STEUBENVILLE - United Steelworkers of America staff representative Santo Santoro says he's "puzzled, so confused" by word that more RG Steel assets have sold at auction for virtually pennies on the dollar.
"The only thing I was told (Tuesday) night was that, somebody, a demolition company, bought Sparrows Point for $72 million and that WCI was bought for $17 million by a scrapyard in Pennsylvania," Santoro said this morning. "The saddest part about the whole thing is, nobody can understand why scrap yards are the only ones bidding. ... We don't understand it, to be honest with you. Until we get some answers, I don't know what else we can say."
RG Steel's Sparrows Point, Md., and Warren plants were sold at a court-ordered auction Tuesday in the Willkie, Farr & Gallagher law offices in New York City.
Last week, a New York company specializing in demolition and brownfield development acquired RG Steel's Mingo Junction plant for $20 million, while rival steelmaker Nucor purchased equipment from RG Steel's Wheeling Corrugating division. Buyers for the bankrupt company's Martins Ferry, Yorkville and Ohio Coatings plants plan to operate their mills.
Santoro pointed out that RG Steel acquired the properties from Severstal NA for roughly $1.5 billion, " now everything is being sold for less than $200 million."
Meanwhile, the apparent new owners of RG Steel's Yorkville plant see opportunity in the domestic steel industry, despite a sickly national economy and poor market conditions.
Esmark Steel is partnering with South Korea's TCC Steel to acquire the Yorkville plant, and also has purchased RG Steel's 50 percent stake in Ohio Coatings Co. Though nothing is final until a U.S.Bankruptcy Court judge in Delaware signs off on the changes sometime today, Esmark Chairman and CEO Jim Bouchard said he "feels very good" about the opportunities that lie ahead.
"It's just going to take some time," he said. "We're not going to wave a magic wand and have everything be good. It's a very poor steel market out there now, a very poor economy. We have a lot of things working against us, but we've put a pretty good game plan together and we've lined up some strategic suppliers. Now we've got to go back out and solicit our customer base. It's predominantly being supplied by foreign producers now so there's a niche need for a light-gauge, cold-rolled supplier here in the U.S."
ArcelorMittal's mill in Weirton supplies Ohio Coatings with some of the products it needs, a relationship Bouchard expects will continue.
"OCC is very happy with the product coming from Mittal, from Weirton, so that product will continue to come from Weirton," he said. "And we've lined up two other good, strong suppliers to supply product to Yorkville. Yorkville will continue to run cold-rolled, the majority of cold-rolled needed for Ohio Coating Co."
Bouchard is no stranger to the Ohio Valley, having previously operated Wheeling-Pittsburgh Steel Corp. after a reverse hostile takeover in 2007, only to sell the company the following year to Russia's Severstal NA for $1.2 billion. Severstal, in turn, sold it a year later to RG Steel, a subsidiary of billionaire Ira Rennert's Renco Group.
"We've done what little we could do to put together a game plan for Yorkville and Ohio Coating. I feel good about that and I think we're going to have a really nice niche operation, do some good things at Yorkville," he said, adding, "I feel bad, if anything, about what happened to the Ohio Valley."
He said Wheeling-Pitt has always had tremendous money-making potential under the right conditions, but raw materials pricing and market conditions over the years have made for a difficult operating environment.
"In the second quarter of 2008, I think we made $100 million at Wheeling-Pitt," he said. "It was exceptionally profitable when we had it, then we sold it to Severstal. But when we sold it in August, we'd had a tremendous nine months of 2008. .... we'd made (a lot of money), we'd built the Electric Arc Furnace, rebuilt the blast furnace and hot strip mill. ... we put a lot of money back into it. The problem was, we knew we needed a strategic partner - we did not have our own raw materials supply, and back in 2006, 2007 and 2008, prices were just going through the roof. It was a difficult environment. We'd been looking to partner with somebody who could provide the raw materials or sell to somebody who had the raw materials, but we'd built it up. Wheeling-Pitt, in 2008, made a tremendous amount of money, it had the potential. We did it, it can make a lot of money."
After selling the mills to Severstal, Bouchard set about rebuilding Esmark and in the years since, he said, they've been able to "build up some really nice steel operations in Chicago and we have a nice plant in Cleveland," though many still consider the steel sector a gamble.
"When we bought our first operation in 2009 after the first collapse, they said we were nuts. Then when we bought half our old company back in 2010, they said we were nuts again. Now, here we are going back into the Ohio Valley in a horrible steel market. ... I'd like to give it one more shot here, see if there's any magic left. It's very hard. It's not like pre-2008, it was a lot easier then to access liquidity and steel consumption was 25 million tons more in the U.S. than it is today. But on the flip side, we're able now to buy great assets like Yorkville and Ohio Coatings for excellent prices, so there's give and take on that."
Bouchard said the key will be the business plan they've put together. "As long as we stick to it and work with the steelworkers and try to build it back up, we'll be OK. They want to save Yorkville and we want to save Yorkville. If we work together, we can do it."