Beth Steel ups ante at the Point

$60 million outlay to let the mill make wider slabs

Mill to remain competitive

Loss of 28 cents a share in first quarter bigger than expected

Area industry

April 28, 1999|By William Patalon III | William Patalon III,SUN STAFF

WILMINGTON, Del. -- Bethlehem Steel Corp. will further bulk up its Sparrows Point Division, investing $60 million to upgrade one of its casting systems so it can make wider slabs of steel, the company announced at its annual stockholders meeting here yesterday.

Bethlehem also disclosed that it lost a larger-than-expected 28 cents per share in its first quarter on a big drop in sales, blaming its financial travails on the flood of foreign steel that is allegedly being "dumped" on the U.S. market.

Bethlehem, which is spending more than $400 million on production projects at Sparrows Point, said the $60 million investment is important and strategic for two key reasons: It will boost steelmaking capacity at Sparrows Point; and will allow the local division to supply the wider slabs to the company's recently acquired Bethlehem Lukens Plate Division, which currently buys the wider slabs from other companies.

"This significantly enhances the competitiveness of both Sparrows Point and Bethlehem Lukens Plate," said Curtis H. Barnette, Bethlehem Steel's chairman and chief executive officer.

Sparrows Point runs two, single-strand casters, able to "cast," or form, slabs as wide as 88 inches. The new caster will be able to cast slabs up to 104 inches wide. Once cast, steel slabs can be processed further through hot- and cold-rolling and can be turned into steel plate.

The investment will not mean additional jobs at Sparrows Point, but should keep the mill competitive: The corporation is investing $300 million to build a cold-rolling mill here and this summer will spend $100 million to reline its blast furnace with bricks that are super-resistant to heat. The relining project will take the blast furnace out of commission for 51 days and the company is stockpiling steel slabs so that its finishing operations will not have to shut down during that time. Much of the work on the new caster will be done while the blast furnace is down, and the project should be completed by the middle or late part of next year, the company said.

Morgan Stanley Dean Witter analyst Waldo T. Best said Bethlehem Steel had to build the wider caster because competitors -- such as Canada-based IPSCO Inc. -- are doing the same. IPSCO is building one in Mobile, Ala., to grab market share in the Southeast for steel plate -- a traditional stronghold of Bethlehem's Lukens unit, Best said.

In terms of its financial performance, Bethlehem said, it lost $26 million, or 28 cents per share, in the first quarter that ended March 31.

The Wall Street consensus was for a loss of 24 cents a share, according to Zacks Investment Research. Last year, Bethlehem had a profit of $69 million, or 49 cents a share. Sales fell 15 percent to $960 million.

During his management report to shareholders, and again during a news conference with journalists after the shareholders meeting, Barnette repeatedly pointed to unfairly low-priced foreign steel as the culprit for the problems the U.S. steel industry faces.

After turning back a tide of dumped hot-rolled steel by filing trade cases with the government, U.S. steelmakers now find themselves wading through a flood of dumped foreign steel plate, Barnette and Best, the analyst, both said.

A coalition of U.S. steel firms have filed dumping charges against foreign plate-makers, too.

Most alarming to Best was a revelation by Bethlehem Steel during its separate conference call with analysts that it was not building inventories of steel products "as a hedge" against a possible strike by members of the United Steelworkers of America union, which represents hourly workers at companies throughout the United States. Bethlehem's contract with its union workers expires at midnight July 31, and negotiations are only now set to get under way.

At yesterday's meeting, Barnette said he was confident that a new agreement could be hammered out without any work stoppages.

But Best, the analyst, expressed concern. "You don't want to lose your presence with customers" by forcing them to go elsewhere for product, he said. "You don't ever want to be on the bottom of anyone's customer list."

Pub Date: 4/28/99

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