Point buyers vow era of stability

Joint venture plans to boost production at Sparrows Point mill

August 03, 2007|By Paul Adams | Paul Adams,Sun reporter

The multinational joint venture taking over the Sparrows Point steel mill is a mixture of big steel buyers, distributors and iron ore suppliers who pledge to boost slab production at the plant and give it the kind of stability its three past owners failed to deliver in the face of withering global competition.

E2 Acquisition Corp., led by Chicago-based metals distributor Esmark Inc., said its purchase means employment will remain the same or grow at the sprawling Baltimore County mill, which has changed owners four times in as many years.

The 118-year-old steel mill employs 2,450 hourly and salaried workers and stands as one of the few remaining links to the region's blue-collar roots. Its high-paying manufacturing jobs are increasingly coveted by economic development officials as companies like General Motors, Procter & Gamble, Black & Decker and others have curtailed employment or pulled up stakes.

"It [the sale] ensures the future of Sparrows Point for years to come," said James P. Bouchard, chairman and chief executive of privately held Esmark, which acts as a middleman between steel mills and metals buyers.

Luxembourg-based ArcelorMittal SA, the world's largest steel producer, signed papers approving the deal Wednesday to appease U.S. antitrust concerns over Mittal's $41 billion merger with Arcelor SA last year. The Justice Department has 35 days to review the deal, which is expected to close within 60 to 90 days. Terms of the sale were not disclosed pending the government's review.

The buyers also will have to win over the mill's unionized steelworkers, whose contract with ArcelorMittal gives them authority to reject any buyers. Union officials said they are waiting to see E2's business plan before passing judgment.

"It's really important that the plant have some sort of commitment for capital investment," said John Cirri, president of the United Steelworkers Local 9477. "It seems like people buy us and just try to run us hard and then they're out. That's not giving us any kind of long-term future around here."

In addition to Esmark, the mill's list of new owners will include Wheeling-Pittsburgh Corp., which Esmark's founders took control of last year, and two unnamed institutional investors. Also in the mix are Cia Vale do Rio Doce (CVRD), a Brazilian mining and metals conglomerate with vast iron ore reserves; and Industrial Union of Donbass, a Ukrainian steel mill with ties to Esmark and Wheeling-Pitt. CVRD said yesterday that it would invest $270 million in the deal and hold a minority stake.

800,000 tons of slab

Craig T. Bouchard, who co-founded Esmark in 2003 with his brother, will leave his dual posts at Esmark and Wheeling-Pitt to head the new joint venture. E2 expects to use Sparrows Point to feed 800,000 tons of steel slab annually to Wheeling-Pitt, a finishing mill that turns slab into coils for customers and distributors. Sparrows Point produces slab as well as hot- and cold-rolled sheets, galvanized sheet, semifinished steel and tin mill products.

Mittal Steel will go from being owner of the mill to a customer, ordering about 200,000 tons of slab annually from the mill. Combined, Wheeling-Pitt and Mittal will represent 1 million tons of business for Sparrows Point, which produced 2.7 million tons last year and has capacity to produce about 3.9 million. Bouchard said he is negotiating with several other North American mills to purchase slab from Sparrows Point, and expects to lift annual production close to its current capacity.

"Our objective at Sparrows Point will be to rebuild a very healthy steel production business," Bouchard said. "Our vision for doing that is to create a low-cost provider of slabs in the North American market."

The deal also will give Sparrows Point access to Esmark's network of Midwest distribution centers, which serve 2,000 buyers of steel made into everything from appliances to tin cans.

"They'll have one place to ship their production out into the domestic market without having to rely totally on their own mill sales force," said Tom Stundza, executive director of Purchasing magazine, an industry trade publication.

Analysts said the joint venture is a potent combination of industry players who will deliver a ready mix of buyers and suppliers. The result for Sparrows Point could be a beefed up order book and a steady supply of iron ore at good prices.

CVRD, which is a supplier to Sparrows Point, is one of the world's largest producers of iron ore, reporting second-quarter profit of $4.1 billion yesterday. The company's ore is shipped to Sparrows Point via the Chesapeake Bay. The mill is the only integrated steel plant in the U.S. with access to a deepwater port.

"One of Sparrows Point's drawbacks is we have to pay high costs for our raw materials, and that's a disadvantage to us when we're competing," Cirri said. "If we've got some way we're going to get a supply of raw materials at a lower price, then look out competition, is all I can say."

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.