Mittal sorry about ruling

Steelmaker's CFO says order leaves no choice on Sparrows Point sale

February 22, 2007|By Allison Connolly | Allison Connolly,Sun reporter

After a day of silence, Mittal Steel Co. NV said yesterday that it was disappointed by the Justice Department's decision requiring it to divest its Sparrows Point steel mill to resolve antitrust concerns over tin plate production in the wake of its $33 billion merger with Luxembourg-based Arcelor SA.

During a previously scheduled conference call with analysts yesterday to discuss fourth-quarter and year-end earnings, Mittal Chief Financial Officer Aditya Mittal said the company had no choice but to comply with the order even though it preferred to sell its plant in Weirton, W.Va.

A tentative deal to sell Weirton to Chicago-based Esmark Inc. is off the table, Mittal said, because of the Justice Department's decision.

"We sympathize with everyone in Maryland because we feel the same disappointment," Mittal said.

The company has 90 days from Tuesday's ruling to sell Sparrows Point, but is eligible for a 60-day extension.

Esmark Chief Executive Officer James Bouchard said his company, which recently won control of Wheeling-Pittsburgh Steel Corp. in Wheeling, W.Va., has not heard from Mittal even though it has signaled its desire to buy Weirton and possibly Sparrows Point.

"Are we disappointed?" Bouchard said yesterday. "Yeah, but it's not the end of the world. If they say no, then it's no and we'll move on."

In yesterday's conference call, Aditya Mittal said the company wants to "improve profitability" at Weirton.

However, he said tin plate production, while profitable, will likely face some restructuring in the near future because there is excess capacity.

The government chose Sparrows Point for divestment because it would be a more viable competitor in the tin plate market than Weirton. Mittal and U.S. Steel Corp. produce more than 80 percent of the nation's tin plate, which is used for such items as food containers, aerosol cans and paint buckets. The rest is made by Wheeling Pittsburgh.

Mittal declined to speculate how much Sparrows Point might be worth. The Baltimore County plant has the capacity to produce 3.6 million tons of steel per year, he said, and last year shipped about 3 million tons.

Unlike other Mittal plants around the world, the company does not have any major capital improvements planned for Sparrows Point over the next two years.

Mittal is building a hot-strip mill in Poland, increasing slab production in Brazil and expanding output in Ukraine, a country which offers the "lowest cost" and "highest contribution" to the company, Aditya Mittal said.

United Steelworkers spokesman Gary Hubbard said steel-worker jobs are being threatened by cheaper labor overseas. The union said Tuesday that it would work to reverse the Justice Department decision. Yesterday, Hubbard said he hopes a new buyer doesn't shrink Sparrows Point further.

"We've traveled a lot of hard trails at Sparrows Point," he said.

Sparrows Point workers hope the new owner will honor their contract, which is set to expire next year. Eddie Bartee Jr., 51, a third-generation steel worker and a trustee on USW Local 9477's executive board, said Mittal honored the union's contract when it bought International Steel Group in 2005 to form the world's largest steelmaker. ISG had bought the assets of Bethlehem Steel in 2003, two years after Bethlehem went bankrupt.

"Basically, if you come in with a good faith agreement with what we have, I think pretty much we'll be happy," said Bartee, a crane operator, who has worked at the plant for 33 years. "And then we'll face [contract negotiations] in 2008."

John Cirri, president of Local 9477, was traveling yesterday and could not be reached for comment.

Meanwhile, Mittal said the merger with Arcelor is on track and should be completed by July. The combined company, to be named Arcelor Mittal, will produce more than 110 million tons of steel a year.

Aditya Mittal said the company would continue to scale back production through at least March to ensure inventory is on par with supply. He said three blast furnaces across the company have been idled, and workers at Sparrows Point have been offered voluntary layoffs over the past few months. Mittal said the company realized "impressive" cost savings during the down time, and prices rose because the level of foreign imports fell off.

For last year, Arcelor Mittal reported combined earnings of nearly $8 billion, down from $8.26 billion a year earlier. The companies said they were squeezed by high raw materials costs but expect better earnings this year once synergies between the companies in marketing, purchasing and production are realized.

allison.connolly@baltsun.com

Sun reporter Hanah Cho contributed to this article.

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