An empty Sparrows Point Road leads to RG Steel LLC's Sparrows… (Karl Merton Ferron/Baltimore…)
The owner of the financially ailing Sparrows Point steel plant is idling operations there, warning 1,975 workers Thursday that they would be laid off starting next month.
The news, the latest casting doubt on the future of the Baltimore County facility, came as RG Steel is shopping the steel mill and its other assets to potential buyers.
RG Steel informed the Maryland Department of Labor, Licensing and Regulations that layoffs would begin June 4 and continue through June 18. The state said the company would be laying off 1,714 hourly and 261 salaried workers, losses that would be a significant blow to the economy.
For years, the plant has faced uncertainty before last-minute deals salvaged the mill. RG Steel is the latest owner to try to sustain steel production at the once-flourishing facility.
In a letter to the United Steelworkers, the company blamed an "immediate, unexpected liquidity crisis" for the shutdown as its lenders cut off credit to maintain operations. It said it did not know whether the idling would be temporary or permanent.
Joe Rosel, the newly elected president of the United Steelworkers Local 9477, said he expects some workers would remain at the plant to maintain the "L" blast furnace and other parts, though he did not know how many. The total number of affected employees won't become clear until June 4, he said.
Characterizing the situation as "fluid and dynamic," Rosel said the union is working with RG Steel to find capital or a buyer for the company or its facilities.
"We've been through it before. Obviously, people are concerned," said Rosel, who has worked at Sparrows Point for 34 years. "They have every right to be concerned. But we're going to keep them informed, and there is a good workforce here and a lot of smart people."
A handful of workers gathered Thursday afternoon at Micky's bar on North Point Boulevard, just outside the mill's entrance, were not surprised by the shutdown or layoffs, which they've experienced in the past.
"Personally, we've been though this so much, I don't get shook up about this stuff," said Russell Dent, a control room operator who has worked at the plant for 17 years and was on his way to an evening shift at the plant.
"A couple weeks back, they started painting everything," Dent said. "And when they start painting and cleaning up, you know its going up for sale."
Bette Kovach, a RG Steel spokeswoman, said steel-making operations at its other plants in Warren, Ohio, and Wheeling, W.Va., also would be idled as the firm goes into "asset protection mode."
Once a thriving plant, Sparrows Point has struggled in recent years amid industry consolidation and competition from cheaper foreign steel. A series of owners have come and gone in recent years, yet Sparrows Point managed to survive despite being idled several times.
"I'm amazed … it's like the phoenix," said Marc Liebman, president of AIM Market Research, a Pittsburgh firm that provides research for steel companies and their suppliers.
"I don't know," he added, whether this latest shutdown spells doom for Sparrows Point.
RG Steel's parent, Renco Group, bought the mill and other plants in March 2011, seven months after the previous owner — Russian steel giant Severstal — had idled much of the facility, laying off nearly 1,000 workers.
When RG Steel restarted the plant, it needed to win back customers. It also faced a weak economy, reduced demand and high raw-material prices.
Right before Christmas, RG Steel idled the main furnace because of a cash crunch. It restarted in late January after a $125 million cash infusion from Cerberus Capital, a New York-based private equity firm.
With the global steel industry weak and the U.S. suffering from overcapacity, analysts said, it's a difficult time for steel companies to make a profit.
In recent months, RG Steel has been cutting costs at Sparrows Point. In April, it temporarily shut the tin mill because of low bookings. Early this month, it cut the salaries of managers and executives.
Twice in the past few weeks, Sparrows Point idled the main blast furnace, first, it said, for routine maintenance and the second time because of a shortage of raw materials.
In the letter Wednesday to the Steelworkers notifying the union of the shutdown, an RG Steel executive confirmed rumors of another liquidity crisis.
"Unfortunately, in a completely unforeseen and unforeseeable turn of events, the company's lenders and equity investors have advised that they are suspending funding of ongoing ordinary course operations of the company," wrote Thomas Cera, vice president and general manager of RG Steel's Warren and Wheeling plants. "As a consequence of this unexpected development, the company is actively pursuing a buyer of some or all of the company's assets."
Baltimore economist Anirban Basu called the potential loss of nearly 2,000 employees a "significant blow" to the local economy.