John Cirri, president of Sparrows Point Local 9477, has confirmed a previous report in The Brew that Renco Group, controlled by New York financier Ira Rennert, is the choice of the United Steelworkers (USW) to buy Sparrows Point.

Sources who attended a union meeting last night quoted Cirri as saying that the USW had reached a basic labor contract with Renco and that Renco is negotiating with Severstal to reach terms for the purchase of Sparrows Point and two other Severstal mills at Warren, Ohio, and Wheeling, WVa.

But there is no guarantee that Severstal will sell the properties to Renco.

“Things could get ugly” as negotiations among Renco, Severstal and chief USW negotiator David McCall continue, sources said.

One potential source of dispute is Renco’s offer price. Its initial price, among several submitted to Severstal last fall, had angered CEO and majority owner, Alexei Mordashov, who called the bids “embarrassing.” It is not known whether Renco has modified its bid.

Union Rejects Optima

The other major contender for Sparrows Point was Optima/MetinvestHolding controlled by Ukrainian mining billionaire Rinat Akhmetov.

The USW rejected Optima’s bid, Cirri said last night, because it wanted to “slash” wages and benefits and was not interested in a long-term raw materials contract. Renco Group reportedly agreed to keep wages and benefits in line with the USW’s national “pattern” contract.

Cirri e-mailed The Brew today that “any questions regarding the sale of the plants or the status of our successorship language should be directed to the International Union.”

Severstal has a policy of not commenting on the possible sale of Sparrows Point, according to spokesperson Marika Diamond.

Options for Sparrows Point

The next step is for Severstal and Renco to reach a purchase agreement. This may be quickly concluded or may drag out for weeks.

Severstal has several other options. They could push forward with a sale to Optima or another group of buyers not sanctioned by the USW, pull back from a sale of the mills altogether, or place one or more of the facilities into voluntary bankruptcy.

Sparrows Point is organized as Severstal Sparrows Point LLC, a private company with reported annual sales of $1.4 billion and 2,300 employees.

The mill is barely operating at present, with its blast furnace closed and only one of its finishing mills, the tinplate mill, in active operation.

In an e-mail to members last week, Cirri complained that “Severstal still blames the economy and lack of orders for their decision to idle our furnace and restrict our ability to attract customers.”

Cirri attributed Sparrows Point’s plight to Severstal’s “inability to manage, cultural differences [and] bad business decisions” and added, “I want to inform people that everyone is feeling the pain, and, yes, some more than others. But we must stand together and help each other in any way we can. I believe things may get worse before they get better.”

Reach Mark Reutter at reuttermark@yahoo.com.