rapids, Minn.-based Magnetation may terminate the settlement agreement with AK Steel if it receives an alternative offer that would avoid a shutdown.
The settlement with AK Steel requires bankruptcy court approval, with a hearing set for Sept. 27.
West Chester, Ohio-based AK Steel expects to stop purchasing iron-ore pellets from Magnetation around Sept. 30. The company plans to record a charge of $37.5 million during the quarter the bankruptcy court approves the agreement. In July 2015, AK Steel said it recorded a $256.3 million write-down of its investment in Magnetation and didn't expect any additional financial effect.
AK Steel also said it expects to benefit from increased flexibility in purchasing iron-ore pellets after its accord with Magnetation is terminated.
Magnetation uses magnetic separators to recover iron-ore concentrate from waste stockpiles left behind from previous mining operations. The concentrate is processed into pellets that are sold to steelmakers
U.S. steelmakers have been hurt by low prices as the result of a glut of capacity and high levels of less expensive imports. The government's new import tariffs this year were a factor in improved second-quarter results at several big steel companies.
Source : marketwatch.com