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Sparrows Point is back in business after setbacks

Baltimore steel mill still faces many challenges as it tries to lure back customers in a weak market.

Above: The “L” furnace, pictured here in 2009, has been successfully restarted following a major accident.

Sparrows Point is shipping its first finished steel made in-house after its new owner surmounted various problems to get the mostly dormant mill back into operation.

RG Steel wanted to reach full production in early June, but an accident at the mill’s gigantic blast furnace caused more than $15 million in damages, well-placed sources told The Brew. The cold roll mill also underwent a maintenance outage due to lack of steel.

More than 600 workers have returned to work at the plant, the largest industrial facility in the Baltimore region. Many are currently receiving overtime pay, a welcome relief after months of layoffs.

RG Steel purchased Sparrows Point from Russia-based Severstal in March and told customers it planned to ship its first in-house steel by June 6.

But that schedule was upended when part of an interior wall at the “L” blast furnace collapsed on May 19, sending thousands of tons of hot metal into surrounding pipes, destroying costly equipment and injuring two outside contractors, one seriously.

A person knowledgeable of the accident said today, “We truly do not know what happened that day, but we had to [shut the furnace] and start the blow-in process all over again.” That elaborate process went slowly as technicians, some flown in from other mills, closely monitored the furnace, which operates under temperatures of up to 3,900 degrees F.

Spokesperson Bette Kovach said today, in response to questions from this website: “L furnace and all other facilities at Sparrows Point are operating in accordance with our order book. RG Steel is pleased by the response from the marketplace to RG Steel and remains focused on rebuilding our business through satisfying our customers.”

Hard to Win Back Customers

Rebuilding the order book won’t be easy, a number of steel industry experts say.

“RG Steel is essentially a start-up company, and trying to secure orders – or win them back – is very challenging in this economic environment,” said an industry analyst who asked not to be named.

Adding to the hurdles faced by the company, the Baltimore county mill is highly dependent on orders from the construction industry, one of the hardest-hit sectors of the economy since the onset of the recession in 2008.

RG Steel nevertheless appears determined to ramp up production. The company is planning to reopen the sinter plant in August to feed high-quality iron ore to the blast furnace. Replacing the furnace’s current all-pellet “diet,” the sinter mix is expected to smooth out production issues that dogged L furnace before it was shut last year.

Production at the L furnace has reached 7,500 tons of iron a day, a respectable figure that should reduce overall production costs at the mill.

Competition from Southern Mills

Aiding the mill’s transition into full-time production is an agreement by which Sparrows Point will supply 30,000 tons of pig iron and 60,000 tons of steel slabs per month to former owner Severstal.

The pig iron will be shipped to Severstal Columbia, a “mini-mill” operation in Mississippi, while the slabs are destined for Severstal’s mill at Dearborn, Mich., according to several sources. Kovach said specific orders were proprietary and would not be discussed by the company.

Severstal Columbia is expected to become one of Sparrows’ chief competitors. It produces hot- and cold-rolled sheet, pickled and hot-dipped sheet, deep-drawn and galvanized steels – everything that Sparrows Point makes except for tinplate for the container industry.

The Baltimore mill also faces stiff competition from a state-of-the-art carbon steel processing plant opened by German steelmaker, ThyssenKrupp, near Mobile, Ala.

Such production is feeding the general glut of steel in the U.S. market, which is depressing prices.

New York financier Ira Rennert owns RG Steel through Renco Group. Last Thursday Rennert was given a tour of Sparrows Point and briefed on its operations.

RG Steel also owns the Warren, Ohio, and Wheeling Steel facilities purchased from Severstal. Several idled Wheeling operations in and around Steubenville, Ohio, appear slated for permanent closure, especially if demand for steel does not pick up in future months.

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