Shutdown of Sparrows Point extended through first quarter

Russian owner Severstal blames market conditions

  • Charles Taylor, 62, a 37-year electrical linesman at Severstal Steel, reacts to the company's announcement that it will extend the idling of their plants through the first quarter of next year. Taylor is pictured at Mickey's, a well known bar frequented by steel workers.
Charles Taylor, 62, a 37-year electrical linesman at Severstal… (Baltimore Sun photo by Kenneth…)
November 04, 2010|By Andrea K. Walker, The Baltimore Sun

The Russian owner of Sparrows Point said it plans to extend a partial shutdown of the Baltimore County mill through the first quarter and will temporarily lay off more than 1,000 people by Christmas as it grapples with low demand for steel.

On Thursday, Severstal notified state officials, as required by law, about the layoffs that are expected to occur by Dec. 19. The number of employees whose jobs would be suspended includes 668 who have been out of work since July, when company officials first announced a shutdown of the plant's primary operations.

Severstal had initially planned to idle the primary operations at the plant through December, and blamed weak conditions in the steel market for the longer shuttering. The move adds to the uncertainty at the 120-year-old plant, which hasn't been operating at capacity for most of the year. The shutdown is the largest in recent memory.

The instability of the steel mill, an iconic remnant of the state's manufacturing industry, has been the subject of several meetings of state and local officials who want the plant to continue operating. The shutdown could have a widespread impact on local businesses and contractors who do work with the plant.

For workers, the announcement fueled skepticism about the plant's future — and their employment. Workers said they would get paid a reduced wage under their union contract and can collect unemployment to help make up the difference. Union employees have been locked in contentious contract negotiations with Severstal and have been working under extensions of an old contract for more than a year.

Charles Taylor, 62, has worked at the plant for 37 years and qualifies for a pension. The electrical lineman said he'd be okay financially if he were to lose his job permanently. But he worries about younger workers and said it would be a shame to see an institution topple.

"I paid my dues, but I feel for the younger people," Taylor said while drinking a beer at Mickey's, a bar popular with Sparrows Point workers. "I feel for the younger workers. I'd like to see us operate for another 100 years, but the way things are run now who knows if that is possible."

Severstal officials have blamed the shutdown on weak conditions in the steel industry and a glut of the commodity on the market. The company has been cutting costs to offset higher prices for raw materials and low demand from the construction industry and other buyers that have suffered in the recession. Newer plants, including one being expanded by Severstal in Mississippi, have also added to the crowded market, exacerbating problems for the steel mill.

"You've had these newer, more state-of-the-art mills adding capacity to the market," said Rick de los Reyes, a global metal and mining analyst with T. Rowe Price. "The question is how long does it take for the excess capacity in the steel market right now to be absorbed to the point that it makes sense to restart a mill like Sparrows Point."

Union officials have said the company is looking for a buyer for the plant, but the company has declined to comment on the possibility of selling.

John Cirri, president of United Steelworkers Local 9477, declined to be interviewed for this article. In an e-mail to employees earlier this week, he said the plant's future is uncertain under Severstal's ownership.

"I would hope that Severstal puts their pride and emotions aside and agrees to a quick sale with an owner that has a positive business strategy for our plant," he wrote.

A Severstal spokeswoman emphasized Thursday that the jobs cuts were temporary.

"When market conditions improve and it warrants an increase in production levels, we will resume operations at the facilities," said the spokeswoman, Marika Diamond.

But some analysts said there is a possibility Sparrows Point could be shut down through the second quarter of next year as well.

"I wouldn't be surprised if they pushed it back again," said Paul Robinson, a steel analyst with IHS Global Insight in Washington. "It's not necessarily a sign that things are getting worse, but a recognition of how bad it is. The steel market continues to improve, just not at a spectacular rate."

Idling a plant — a massive operation — represents a significant move, analysts said. It can be costly to restart a plant and there is risk of losing workers during a shutdown.

Under the plan for Sparrows Point, the primary and hot mill operations would be idled and other mills would work reduced schedules. The tin mill, which makes steel used in cans, would continue in full operation. Sparrows Point also would continue to provide product to a limited number of customers.

Workers who were at Mickey's blamed the problems on mismanagement and wondered how much impact the economic downturn has really had on the plant. They also wondered if the company was playing hardball with the union.

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.