Cold mill, hot prospects

Profit: Bethlehem Steel expects its $300 million cold-sheet mill in Sparrows Point to beat rivals by producing a variety of steels in large quantities.

April 11, 1999|By William Patalon III | William Patalon III,SUN STAFF

In places, it's five stories high. Its key section is four football fields long. And the whole project will cost about $80 million more than the Baltimore Ravens' football stadium.

The project's most important objective is to rejuvenate Bethlehem Steel Corp.'s long-moribund Sparrows Point Division -- virtually ensuring that steelmaking will remain a major part of metropolitan Baltimore's economy well into the next century.

The project is Bethlehem's new cold-sheet mill, a $300 million plant under construction on the northwest corner of the 2,500-acre Sparrows Point complex.

The mill is to start production next March and be running at full speed seven months later.

But the new cold-steel mill is more than just a high-dollar project. It's part of a company strategy to have its steel command a premium in the market.

The cold mill, plus the $100 million being spent to reline the huge Sparrows Point blast furnace this summer, shows Bethlehem's faith that its Sparrows Point Division's Big Steel plant can still make big bucks.

"Sparrows Point is clearly one of the core businesses, with the modernization going on there," said Curtis H. Barnette, Bethlehem Steel chairman and chief executive officer. "It's one of our largest projects and is a vote of confidence in the Sparrows Point management."

Some analysts once argued that Bethlehem Steel should shut down Sparrows Point, calling it too old, too costly and a drain on the company's fi- nancial performance, said Ken Hoffman, a Prudential Securities analyst. But not now.

However, such progress always carries a price in terms of jobs and tax dollars.

As is true of most big economic-development projects today, the cold-mill decision was initially a high-stakes poker game as Bethlehem dangled the possibility that it might build the plant outside Maryland. The company made sure it was dealt the best hand possible before it agreed to put the new mill at Sparrows Point.

The state and Baltimore County agreed to an $80 million financing package, while Baltimore Gas and Electric Co. reportedly granted inducements to the company, too.

The United Steelworkers of America union chipped in when it agreed to job reductions and more flexible work rules. Sparrows Point's combined white- and blue-collar ranks will shrink to 4,000 next year, from about 5,200 in mid-1997 when the cost-reduction agreements that led to the cold-sheet-mill deal were reached.

The decline in jobs includes 400 lost when the Sparrows Point's plate mill was closed after Bethlehem bought Lukens Inc., a Pennsylvania plate maker.

Once employed 30,000

Bethlehem's Sparrows Point employment topped more than 30,000 in 1959.

"I guess I have mixed feelings about this," said 37-year-veteran Burt Dixon, president of Steelworkers Local 2609, which represents hourly employees who will be working in the new cold-sheet mill.

"If not for [the new mill] coming to `the Point,' I think the company would harvest the plant and move it somewhere else. People know the place for this is here and that we really needed to make the investment."

But other union officials are ecstatic about the new steel mill. To them, it's simple: no cold mill, no Sparrows Point.

Company officials say all but a few of the job losses -- including those from the plate mill -- came through attrition or retirement buyouts, and that most who wanted to return from layoffs have already done so.

Because of Sparrows Point's high turnover rate, company leaders are confident the rest of the agreed cuts also will come through attrition.

With the new cold-sheet mill, a refurbished blast furnace, fewer workers and a more flexible work environment, Sparrows Point is coming into its own just as steel prices are starting to increase, said Hoffman, the Prudential Securities analyst.

Company executives, analysts and union officers all agree the cold-sheet mill is key to making the Sparrows Point Division a vibrant and profitable enterprise.

That's because the cold-rolling process creates steel products of higher quality and allows the manufacturer to offer profit-boosting extras, such as special coatings, that can't be offered with hot-rolled steel.

Bethlehem Steel is a "vertically integrated" steelmaker, which means it makes most of its steel from scratch and tries to serve a big range of markets -- unlike "mini-mill" rivals, which operate more cheaply by churning out steel made mostly from scrap and which cater to niche markets.

Big firms such as Bethlehem Steel, with their sprawling operations and high fixed costs, have to run as much steel through their plants as they can to make money.

The new cold-sheet mill should lead to higher output, company leaders figure, because it heightens the facility's product mix.

The Sparrows Point plant takes iron ore and coke and makes big steel slabs.

The slabs are run through a "hot-strip mill" which rolls the super-heated steel into thin sheets that are wound into huge, tight coils.

Shaped while cold

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