There are all kinds of luck in the business world, but Wheeling-Pittsburgh
Emerging from bankruptcy back in 2003, WPSC was on its way toward establishing an interesting sort of hybrid steelmaking model. It would operate both a traditional blast furnace -- like U.S. Steel
Then the stuff hit the fan. In late 2004, ductwork collapsed at a furnace facility. Then the company had to deal with spiking raw-material prices in iron ore and natural gas. It also got caught up in a dispute with its metallurgical coal supplier, a unit of Massey Energy
But wait -- there's more. The electric arc furnace proved to be a little more expensive and time-consuming to get running than the company had planned, and expenses relating to Wheeling-Pittsburgh's coke batteries were higher than originally hoped. That all did a number on the company's financial performance, leading it to violate some debt covenants. The stock went on a nasty and prolonged slide as a result.
So where are we today? The first bit of good news is that the company hammered out some waivers with its lenders, buying it time through mid-2007. It's also encouraging to see that the electric arc furnace is up to 90% of rated capacity and should be at 100% for most of the year.
While I believe this company's performance has likely bottomed out, a few scares could still lie ahead. This probably isn't a great stock for risk-averse investors, and since I already have a stake in the steel game through Mittal, I'm not looking to overweight myself in the sector.
I don't think WPSC is a superior company to Mittal, Steel Dynamics, or Nucor. But even though WPSC's shares have roughly doubled from their lows, the market will probably continue to reward continued operational improvements.
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Fool contributor Stephen Simpson owns shares of Mittal Steel but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Fool has a disclosure policy.