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Steelmaker Looks To Sell Factories

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Russia’s largest steelmaker Severstal is seeking to sell plants in Maryland, Ohio and West Virginia that it acquired for a total of $2.2 billion in 2008, the United Steelworkers union said Thursday.

The union said it is working with Severstal in hopes of finding a single buyer for the Sparrows Point complex near Baltimore; the former Wheeling-Pitt operations based in Wheeling, W.Va.; and the former WCI Steel mill in Warren, Ohio.

Severstal also owns a mill at the Rouge Complex in Dearborn.

The union said it represents about 6,000 workers at the three properties combined, including about 2,500 at Sparrows Point, 2,200 at Severstal Wheeling and 1,300 at Severstal Warren.

“We are very concerned about keeping those jobs and keeping a certain capacity of steel in this market,” said United Steelworkers spokesman Gary Hubbard in Washington.

The trade journal American Metal Magazine reported Thursday that Severstal wants to hear from potential bidders by Friday.

Marika Diamond, a Severstal spokeswoman in Dearborn, Mich., declined to comment on what she called “market rumors and speculation.”

Steel industry expert Robert Crandall at the Brookings Institution in Washington said it’s no surprise that Severstal wants to sell the plants, which he said are generally old and inefficient except for a large blast furnace at Sparrows Point that, at just more than 30 years old, is among the newest in the United States.

But even the blast furnace, which reduces ore to molten iron, is costly to run because iron ore costs have nearly doubled in the past year largely because of strong demand from China, said Charles Bradford of Affiliated Research Group LLC in New York.

“There are serious, serious issues” with all the plants Severstal wants to sell, Bradford said. “These plants are obviously losing lots of money.”

Severstal reported a $1 billion loss last year, but said it was well-positioned for recovery.

In May, Severstal sold its remanning Northern Steel Group Inc. assets – Independent Steel in Ohio, and Sun Steel and Century Steel in Illinois – to Esmark Inc. It previously sold other parts of that group to Aurora Resurgence.

CEO Sergei Kuznetsov said in May that Severstal planned to focus on its core strategy of developing competitive and efficient assets in North America.

Bradford said Severstal’s best asset is a modern minimill in Columbus, Miss., that the company is expanding. Severstal also owns a mill in Dearborn, Mich., that Bradford called “another catastrophe.”

Hubbard, of the steelworkers union, said Severstal’s problems reflect the troubled state of the U.S. steel industry in a market beset by a global recession and abundant supply from China. And he noted that Severstal’s collective bargaining agreement gives the union the right to counter any purchase offers it doesn’t like.

© MMX WWJ Radio, All Rights Reserved. The Associated Press contributed to his report.

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