Sparrows Point to idle portion of steel plant, lay off workers

About 600 employees work in areas to be affected

June 04, 2010|By Andrea K. Walker, The Baltimore Sun

Several hundred workers at the Sparrows Point steel mill are in danger of temporarily losing their jobs as the plant prepares to shut down for 30 days because of low demand.

The primary steelmaking facilities at the Baltimore County plant — three main divisions at the sprawling facility — will be shut down by July 1, company spokeswoman Elizabeth Kovach confirmed Friday. Union leaders had notified workers of the temporary layoffs and planned shutdown on Thursday.

About 600 people work in the parts of the plant to be affected, but Kovach said it is unclear the number of workers who will be out of a job. "How many people will go on layoffs versus doing other work in the plant has not been determined," Kovach said.

The future of Sparrows Point, a key economic engine for the surrounding community and one of the last vestiges of Baltimore's manufacturing sector, has been in question in recent months. Sparrows Point is owned by Russian steel conglomerate Severstal, which is undertaking a restructuring that could include selling plants and laying off workers.

Steel companies across the country are grappling with a slowdown in the industry. Automakers, construction companies and other customers that buy steel from companies such as Sparrows Point have high inventories because of the slow economy and don't need to restock.

Steel prices also have declined, meaning steel companies are making less profit from customers who are still buying the steel. At the same time, the cost of raw materials needed to make steel has risen, making it costlier for steel companies to operate.

"Obviously a plant would not shut down even temporarily if the situation was not serious," said Christopher Plummer, managing director of Metal Strategies Inc., a Pennsylvania consulting firm.

Sparrows Point is at a further disadvantage because it buys all of its raw materials instead of producing them.

Take iron ore pellets, which are placed in the blast furnace with coke to make purified iron and then steel.

It costs $50 to produce a ton of the pellets, whereas it costs $155 to buy a ton of the pellets, Plummer said. The price of the pellets has risen as much as 130 percent in recent months, and could reach $200 per ton in the third quarter, according to Metal Strategies.

"These are, by far, the biggest-cost items for a plant like that," Plummer said. "For them to go up by that magnitude in price can be costly."

Kovach said the company has excess inventories of stockpiled steel to sell to potential customers.

"This is strictly a market correction and the need to balance inventories," she said of the shutdown.

As part of the shutdown, the company's blast furnace, which turns ore into metal, will be idled. The basic oxygen furnace and the continuous castor, which produces the first solid form of steel slabs, also will temporarily cease production, Kovach said. It's a serious step because restarting the furnaces is a slow and expensive process.

Any layoffs must be negotiated with the United Steelworkers Local 9477, which represents the 2,500 employees at Sparrows Point. Kovach said those who lose their jobs will be eligible for "state unemployment compensation" and "company-provided supplemental unemployment benefits."

John Cirri, president of the local steelworkers union, didn't return phone calls about the plant shutdown.

In an e-mail to plant workers dated Thursday and obtained by The Baltimore Sun, Cirri said that union leaders would meet with the company next week to review plans for idling the plant and would "have a clearer picture of the [e]ffect it will have on our workforce."

Cirri said in the e-mail that the company plans to sell steel slabs from Severstal plants in Russia and Dearborn, Mich., while Sparrows Point is down. Cirri said that is in violation of the union contract and would be challenged in a grievance.

Kovach declined to comment on a potential grievance.

The temporary layoffs are separate from a plant restructuring that Severstal and the union has been acrimoniously hammering out since last year. The union received a draft proposal from the plant's Russian owners in September detailing a restructuring that could affect as many as 580 jobs, or nearly a third of the work force.

The union had been working on a month-to-month contract but recently extended the contract through the end of the summer.

Several high-ranking Sparrows Point managers recently took early retirement. In March, plant manager Thomas Russo retired after more than three decades at the plant, where he started working right out of high school.

Severstal, which bought Sparrows Point in 2008 in an $810 million deal, has been working on a strategy to make its North American operations more financially viable.

Severstal could do a number of things to improve its balance sheet, which could range from declaring bankruptcy to selling assets around the globe. The company has denied reports by trade publications that it plans to sell its U.S. assets.

andrea.walker@baltsun.com

twitter.com/ankwalker

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