RG Steel has notified key staff that it is considering idling the tinplate mill at Sparrows Point and consolidating operations in Ohio.
The shutdown of the tin mill – with the potential loss of about 300 jobs – comes amid intense pressure on RG Steel to stop losses at the Baltimore County facility or else face the same cash crunch that led to the mill’s closure before Christmas.
Sparrows Point was reopened in late January after a cash infusion of $125 million from the private equity fund Cerberus Capital.
When it closed in December, Sparrows Point had an accounts payable debt of $90 million. It is currently struggling to pay off creditors and become “cost neutral” by the middle of April, well-informed sources tell The Brew.
Customers Take Orders Elsewhere
A major victim of the mill’s Christmas closure was tinplate operations. “Customers are nervous about RG Steel,” a source familiar with sales said today. “When they shut down, customers said, ‘You’re not committed to our product’ and began looking elsewhere.”
The shutdown coincided with the annual renewal of tinplate orders, leading many customers to shift their orders to other companies for 2012.
Another factor that spooked customers was a fire at the tin mill last October, which halted operations and led to questions about the company’s reliability.
Shift to Yorkville, Ohio
Bette Kovach, spokeswomen for RG Steel, declined today to say whether the tin mill was being shut. “We do not comment on how units are scheduled,” she said in an e-mail.
Last night the trade journal American Metal Market quoted “well-placed players in the tinplate market” saying Sparrows Point would temporarily cease production.
RG Steel produces tinplate in Yorkville, Ohio, through a 50-50 joint venture known as Ohio Coatings Co. The mill has a capacity of 300,000 tons a year, indicating that RG Steel’s share of production is 150,000 tons.
Sparrows Point is a much bigger operation – with a 550,000-ton annual capacity – but has not been fully utilized for several years.
A well-informed source said Sparrows Point never recovered from the shutdown of the steelmaking furnaces in 2010-11 by its previous owner, Severstal.
At that time, the mill had a very profitable line, called “drawn-in-iron” or DNI steel, used to make aerosol and other cans with just one weld.
“Sparrows Point was the only mill outside of U.S. Steel that could make the product,” the source said. But when furnace operations were closed by Severstal, the plant lost the orders for good.
Several sources told The Brew that RG Steel was arranging to shift orders from Sparrows Point to Yorkville in April, and idle the Baltimore facility sometime after that.
Those plans are subject to change. It is also conceivable that the company could pick up enough orders in the next few months to reopen the facility – though sources caution that Sparrows Point needs to be run at a high volume to be profitable.
Sparrows Point has been identified with tinplate product since July 1917, when owner Bethlehem Steel opened the first integrated tinplate mill east of Pittsburgh.
For decades, the mill supplied thousands of customers – including Campbell Soups, Dole Pineapples and scores of beer companies – with thin-gauge, rust-resistant steel known as “tinplate” even though the metal contained very little tin.
Tinplate production rose rapidly through the 1950s, then began a slow decline as packagers began to use aluminum, plastic and cardboard composites in place of steel for containers.
In addition to tinplate, Sparrows Point produces various types of cold-rolled coils for industrial uses, and galvanized and trademarked Galvalume steel for roofing and other construction materials.