October 13, 2012 12:02 am
By Len Boselovic / Pittsburgh Post-Gazette
The former operator of Wheeling-Pittsburgh Steel has acquired the defunct steel maker's Yorkville, Ohio, plant and a 50 percent stake in a related joint venture for $6.3 million.
Sewickley-based Esmark said it plans to restart the Yorkville plant in January and hire about 160 workers who will be covered by a four-year contract that has been negotiated with the United Steelworkers union. Esmark will invest more than $15 million to purchase steel sheet and other supplies necessary to restart the mill, which will be known as Ohio Cold Rolling.
The acquisition was completed Thursday.
Yorkville and the 50 percent interest in Ohio Coatings Co. were among the assets put on the auction block following the May bankruptcy of RG Steel, the nation's fourth-largest steel producer. RG was formed in March 2011 by combining Wheeling-Pitt's former operations, Bethlehem Steel's former Sparrows Point plant in Baltimore, and the former WCI Steel plant in Warren, Ohio.
The bankruptcy idled all the plants, and much of their equipment is expected to be scrapped given the depressed state of the steel industry. U.S. mills are operating at only 71 percent of capacity.
"We're going to be starting up again in a tight market," said Esmark chairman and CEO James P. Bouchard. "It's just going to take time. We don't want to buy market share."
Mr. Bouchard estimated it would cost $800 million to rebuild the plants Esmark acquired at the bankruptcy auction for $6.3 million, plus $15 million or more to be invested in restarting the plant.
"There were no other bidders except scrappers. That shows you the state of the steel business," he said.
A dispute over cleaning up environmental hazards at the plant had delayed completing the transaction. The U.S. Environmental Protection Agency agreed to make Ohio regulators responsible for enforcing the remediation, which Mr. Bouchard estimated will cost $1.5 million to $3.5 million. He said Esmark has set aside $2 million for the project and Ohio will provide $1 million.
Esmark owns steel service centers in the Northeast and Midwest that process steel for steel producers and their customers. It took control of Wheeling-Pitt after a 2006 proxy fight and sold the operations to Russian steel producer OAO Severstal in 2008 for $1.25 billion, which included the assumption of debt. Severstal sold the mills to RG in 2011.
The Yorkville plant produces light gauge steel used in the container and packaging markets. Much of its steel will be shipped to Ohio Coatings Co., also located in Yorkville. South Korea's TCC Steel owns the other half of the steel processing venture.
The other buyers of RG Steel's assets include a partnership led by Beaver County businessman Charles Betters. They paid $16 million for the Warren plant. Mr. Betters hopes to find someone who will operate the mill, which produced high-carbon steel used in the blades of farm equipment, knives and other products.