((2:30 p.m. UPDATE: RG Steel has issued the following statement on its website: “The L blast furnace at RG Steel’s Sparrows Point facility will be restarting this weekend after a routine maintenance outage. Production will resume at the level necessary to balance production with current market demand, and to service our customers.”))
The Sparrows Point blast furnace has been taken out of service, reportedly for maintenance, as rumors swirl that owner RG Steel is unable to pay its bills.
Sources told The Brew this morning that the furnace was temporarily idled Wednesday night and remains closed.
At present, not only the blast furnace but all primary (steelmaking) operations are suspended.
The L furnace is scheduled to reopen either over the weekend or next Tuesday.
The L furnace supplies the raw iron for all of the mill’s operations. While the plant can continue to finish steel from a backlog, other operations would be forced to close if the furnace remains closed.
Sparrows Point, which was shut down last Christmas for a month after the parent company ran out of cash, employs 1,600 union workers and more than 400 contract workers. It is the biggest steel mill in the Eastern U.S.
The furnace “take down” has led to a published report that the plant has been idled. Last night, Mark Parr, a KeyBanc steel analyst, published a note to his customers saying, “we have learned RG Steel’s Sparrows Point facility in Baltimore . . . has recently been idled.”
Parr added that, while the company has “indicated that the outage” is temporary, “it is difficult for us to believe the company is cash viable at present levels of spot carbon hot-rolled steel pricing.”
Ira Rennert Wants to Sell Mill
The Baltimore County steel plant has been beset by financial problems since it was purchased a year ago by RG Steel, a subsidiary of Ira Rennert’s Renco Group.
A billionaire financier, Rennert has been scrambling to find a new owner for Sparrows Point, according to very well-informed sources, and is trying to keep the steel plant operating – at the lowest possible cost – until a buyer is found.
“He’s not paying the vendors. He keeps it all close to his vest, but he wants to keep the plant operating because he figures he’ll get a better price if Sparrows is open and not shut down,”a source told The Brew this morning.
RG Steel’s spokesperson, Bette Kovach, did not respond to questions about the operating status of the plant.
((10:30 p.m. UPDATE: Ms. Kovach has e-mailed us back to say this about RG Steel’s payment for raw materials and other bills, “We continue to purchase raw materials in accordance to our production needs, and our standard term of payment is 60 days.”))
Sparrows Point has on the ground a large amount of iron ore shipped from overseas, but much of the ore is owned by other parties and has not been released to RG Steel because of nonpayment.
Sources say that many ore piles are circled by paint, which indicates they are not owned by RG Steel and cannot be used to feed the L blast furnace.
A confidential report obtained by The Brew indicates that, in March, Sparrows Point lost an average of $500,000 a day.
Last January, RG Steel received a $130 million cash infusion from Cerberus Capital Management, which allowed the plant to reopen after its abrupt shutdown shortly before Christmas.
Recently, RG Steel ballyhooed to the local media that management was taking a 10-25% pay cut to help the company through tough times. Sources say the story was planted to appease the bankers who have loaned money to the company.