Business & Tech

Steelworkers Union Leader Says Argentinean Firm Out; New Reports Focus on N.Y. Investment Co.

John Cirri, president of Local 9477 of the United Steelworkers, remains hopeful the Sparrows Point mill will soon be sold and steel-making operations restarted.

At an information fair Thursday for laid-off steelworkers at the Sparrows Point mill, the president of the local United Steelworkers union remained hopeful the company would soon be sold and steel-making operations restarted.

But the union official—John Cirri, president of Local 9477 of the United Steelworkers—dismissed previous reports that Russian-owned Severstal North America would sell its operations to Ternium, the Argentinean-based steel manufacturer with operations in Mexico, Colombia, Guatemala and the United States.

“The Argentineans were here for a day last month to look around, and they left,” Cirri said. “That was it.”

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Cirri added, however, that as far as he knew, Severstal does remain in talks with one or two other potential buyers that he wouldn't name.

“They’re (Severstal) talking and that’s a good sign, it’s encouraging,” said Cirri, who also dismissed rumors that Severstal North America will file bankruptcy.

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According to recent reporting by WTRF-7 in Wheeling, WVa., the United Steelworkers are backing a bid by The Renco Group, Inc., to buy Severstal, which owns plants in Wheeling and Warren, Ohio, as well as Sparrows Point.

The Wheeling television station cited “sources close to the negotiations” that the union is backing the family-owned Renco Group, a private holding company with revenues in excess of $5 million, employing over 15,000 people around the world, according to its website.

A story in the Warren-based Tribune Chronicle today also reported it has confirmed through sources that the United Steelworkers are supporting the Renco bid.

In a follow-up phone interview Tuesday morning, Cirri said he did not wish to comment on reports the United Steelworkers are supporting a bid by Renco.

Previously, in August, an Ohio newspaper reported that Brazil's CSN, which reportedly attempted to buy Wheeling-Pitt facility in 2006, was sent information packets by Severstal as potential suitors. U.S. Steel, and capital investment firms, including Aurora Capital Group in Los Angeles, which bought some steel service centers from Severstal last year, also were reported to have received information packets by Severstal as potential suitors.

The Ukraine's Optima/MetinvestHolding was also mentioned in the fall as a potential buyer.

In July, Russian-owned Severstal North America laid off hundreds of local steelworkers as it announced the idling of the blast furnace and steel-making facilities at Sparrows Point, initiating rumors that the company was looking to sell the plant, which were later confirmed.

In November, Severstal announced that it was extending the idling of its primary operations at the Sparrows Point mill through the first quarter of 2011.

Primary and hot mill operations are idled and other mills are working reduced schedules. The tin mill continues to operate and to service the needs of tin customers.

Severstal said in its November press release that Sparrows Point will also continue to provide product to a limited number of its cold roll and coated products customers.

Cirri said that approximately 1,000 steelworkers of the local union’s 1,850 members now "out on the street,” at least through March of this year. Rumors about the future sale of the mill have circulating for months.

Severstal said in a press release that the economic downturn led to a reduction in orders from customers. Fewer orders forced the company to extend the idling period.

In its communication with employees, Severstal said it remained hopeful that market conditions would improve enough in 2011 to warrant an increase in production levels.

Cirri said, however, that with the current idling of the “L” furnace at the mill, steel-making operations at Sparrows Point have put the mill in a no-win situation.

“We’re losing all our customers,” Cirri said. “They (Severstal management) say they’ll start back up when we have more orders, but our customers know the situation – that we’re up for sale. We need to start making steel again and build our inventory to attract customers. It’s a Catch-22.”

At the moment, the major obstacle to making the plant profitable, Cirri said, is the high cost of raw materials, specifically iron ore. OAO Severstal, the parent company of Severstal North America, owns iron ore mines in Russia and elsewhere and could potentially sell the iron ore to its North American arm at below-market prices (and still make a profit) to help make Sparrows Point’s operations competitive, Cirri said.

“They have decided against that,” Cirri said. “That tells you what they think of the North American arm. They don’t care about it, they look at it as entirely separate.”

Cirri admitted the economic collapse has hurt the industry and the Sparrows Point operations. But he pinned Sparrows Point’s problems on management turnover and its ever-changing corporate strategy.

“They’ve been through two CEO’s and two COO’s in about the last two years, as well as letting go the plant's general manager,” Cirri said. “After 22 years in the union, I can tell you I’ve never dealt with a company like Severstal.”

In response, Severstal spokeswoman Marika Diamond defended Severstal’s corporate manuevering.

“Our strategy demands the experience of a seasoned management team, and we are fortunate to have the current talented group of people within our company who possess the skills, energy and commitment to achieve our goals for growth,” Diamond said.

She added that Severstal remains committed to the North American market, but left the door open for potential sales of some assets.

“As previously disclosed, the company has been exploring strategic alternatives for certain of its assets,” Diamond said. “At this time the strategic review is ongoing and we cannot comment further. We will, however, provide updates when appropriate.”

Meanwhile, the union membership, Cirri acknowledged, sometimes blames the company, sometimes the union, “and sometimes both,” for ineffective decision-making at the mill.

In the best-case scenario, Cirri said, the Sparrows Point operations will be sold to a company similar to Severstal, one that owns iron ore facilities and is willing to provide the mill with affordable raw materials.

Renco's businesses include mining and mineral recovery, defense equipment, fabrication of metal products and automotive supply.

Cirri said new owners need to invest in capital upgrades at Sparrows Point's steel-making operations, including building a new plate mill, which is needed to make, for example, steel for green energy wind turbines and military armor.


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