RG Steel Sparrows Point steel making operations are not operating at this time. Our sources tell Steel Market Update (SMU) the “L” blast furnace went down for maintenance earlier this week and has not restarted. Comments from the local press indicate the furnace is being “banked” which means steel making operations have ceased at the mill.

According to our sources, iron ore vessels scheduled to discharge at the Sparrows Point mill have been turned away. However, there does appear to be one ore vessel in port at Sparrows Point – the Unicorn Ocean. Without iron ore steel making operations cannot resume.

Our sources are telling us the slab inventory at the mill is low and that the hot mill will not be able to operate for too long – maybe two weeks is the speculation.

The understanding is the cold mill and the one operating coating line will continue to finish in-process inventory.

Our understanding, without official mill confirmation as our inquiries with official mill channels have not yet prompted a response, is the mill is being shut down indefinitely.

Local press reports including the Baltimore Brew and ABC News reported reviewing an email from a union representative at Sparrows Point to their members. The email said in part, “…Your union and the company is hard at work to resolve this. I promise you that. Please don’t do anything to destroy our chances to save our plant, our mills, our livelihoods.”

The Sparrows Point plant employed about 2,200 workers. Many of them received their “pink slips” just two days before Christmas.

RG Steel purchased Sparrows Point and its 3.5 million ton production capabilities nine months ago – along with other former Severstal mills – Warren and Wheeling-Pittsburgh as well as other assets. Combined, the RG Steel mills had the potential to produce approximately 7.0 million tons. The steel making at Wheeling-Pittsburgh has been idle prior to the purchase by RG Steel and was not restarted by the new owners. The blast furnace at Warren has been producing steel and it is unclear to us at this time if there are plans to shut it down as well.

Steel Market Update spoke with a number of steel mills on Friday to see if their order book was being impacted or how they were reacting to the news regarding Sparrows Point. The mills with whom we spoke told us they had closed their order books and had suspended any open negotiations with customers. Most mill sales offices will be closed until Tuesday and the expectation was that it would take a few days to figure out the impact on the market.

Our expectation is those mills that have not officially announced or followed the third price increase would do so early next week. This would take hot rolled to $750-$790 per ton.

We would also anticipate a potential fourth round of increases once scrap prices are settled for January. Right now the market anticipates an increase of somewhere around $30 to $70 per gross ton.

One thing is for sure. The next few weeks will prove to be interesting for those of us involved in the flat rolled steel industry.

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