By MARK REUTTER
About 125 supervisors and salaried employees will be terminated at the Sparrows Point steel mill at the end of this month, according to sources and documents obtained by the Brew. The layoffs are the first element of a restructuring plan that may claim 500-600 more jobs by the end of the year.
The restructuring is part of an effort by Severstal, the Russian owner, to turn around its troubled North American steel division – or make it more attractive for sale.
Negotiations are expected to get underway soon with Local 9477 of the United Steelworkers Union to eliminate hourly jobs, according to these sources.
One document obtained by the Brew refers to the elimination of 580 positions, about one-third of the Point’s unionized workforce. Employees will be encouraged to retire early and may also receive cash buyouts.
Sergei Kuznetsov, who became chief executive of Severstal’s North American division this summer, initiated the restructuring. Kuznetsov is the division’s third CEO this year. He reports to Alexei Mordashov, the Russian oligarch who has seen his personal fortune, tied to Severstal stock, drop from $22 billion to $6 billion in the last 16 months.
Many of the company’s financial problems stem from Mordashov’s purchase – at the top of the market – of steel facilities in the Ohio River Valley. These mills were forced to close this spring. Sparrows Point had been supplying the mills with steel slabs, and their closure reduced the Point’s iron production, resulting in operating losses.
Ironically, the Point’s core products of tinplate and cold-rolled steel have seen relatively high demand during the economic downturn, but the price for these products has not been enough to offset losses on the steelmaking side of the plant.
Over the last five months, Severstal’s Moscow headquarters has threatened to close the Point’s “L” blast furnace and import steel slabs from Russia or other overseas sources. Such drastic action was never taken by the division’s previous CEO, Gregory Mason, and the furnace was kept running at reduced capacity.
The business press has repeatedly reported that Mordashov is trying to sell his North American plants. Last month, Severstal issued a news release saying it plans to stay in the North American market.
One potential buyer of Sparrows Point, if Severstal decides to sell, is Mittal Steel.
Mittal gained control of Sparrows Point in 2005 when it purchased International Steel Group (ISG), but was forced to sell the mill last year in a settlement with the U.S. Department of Justice’s anti-trust division.
DOJ argued that Mittal’s ownership of Sparrows Point would give it a potential lock hold on tinplate production and pricing in the U.S. Tinplate is used to make metal cans and other consumer packaging.
If Mittal Steel did seek to purchase Sparrows Point (making it the fifth owner of the Point in the last seven years), it would doubtless argue that the recession has caused material changes to the steel industry.
A former Baltimore Sun reporter, Reutter wrote “Making Steel: Sparrows Point” (2004) and keeps tabs on the steel industry at makingsteel.com . He can be reached at reuttermark@yahoo.com .
