Point blast furnace fails

Sparrows Point breakdown halts production, forces some layoffs

July 06, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

The giant steel-making furnace at Sparrows Point broke down Friday, halting production and forcing a monthlong temporary layoff of an undisclosed number of workers.

The shutdown comes as Sparrows Point's Netherlands-based parent company, Mittal Steel Co. NV, is considering selling the plant to avoid antitrust issues related to its pending merger with Luxembourg-based Arcelor SA.

The merged company, to be called Arcelor-Mittal, would be the world's largest steelmaker by a factor of five and produce more than 110 million tons of steel a year.

It was uncertain yesterday how many of the Baltimore County plant's nearly 2,500 workers would be laid off.

The union negotiated a four-week voluntary layoff that begins Sunday. Workers have until Friday to sign up.

Without the ability to make steel, much of the plant is affected, as are at least two other Mittal plants that depend on slabs from Sparrows Point.

"Without a blast furnace, Sparrows Point is worthless," said Jim Blankenship, control room operator for the blast furnace.

The 294.6-foot-tall "L" blast furnace produces the molten iron which is mixed with scrap metal to produce steel. The second-largest blast furnace in North America, it was relined in 1999 by then-owner Bethlehem Steel Corp. at a cost of more than $100 million, giving it the ability to produce 9,800 tons of hot metal a day for at least 12 years, according to information provided by the company.

The furnace had been operating erratically since June 23, when lightning struck an electricity substation and caused a power outage, Blankenship said. Without power, the furnace that normally fires at more than 3,000 degrees cooled. On Friday, the "tuyere," or nozzle, that supplies the blasted heat to the furnace broke, Blankenship said.

Technicians worked around the clock through the holiday weekend trying to repair it.

"Our people rolled up their sleeves and are doing what they've been asked to do," said John Cirri, president of United Steelworkers Local 9477, which represents production workers at Sparrows Point.

Cirri declined to say how many workers are affected. He said the company could lay off more workers if not enough sign up for the voluntary leave. A memorandum sent to some workers yesterday and obtained by The Sun said the four-week voluntary layoff begins July 9, with workers to return the week of Aug. 5 or sooner if the furnace is repaired.

Blankenship said it would take some time to get up and running at full production after the problem is fixed. "Even if we started to make iron now, it would take 10 days to make steel," he said.

Sparrows Point supplies steel slabs to Mittal plants in Weirton, W.Va., and Conshohocken, Pa. It is not known whether Mittal will fire up Weirton's blast furnace while Sparrows Point's furnace is being repaired. Mittal idled Weirton's furnace this year and sent the hot work to Sparrows Point because it was more efficient.

Mittal spokesman David C. Allen declined to speculate on what the company will do in the meantime.

"Mittal has a team of blast furnace experts working diligently to restart the blast furnace as soon as possible," he said. The shutdown comes a week after Mittal and Arcelor agreed to merge, ending a hostile five-month takeover bid by Mittal.

To appease regulators, Mittal has agreed to sell Canadian steelmaker Dofasco to German-owned ThyssenKrupp AG if its merger with Arcelor is approved by shareholders. However, in one of a series of defensive moves to fend off Mittal, Arcelor transferred its shares of Dofasco to a Dutch trust.

Arcelor officials still refuse to sell Dofasco, despite the merger agreement. While Mittal Chief Executive Officer Lakshmi N. Mittal will be CEO of the new company, Arcelor will retain a majority stake and have influence in the company's decision-making.

Justice Department officials have said that if Mittal is unable to sell Dofasco, it must divest equivalent assets. Sparrows Point officials confirmed that representatives from ThyssenKrupp toured the plant in late May and expressed interest, although they said Mittal still intends to sell Dofasco first.

If Mittal sells Sparrows Point, it would be the Baltimore County plant's third sale in as many years.

Mittal bought Sparrows Point last year from International Steel Group, which bought it from bankrupt Bethlehem Steel in 2003. The plant is profitable and more efficient than it has ever been, with workers eligible for performance-based bonuses. Before the blast furnace mishap, the plant was on track to produce more than 3 million tons of steel this year.

Cirri, the union president, is optimistic about the furnace being fixed sooner than later. "It's serious, but we think we'll get it up and running again," he said.

allison.connolly@baltsun.com

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