Being free of Mittal is a good thing for the Point

February 21, 2007|By Jay Hancock | Jay Hancock,Sun Columnist

Getting sold by Mittal Steel might be the best thing to happen to Sparrows Point in a long, long time.

Change always prompts discomfort. But for the century-old steel mill, the uncertain future unveiled yesterday looks a heck of a lot better than the certain past, in which the plant has been deprived of investment, squeezed of cash and pointed toward long-term obsolescence.

With a new owner, Sparrows Point won't be just a branch office of the world's biggest steelmaker. It won't be forced to compete for financial oxygen against sister Mittal mills. Because it won't be part of a partial monopoly in certain products, its managers won't be tempted to cut production to try to control prices.

With the right owner, Sparrows Point could attract financial upgrades, capitalize on its superb shipping facilities and - who knows? - add to its 2,400 jobs.

Mittal is getting rid of the Point only because the government requires it, but the timing could hardly be better.

Potential suitors are everywhere. Hardly a month goes by that doesn't include the announcement or negotiation of some multibillion-dollar steel deal - often for assets far less attractive than those outside Baltimore.

Brazilian steel producer Companhia Siderurgica Nacional has been flailing all over the globe for steel factories. After failing in a bid to buy Wheeling Pittsburgh late last year, CSN came up empty again in trying to acquire Corus, an Anglo-Dutch out- fit.

True, a CSN purchase might not be the best thing for the Point. The company would be sorely tempted to shut down the Sparrows Point blast furnace, import steel slabs instead and run only the finishing lines. That seemed to be the plan for Wheeling Pittsburgh.

But other buyers should be interested in Sparrows Point's steelmaking furnace, which will have years of useful life before requiring expensive maintenance, as well as its other assets.

Maybe the Brazilian-owned Gerdau AmeriSteel, which relies on melted scrap steel, will decide it needs an integrated U.S. operation and expanded hot-roll finishing capacity.

Maybe the German Salzgitter AG will get interested. Salzgitter is in preliminary negotiations to add North American capacity in plate, hot-rolled and cold-rolled steel by buying the marginal Algoma Steel in Canada.

Sparrows Point would give the company better facilities with greater capacity in a vastly improved spot on the map. The Salzgitter people ought to put Algoma on hold and call Mittal today.

Another German outfit, ThyssenKrupp, told The Sun yesterday that it's not interested in the Point. That's surprising, because ThyssenKrupp really wants to sell tin-plate steel, a Sparrows Point specialty, in North America.

The company failed in its attempt to buy Mittal's Dofasco unit, which is also strong in tin-plate. Last year, ThyssenKrupp officials visited Sparrows Point, as reported by my colleague Allison Connolly.

(Thanks to production at the Point and Dofasco in Canada, Mittal dominates the North American tin-plate business. That's why the government, concerned about monopoly power, says it wants the Point to be sold.)

So why doesn't ThyssenKrupp buy Sparrows Point? The company has said it will build a tin-plate mill in the American South instead, but stock analysts hate that idea, and it may not be the last word. Sparrows Point would give ThyssenKrupp a first-class facility without having to pour an ounce of concrete.

And that's only the start of the potential buyers. The Russians want to expand in North America, too: Severstal and Evraz Group will probably take a look. And a U.S. buyer is not impossible: U.S. Steel and Esmark should not be ruled out.

Many possibilities; few guarantees. But one thing seems clear. Almost any owner will be better than the present one.

jay.hancock@baltsun.com

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