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AK Steel at Risk From Massey Disaster

AK Steel shares fall sharply Tuesday after the company says that 25% of its coking coal supply was supposed to come from Massey's Upper Big Branch mine.
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NEW YORK (TheStreet) -- AK Steel (AKS) - Get AK Steel Holding Corporation Report was supposed to receive 25% of its coking coal needs this year from the Massey Energy (MEE) mine that exploded in West Virginia, killing 29 workers.

AK Steel, which disclosed the information in a filing with the

Securities and Exchange Commission


Monday night, will likely need to buy some of its coal from other sources, and at a higher price, which will push its costs higher and possibly hurt the company's profit.

Rising raw materials costs have dogged AK Steel and its share price of late. Last week,

AK Steel warned

that higher iron ore prices and a move by the global mining industry to shift pricing to a shorter-term system would likely

cut into its profit margins

in the second quarter and possibly beyond.

AK's shares declined sharply Tuesday, along with the broader market, as Greece and Portugal debt fears once again sparked an equities selloff across the globe. Steelmaker shares, which had rallied since the beginning of the year, were particularly hard hit, with AK Steel pacing the losers.

Shares of the West Chester, Ohio, company were changing hands in recent trades at $17.42, down more than 8%, on volume of 25 million shares. Daily turnover for AK Steel for the last three months has averaged 10 million.

In the filing, AK Steel stopped short of quantifying the impact of the explosion at Massey's Upper Big Branch mine.

The company said it "purchases coal from a diverse group of suppliers ... and believes at this time that it will be able to secure alternative sources of coal for 2010. The cost of acquiring that coal from alternative sources, however, may be significantly higher than the contract price which the company would have paid to Massey. The Company cannot reasonably predict at this time if it will incur such additional cost or, if it does, what the amount of that additional cost may be."

Among other steel names,

U.S. Steel

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retreated 4%.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.