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Argentine company vies for Sparrows Point, as union seeks sale by year’s end

New possible buyer emerges. Russians reportedly unsatisfied with others so far

Paolo Rocca (left) wants Sparrows Point for his Argentine steel group from Alexei Mordashov, who may – or may not – sell.

Paolo Rocca (left) wants Sparrows Point for his Argentine steel group from Alexei Mordashov, who may – or may not – sell.  

Photo by: World Steel Association

The Ternium steel group is actively seeking to buy Sparrows Point, The Brew has learned. The Argentine company, controlled by Italian industrialist Paolo Rocca, joins three other parties previously identified in media accounts as bidders for Sparrows Point.

With the Baltimore County mill barely working and more than 800 union employees laid off, the United Steelworkers Union (USW) is pressing Severstal to sell the facility by the end of the year.

A source cautioned that the Ternium bid should be considered a long-shot, since it arrived after the other bids were submitted.

In Ternium’s favor, however, is Alexei Mordashov’s reported dissatisfaction with the other offers. Representatives of the Russian billionaire, who owns Severstal, have hinted that the company may keep Sparrows Point idled until either steel prices rebound or higher bids are received.

Following the first round of bids submitted by October 22, Ternium executives inspected the Baltimore mill on the ground and in helicopter flyovers, sources told The Brew. They outlined to union representatives their plan to fire up the “L” blast furnace, which Severstal idled in July.

“They promised to run our primary to fullest capacity,” said one source. (“Primary” refers to the plant’s steel-making furnaces.)

Another source said, “They liked L furnace. They were amazed that in its condition it wasn’t running.”

Access to Raw Materials

With mills in Mexico, Guatemala and Colombia as well as Argentina, Ternium specializes in the same flat-rolled products that are produced at Sparrows Point. If  a sale went through, the Baltimore mill would add 30 percent capacity to Ternium, making it one of the largest steelmakers in the Western Hemisphere.

Sources said Ternium has access to abundant iron ore deposits in Argentina, Brazil and Mexico that are sorely needed by Sparrows Point, whose competitiveness has been hobbled by its dependence on expensive ore from Canada and from “spot” markets. Iron ore is the highest cost item of steel-making.

“They have raw material and money. We have tinplate. They send the raw materials up and we send high-quality American steel down,” said a source, outlining the company’s business plan as explained to Point officials.

The company’s Argentine subsidiary has entered into a joint venture to build an ocean-side steel mill 175 miles north of Rio de Janeiro. The facility could ship steel slabs or processed ore directly to Sparrows Point.

Ternium was founded by Paolo Rocca. He is the grandson of Agostino Rocca, a prominent ally of Benito Mussolini whose family emigrated to Argentina after the Italian Fascist regime collapsed.

The family retained close business contacts in Italy and took control of Dalmine, now Tenaris, a leading steel tube maker. In 1992, the family purchased a majority stake in Somisa, the Argentine state steel firm, when it was privatized.

The company acquired its present name (a combination of the Latin words for “three” and “eternity”) in 2005 when Paolo Rocca consolidated Hylsa of Mexico and Sidor of Venezuela with the Argentine company.

After Venezuelan President Hugo Chavez nationalized the Sidor branch in 2008, Ternium negotiated a $1.65 billion settlement for its stake in the firm. As of last week, Venezuela still owed a balance of $255 million, plus interest, according to Ternium.

Other Bidders

Ternium’s interest in Sparrows Point comes after the close of the first round of bids for Sparrows Point and two other mills, Severstal Warren and Severstal Wheeling.

Alexei Mordashov was reportedly dissatisfied with the bids, which he believed undervalued the properties. Mordashov paid $810 million for Sparrows Point in 2008 and spent an additional $1.6 billion, including debt, for Severstal Warren and Severstal Wheeling.

All three mills are represented by the USW. David McCall, the chief union negotiator, has called a single sale the most equitable way to find a reliable buyer, much to the chagrin of many Sparrows Point employees who believe their mill is a candidate for a stand-alone deal.

Ternium reportedly bid only on Sparrows Point. Investment groups previously identified as placing bids on all three plants are the Renco Group, Optima Fund Management with Metinvest Holding, and Aurora Capital Group.

Junk-bond financier Ira Rennert has his eyes on Sparrows Point and two other Severstal mills. (credit: Forbes magazine)

Junk-bond financier Ira Rennert has his eyes on Sparrows Point and two other Severstal mills. (credit: Forbes magazine)

Renco Group is controlled by 76-year-old Ira Rennert. The New York billionaire financier owned Severstal Warren (then called WCI Steel) between 1988 and 2003, when the company failed to repaid $300 million in junk bonds and declared bankruptcy. Rennert tried to regain control of the company in bankruptcy court, but failed. Eventually it was sold to Severstal.

Optima Fund, a minority stakeholder in WCI, unsuccessfully bid for the property in 2008. The offshore hedge fund was incorporated by Mordechai Y. Korf and Uri Laber of Miami. The fund has teamed up with Metinvest, a Ukrainian mining group that supplies iron ore and coke to steel companies. Metinvest’s main stakeholder is controlled by Rinat Akhmetov, described by Forbes magazine as Ukraine’s wealthiest businessman.

