Story and photo by MARK REUTTER

The sad, painful and infuriating decline of Sparrows Point – onetime anvil of America’s swaggering industrial might, now reduced to a shell of its former self along Baltimore’s outer harbor – has moved to a new crisis stage. The report in today’s Baltimore Sun that the mill’s blast furnace will close next month for an indeterminate period was not unexpected, given the financial strains besetting the Point’s parent company, Russian steelmaker Severstal.

After spending $3.1 billion to buy up American mills and coal mines last year, Severstal is staggering from low demand and operating losses. Russian oligarch Alexei Mordashov, who owns Severstal and has seen his own personal fortune decline by $19 billion, is reportedly trying to off-load some or all of his North American assets.

This means that Sparrows Point – which has been under four owners since 2003 – may be sold again. Or reduced in size. Or simply closed.

At present, the Point is the most solvent of Severstal’s U.S. assets. Its specialty in making tinplate has saved it from the worst of the downturn because canned goods have undergone a modest revival in a down economy. Severstal’s other facilities supply steel chiefly for the automotive industry. With Chrysler in bankruptcy and General Motors suspending much of its production this summer, the current low demand for automotive steel is liable to dip even further.

Subprime crisis culprits weakened steel, too

My series, Crisis in Steel, explains how the current downturn is not a typical cyclical phenomenon but a deeper collapse aggravated by overpriced mergers and takeovers that enriched hedge fund operators and international bankers at the expense of the industry’s long-term future.

Unknown to the general public, many of the same banks that were at the heart of the subprime mortgage crisis were involved in helping companies such as ArcelorMittal (who owned Sparrows Point between 2005 and 2008) and Severstal expand their empires through debt.

More woe for workers

The next few months will bring pain to the 2,500 workers at the Point, down from 30,000 employees who made up the workforce during the plant’s heyday. Recall that employees and retirees (together with the government-run Pension Benefit Guaranty Corp.) absorbed huge cutbacks in health-care benefits and pension pay during steel’s last meltdown in 2001-03.

Only time will tell whether U.S. taxpayers will be forced to bail out the steel industry. Or whether oligarch Mordashov loses his U.S. empire. Or whether more than a century of smelting and rolling red-hot slabs of steel in Baltimore comes to an inglorious end.

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Mark Reutter, a former Baltimore Sun reporter, wrote Making Steel: Sparrows Point (2004) and keeps tabs on the steel industry at makingsteel.com .