Changing Point

September 03, 2007

Ahalf-century ago, at the height of the labor movement in this country, Sparrows Point was the largest steel mill in the world. Today, it may not employ tens of thousands of steelworkers as it did in those boom years, but despite all the adversity the mill has faced from mounting global competition to Bethlehem Steel's bankruptcy in 2003 to the layoffs of recent years, it remains Baltimore County's second-largest employer and an important economic asset for the region. And soon, a new chapter will be written.

The pending sale of Sparrows Point to a multinational joint venture known as E2 Acquisition Corp. and led by Chicago-based Esmark is going to bring change. To some, that may seem unsettling. But there is reason for optimism.

Luxembourg-based ArcelorMittal SA, a $41 billion steelmaking giant, had to sell Sparrows Point to avoid violating U.S. antitrust laws. Mittal Steel has made the plant highly productive and profitable. But at Mittal - and especially within the framework of the new ArcelorMittal - it was a relatively small asset in a large company.

What we've heard so far from Esmark is very encouraging. Esmark's owners say they expect to run the facilities at full capacity and are talking about investing and producing more. Sparrows Point, particularly its continuous cold-rolling mill, is efficient and well-regarded, but production could be greater still. And the Point's long-term prospects depend on how much Esmark is willing to invest in Maryland - that's just the nature of steelmaking.

If there's a rub, here it is: Will the new owners have deep enough pockets? Sparrows Point might have been in danger of neglect under Mittal, but the company's ability to invest was never in question. The new owner is likely to be more attentive, but the scale of the enterprise is suddenly much smaller.

In business, smaller companies are touted for their agility and quick reaction to changing market conditions - and Esmark may prove to be just that type of employer.

Still, on a holiday that traces its roots to 1882 (just seven years before there was a steel mill at Sparrows Point) and celebrates working men and women, it's hard not to feel a bit of regret over what has been lost there. Bankruptcy cost Point workers billions of dollars in unpaid pensions and benefits, and those 95,000 retirees will never be made whole. But that too is in the past.

The future of the Point may not be certain, but prospects are good. If the Justice Department approves the merger - as it seems likely to do later this month - the Sparrows Point sale can be finalized and a new era can begin.

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