Like Ternium, the Metinvest group has been seeking entry into North American markets through the purchase of steel or mining subsidiaries.

A final investor eyeing the properties is Aurora Capital, a Los Angeles-based group that buys midsized industrial companies as investments. Earlier this year, Aurora purchased four steel service centers from Severstal for an undisclosed sum.

USW officials have expressed frustration at the lack of disclosure by Severstal about how the sale is progressing.

The slow pace comes at a time when layoffs are increasing at Sparrows Point. More than 800 workers were on forced furloughs last week and that number is expected to rise to between 1,000 and 1,200 workers by Christmas.

Nearly the entire “primary side” workforce of 550 is currently on layoff. Some workers with high seniority have “bumped” to the tin mill, which is the only operation now running fulltime at the plant.

Reach Mark Reutter at reuttermark@yahoo.com.

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  • Rick Daub

    the USW (the International) has emphatically stated that Sparrows Point would not be sold unless Wheeling WV and Warren OH are part of the deal!
    The International would rather see 6000 steel workers loose their jobs then have 1200 keep theirs.
    So unless they (the International) have a change of heart, someone with at least $2.5-$3 billion needs to step forward or Alexi will NOT sell!
    Unfortunately, those are the cold hard facts.

    • THISSTINKS

      MCCALL SHOULD BE FIRED FOR HOLDING SPARROSWS POINT HOSTAGE

  • WCISteel

    It is truly tragic what has happened to the Point since the Russians bought it and installed their incompetent management team lead by David Howard. The best outcome would be someone who bought all of the plants for sale (maybe Renco?), but failing that, it would still be a better outcome if bought by the Argentines than allowing Severstal to let the place fall apart. The current mangement is ulikely to know enough or care about ensuring that the hot end is perserved for future operation.

    • Guest

      Are you kidding? When was the last time Wheeling Pitt made money? The best possible outcome for Sparrows Point would be for us to be sold as a stand alone plant. We will get our customers back once they find out that we are being run by competent management. Give us an owner who has the raw materials to feed the Beast of the East. And Sparrows Point will prosper. And give us a union that will look out for the people, not the USW.

  • Fernando Vargas

    Brew quote:
    “They promised to run our primary to fullest capacity,” said one source. (“Primary” refers to the plant’s steel-making furnaces.)

    Vargas reply:
    “Primary” refers to the Primary Side of the mill, the part of the mill that makes molten steel from raw materials. The Primary Side includes the Sinter Plant, Blast Furnace, and the Basic Oxygen Furnaces (BOFs).

    • Fernando Vargas

      Forgot to add the Continuous Caster to the list.

  • Fedup

    I agree – McCall and company should re-think…… DUH!
    I guess when you are the district director of OH valley you have to save your own – even at the demise of the rest of us. What a man

    • regalroyal25

      You guys kill me NOT ONE SparrowsPoint Worker cussed and bad mouthed McCall when the plants in his district were shut down for over 18 months and to this date most of Wheeling Pitt workers are still laid off which by the way Wheeling is mostly in Ohio.

      During the 18 months that the plants in ohio were closed we were working everyday and most workers all over Sparrows Point were getting all the over time they wanted and in allot of cases OT that they didn’t want.

      So Daub & Fedup how can you say that McCall only cares about plants in Ohio

      • Jason

        McCall is so egotistical that the union hall in Ohio is named after him. Sparrows Point employees will be working right now if he would allow the single sale go through. It was McCall the agreed to the non union coils to be shipped from Mississippi that could be made at Sparrows Point.

        Everyone is angry over his conflict of interest. He has not done a single thing to help Sparrows Point through these difficult times. He is no different than these Russians that he drinks with after failed negotiations. McCall is far from what a real man should be.

        • LaidOffThisWeekToo

          Here’s copy of a letter I wrote last week (before I knew I was getting laid off this week) to our “Union” publication, USW@Work (oxymoron title) the other day. Don’t expect to ever see it ever printed, but sums up my thoughts, as well as many others who agree…

          To whom it may concern,

          I find it a bit disheartening to open my latest USW@WORK publication, only to see that once again there is not so much as a peep about what is going on at SEVERSTAL N.A. Sparrows Point, in Sparrows Point, Maryland. Not one mention of the hundreds of people laid off, while outside contractors still flourish and are still working all over our plant. Not so much as a whisper about our Blast Furnace, the Beast in the East, sitting there empty and basically falling apart from the outside in. Not one iota of print about our Russian owners seemingly chasing away what little customer base we still retain, or the fact that 300-500 more Union represented workers are facing layoffs by December 19, 2010…to join the over 600 presently not working. Sad.

          I can’t help but wonder anymore what exactly are we “represented” at?
          What exactly is our International Union doing to stop the nonsense that company management is, and has been, getting away with?

