By Jamie Smith Hopkins, The Baltimore Sun
9:46 PM EDT, August 7, 2012
The Sparrows Point steel mill was auctioned off Tuesday, but no one — not the company, not its attorneys, not the union — would say who bought it.
The auction for the Baltimore County mill was held in the afternoon, according to a source familiar with the proceedings. No details were filed with the U.S. Bankruptcy Court late Tuesday, and it may be several days before any appear there.
The timing isn't clear, let alone the results, because owner RG Steel has been silent for days outside of court filings.
Such information blackouts are generally a bad sign, said Peter A. Chapman, president of Bankruptcy Creditors' Service Inc., which publishes newsletters about corporate restructuring.
"In these cases where … the information stops, it's because there's just literally nothing good to share," he said.
The auction stems from RG Steel's bankruptcy filing in late May, which the company blamed on the weak steel market. Any sale must be approved by the federal bankruptcy court in Wilmington, Del. A hearing is scheduled for Aug. 15.
Several thousand Sparrows Point workers and contractors nervously await the results, hoping for a company that will restart steelmaking. But it's not at all clear whether that will happen.
No lead bidder emerged before the auction. And an RG Steel mill in Mingo Junction, Ohio, was auctioned off for $20 million last week to Frontier Industrial Corp., which demolishes plants and recycles equipment and scrap metal.
"We're pretty much scared to death," Mike Hartnett, who has worked at Sparrows Point for 37 years, said Tuesday night as he waited for news. "I can't even sleep at night."
Nearly 2,000 employees were laid off from the plant in recent weeks, practically the entire workforce there. About 1,000 others who work for contractors, vendors and suppliers have lost or are losing their jobs as a result of the bankruptcy, Baltimore County officials estimate.
One company reportedly in the running to buy Sparrows Point opted against it. Ivan Shmidik, a spokesman for Ukrainian mining and metallurgy company Metinvest Group, said by email Tuesday that the company would not be bidding.
Other registered bidders identified by a source with knowledge of the proceedings wereNucor Corp., a U.S. steelmaker, and Brazilian steel giant CSN. Neither responded to requests for comment Tuesday.
The mill and RG Steel's facility in Warren, Ohio, were both scheduled for auction at 10 a.m. A United Steelworkers representative said at 7:30 p.m. Tuesday that the auction was still under way, but a source said Sparrows Point was complete.
The Maryland Department of the Environment objected Tuesday to the sale, saying RG Steel's proposed sale order "is currently believed to be silent" about the obligation of any buyer to continue efforts to find and fix environmental problems caused by the Sparrows Point mill during its century-plus history. The U.S. Department of Justiceoffered a similar objection last week on behalf of the federal Environmental Protection Agency.
Failure to spell out the environmental obligations is a "clear violation" of a consent decree involving the property, wrote the Maryland attorney general's office in its objection for the state environmental agency. The 1997 decree — involving the state, the EPA and then-owner Bethlehem Steel — predates RG Steel, which purchased the property last year.
The Justice Department, meanwhile, warned that it reserved the right "to object to the sale of contaminated property to any purchaser unless it is financially and otherwise capable of performing cleanup and taking other steps required under environmental law to protect the public from hazardous conditions."
Chuck Bradford, a metals analyst with New York-based Bradford Research, said Tuesday that he wondered whether that declaration might "keep some people from bidding."
Bradford said Nucor, one of the companies identified as a registered bidder, strikes him and others as an unlikely operator of Sparrows Point because it owns a mill in South Carolina that makes most of the same products and is cheaper to run.
John Anton, a steel analyst at IHS Global Insight, said he couldn't comment about the auction because "various players" involved in it are his clients. But he said he thinks the Sparrows Point plant is a "good facility" with a good location.
"I think the company most likely to make a good go of it is someone who makes slabs in Brazil or Russia and sends them there to be rolled," Anton said. "I think the union would not like that because it means some employees in the hot mill would lose their jobs."
Winning bids at RG Steel's auction last week of its Wheeling, W.Va.-area assets, largely across the river in Ohio, ranged from $20 million for Mingo Junction to just $2 million for its Martins Ferry, Ohio, plant. Union leaders at the Yorkville, Ohio, mill are cautiously optimistic because the high bidder in that case — steelmaker Esmark Inc. — says it intends to run the mill and employ at least 230.
But the prices, union leaders say, are a far cry from the previous sale.
"Wheeling sold for about a billion and a quarter [dollars in 2008]," said Jerry Conners, president of the United Steelworkers Local 1223 in Yorkville. "And all the assets that were sold last week at auction … sold for approximately $35 million. That's a sobering perspective."
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