Esmark submits bid to buy Sparrows Point steel plant

Daily Record, The (Baltimore), Mar 21, 2007 by Jen Degregorio

Chicago-based Esmark Inc. said Tuesday that it has submitted a bid to purchase the Sparrows Point steel plant from Mittal Steel Co. NV.

Esmark spokesman Bill Keegan told The Daily Record that his company was one of "a number" of bidders for the mill, which last month was ordered by the U.S. Department of Justice to be sold to make sure that Mittal does not have a monopoly over the U.S. market for tin.

Keegan would not say how much Esmark offered or provide further details, and a spokesman for Mittal declined to comment. But Scott Burns, a steel analyst with Chicago-based Morningstar Inc., placed Sparrows Point's value at between $875 million and $1 billion.

The Justice Department gave Mittal until late May to sell Sparrows Point, with the possibility of a 60-day extension. The ruling came after the Netherlands-based company announced a $33 billion merger with Luxembourg-based Arcelor SA that would create the world's largest steel company. Initially, the Justice Department ordered Mittal to sell Dofasco Inc., a Canadian-based subsidiary of Arcelor. But that deal fell through after the Dutch trust that Arcelor placed Dofasco in to avoid Mittal's hostile takeover bid refused to agree to the sale.

The Justice Department's next choice was to force the sale of either Sparrows Point or a Mittal plant in Weirton, W.Va., both of which provide tin to the Eastern United States. The department ultimately chose Sparrows Point because it was deemed stronger and more likely to survive on its own. Esmark had a tentative deal with Mittal to purchase Weirton, but that fell apart after the department's announcement.

Esmark is "one of the few domestic buyers that would likely be interested" in Sparrows Point, Burns said. The company is looking to expand its production capabilities after buying Wheeling-Pittsburgh Corp. in a deal that is expected to be finalized this summer.

With its direct ocean access, Sparrows Point is more desirable to foreign steel makers that need to import raw materials by ship, according to Burns. U.S. steel producers tend to congregate around the Great Lakes and consider energy and labor costs prohibitively expensive on the East Coast, he said.

"Foreign steel producers are really trying to get footholds in the U.S. market," Burns said.

David S. Iannucci, Baltimore County's executive director of economic development, said he does not care what company buys Sparrows Point as long it invests in its operations.

The plant, which employs about 2,400 and has the capacity to produce 3.6 million tons of steel per year, has for decades been considered one of the county's most important economic engines. It produces galvanized hot- and cold-rolled sheet, semi-finished steel and tin to the construction and automotive industries, among other users.

"We viewed the Department of Justice's determination - as a vote of confidence in the long-term viability of the Sparrows Point plant," Iannucci said. "Baltimore County hopes that the new buyer will have deep pockets and will have a willingness in making significant investments in improvements to infrastructure."

Emanuel Jones, financial secretary for United Steelworkers Local 9477, the union that represents Sparrows Point workers, hopes a new owner will expand the plant's influence in the industry.

"Hopefully we'll get blessed with somebody - who tries to make us their main factory so that we can compete," Jones said. "They have to come up with a plan to put money in the plant."