          The last USW@WORK publication had 5 pages or so soliciting support for Mexican workers, while workers right here in the United States of America, at one of the oldest steelmaking facilities in the world, are being pretty much made fool’s of? Heck, at the Company’s “informational” meetings held several weeks ago, our new Plant Manager flat out said that if we got a better price on raw materials, just like our sister plants do, that we’d be profitable RIGHT NOW.

          Not a word in the USW@WORK pages about the fact that we have been working under an expired, although often temporarily extended, “day to day” contract that “officially” expired in September 2008, while our Union brothers and sisters elsewhere got their “signing bonuses” and “pattern agreements” done at the same time. No mention of the fact that we’ve not gotten any sort of wage adjustment for over 3 years…

          One can’t help but wonder where the priorities of our International Union are…I always thought it was to keep dues paying members working, not wondering how long their plant can bleed out before finally expiring itself….

          Where exactly is this “Powerful Voice for Workers” when we truly need it?

          • beenlaidoff

            in response to laidoffthis week i couldnt agree more.u never see any news about steel in that publication.always news about other usw represented companies like rubber workers and shipbuilders and others represented by usw.never anything about steel making companies.i have been laid off since september and not once have i recieved anything from our union officials about any news on what is going on at the plant.communication sucks at the point.as long as they are getting a paycheck why should they care. beenlaidoff

          • Lady of Steel

            I agree with you, totally. Even the one before this last one didn’t mention anything on Sparrows Point. I was so infuriated, that I wrote Mr. Leo Gerard on the matter. I was shocked when I got a response from him. It was a whole month later, and all he could tell me was that things were a “sensitive” matter, dealing with this foreign company. He assured me that, our anger was also felt by the international. (Yeah, right!) I told him that I feel violated, every time I look at my pay-stub, and see the union dues being extracted! Where the hell is our representation? Where the hell are our rights? I ask him this. Mr. Leo Gerard supplied me the home address of Mr. Alexi Mordashov! What a guy! I use to be pro-union, not so much anymore. It’s bad enough dealing with these Russian, let alone the international with their self servicing, egotistical bull-shit!

          • Fedup

            Don’t be so surprised! The Unions in this country support socialism, and big government. Why do you think they are democrats? Give me a union that will give you something for nothing and I will show you a union that will take everything away for themselves. All Unions are corrupt just like this government and the Obama administration who the Union loves is more corrupt and taking our once Capitalistic society and turning us all into Government reliant socialists. Hey the Unions got what they asked for. Unfortunately for the dues paying members – you only get to pay dues.

      • tied of being lied to

        the plants in Ohio were shutdown when Severstal was running non union facilities at columbus and dearborne. Why hasn’t McCall processed that grievance for us? Columbus and Dearborns are running at a 100% capacity. Yet our union officals tell us this is because of a bad economy. They should really get their act rogether and start telling our membership the truth.

  • BOB

    Get Rid Of The RATS

    • BURT

      russians always thinking stupid. Is that RATS ?

  • Wadebalt

    Since ternium has entered into a brazilian location, think maybe the us gov. would relieve some of brazil’s trillion dollar debt to the U.S. on good faith to ensure the U.S. steel industry could remain strong in the world market. Seems as though the gov. started this downhill slide with the forced sale under mittal’s reign anyway. just a thought. Just think how well the steel making side would operate with quality raw materials at our beckon call

  • Jason

    The international union has sold out Sparrows Point. They only care about the mills they own stock in. Most of the international union representatives make over 100k a year. Sparrows Point doesn’t have a chance with this kind of representation.

    • Caster

      Where is the local union representation at Sparrows Point? WE HAVE NONE. Most zonemen are using their super seniority because they don’t have enough seniority to continue to be working. That is why they are sitting back and letting Cirri and the International put the screws to the workers at Sparrows Point. Sucking up the perks on the backs of those poor souls that are laidoff. Shame on them!!!

  • HS

    Whatever it is they do, they need to do it soon because the attrition rate (salary and hourly) is becoming alarming lately.

  • burt

    Anyone heard of any movement on the sale, takeover, or whatever with the steel plant? I’ve seen very little, and heard even less about it.

    • Skianbfree

      Just like all the other sales,we wont hear anything until ya see them shaking hands and saying what a great job they did.Would be a great way to start the new year though.

  • burt

    What………….. still nothing?

    • SteelCros

      I wouldn’t expext to hear anything until after the 1st of the year. Maybe a quiet news cycle is a good thing?

    • beenlaidoff

      Type your comment here.in response to burt.i wouldnt hold my breath waiting for some news from the union.these guys really know how to keep things to themselves.i know that they sign confidentiality papers but they could at least tell us something.i know that they cant go into details but at least they could let us know if any progress has been made without going into details.but they choose to keep us in the dark.meanwhile we all keep wondering when and if we will go back to work. beenlaidoff

      • Gambalhol

        I guess someone honoring a “confidentility” contract is not honorable to you.

  • burt

    It’s been my experience that confidentiality agreements are a tool for posturing for those involved to fabricate the best possible story to achieve the desired accolades in order to justify their inability to be honest. And these guys haven’t shown any sign of that yet, nor will they ever

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