Allenport mill has new owner, but no hope for reopening
A steel mill in Allenport has a fourth owner since Wheeling-Pittsburgh Steel announced plans to close it 3 1/2 years ago - but apparently no hope for reopening.
Russian steelmaker OAO Severstal is dismantling the U.S.-based steel empire it acquired three years ago. It sold former Wheeling-Pittsburgh Steel mills in Ohio and West Virginia, plus mills in Warren, Ohio, and Baltimore in a deal valued at $1.2 billion, the company said Wednesday.
In its acquisition of the former Wheeling-Pitt plants, RG Steel becomes the latest owner of the closed mill at Allenport, once part of Mon Valley powerhouse Pittsburgh Steel. Allenport closed in May 2008 by Esmark, the owner that followed Wheeling-Pittsburgh.
The Allenport mill will remain closed, RG Steel spokeswoman Bette Kovach said.
The Renco Group Inc., a New York-based family-owned investment holding company, is acquiring those operations to form RG Steel LLC. The two companies expect to complete the deal this month, pending approval by regulatory agencies.
By purchasing the assets, RG Steel will have about 7.5 million tons of annual steelmaking capacity and will be the nation's fourth-largest flat-rolled steel producer, the company said. Flat-rolled steel is used by the auto industry for vehicle bodies, for appliances and other uses.
The operations being sold employ about 3,000 people, Severstal spokeswoman Katya Pruett said.
Severstal, one of the world's leading steel and mining companies, said in August that it wanted to sell some of its steel assets in the United States. While Severstal North America is selling three units, it will retain operations in Dearborn, Mich., which serves the auto industry, as well as a new mill in Columbus, Miss.
Severstal acquired the assets it is selling when the steel industry was booming in 2008, and paid more than $2 billion in cash and assumed debt.
Under terms of yesterday's deal, Renco will pay $125 million in cash and a $100 million secured note and repay $317 million in third-party debt. Renco also is assuming $650 million in employee-related and environmental liabilities, the steelmaker said.
"They kept the really good stuff. Some of the assets, like (former) Wheeling-Pittsburgh, are really bad," said steel analyst Charles Bradford, of Affiliated Research Group LLC of New York.
Severstal acquired the former Wheeling-Pittsburgh mills, along with its Wheeling Corrugating Co., when it purchased the former Esmark Inc., a steel service center and steel producer, in August 2008 in a deal worth $1.25 billion.
Renco also is buying Severstal's 50 percent interest in Mountain State Carbon LLC, a coke-making plant in Follansbee, W.Va., and its stake in Ohio Coatings Co. in Yorkville, Ohio.
RG Steel will get the sprawling former Bethlehem Steel Corp. Sparrows Point mill outside of Baltimore. Severstal bought that mill in March 2008 from ArcelorMittal for more than $800 million.
ArcelorMittal owns the former Koppers coke plant in Monessen, which has been out of operation since May 2009. It is undergoing upgrades, but ArcelorMittal has announced no plans to reopen the facility.
The problem with that acquisition, Bradford said, is that Sparrows Point needs a cheap source of raw material - coking coal and iron ore - and that's not available in a very strong market for those materials.
The former WCI Steel operation in Warren, previously owned by Renco, was sold after WCI filed for bankruptcy. Severstal bought WCI Steel for $140 million, plus an assumption of $230 million in debt, in July 2008. WCI Steel is a former Republic Steel and later an LTV Steel plant.
The United Steelworkers, which represents employees at Severstal's plants, reached a tentative contract with RG Steel in accordance with a successor clause in its contract with Severstal, USW spokesman Tony Montana said.
The USW declined to discuss any details of the agreement, pending meetings with its members.
Renco Group Inc. is the latest in a series of owners - or near owners - of the shuttered Allenport plant.
The Allenport facility was opened in 1954 by Pittsburgh Steel.
In December 1968, Pittsburgh Steel Co. merged with Wheeling Steel Corp. to form the Wheeling-Pittsburgh Steel. It operated the cold-rolled steel facility for nearly four decades.
When Esmark took over Wheeling-Pittsburgh in November 2007, the Wheeling-based steelmaker had already announced plans to eventually idle Allenport. Six months later, the facility closed idling 240 workers.
Severstal North America Inc., based in Dearborn, Mich., acquired it in June 2008 when it bought Esmark. However, the plant remained closed.
Hope floats
A year later, some hope developed when William "Russ" Kingston, of Chino, Calif., made a bid to purchase the plant and reopen it.
Kingston, president and CEO of North American Trading Co., has a patent pending on a process called S-clad. cladding. The bonding of differing metals is nothing new, but bonding steel to steel is.
His process would bond stainless steel to carbon steel to create a product that mirrors stainless steel but is cheaper to produce. Because Allenport was a cold-rolled steel facility, it would have been ideal to produce the large coils Kingston hoped to make there.
Kingston had a memorandum of understanding with Severstal to buy the plant, and by the fall of 2009 he was confident he would acquire the plant by the end of that year.
After acquiring that memorandum, Kingston began negotiating a union contract with United Steelworkers Local 1187.
The main sticking point of those talks was seniority. The union wanted Kingston to hire directly from a seniority list. The deal apparently would provide buyouts for workers willing to retire and provide Kingston with more freedom to hire based on skills.
When Kingston went to Harrisburg in April to discuss his plans with state officials, including the Governor's Action Team, he traveled with then-USW Local 1187 President Bill "Pudge" Kinney.
The two worked closely on the deal. But Kinney lost the election for USW Local 1187 president to Rick Bergstedt.
But by early 2010, Severstal North America's deal to sell the mill had fallen through, mostly because the prospective buyer's lack of money.
