Can the Newly Restarted Sparrows Point Mill Succeed?
The question on everyone’s mind is now that RG Steel has restarted the “L” blast furnace at Sparrows Point can the plant ultimately succeed or, did the shutdown of the hot end of the mill do irreparable damage to the company’s customer base?
During this week’s SMU Steel Market Survey we asked those in the flat rolled steel community what they thought. We specifically tried to identify RG Steel customers to see if they were inclined to continue doing business with the mill.
As one RG Steel customer told us the orders on the books are “competitively priced” since they were sold prior to all of the increases going into effect. We are unaware of any customers with orders on the books canceling those orders.
Going forward the question was a bit more complicated to answer as a number of RG Steel customers have now double bought steel for late January, February and into March.
As you can see by the graph above, those responding to our survey (and we do not pretend to have canvassed all of the RG Steel customers) approximately 72% of the RG Steel customers said they would continue to do business with the mill. Only 28% told SMU during the survey process that they would no longer do business with Sparrows Point.
Of course, there are always “buts” to consider and price is one of the unknowns. Will buyers place orders at RG Steel is they are $20-$30-$40 per ton below the other mills? Can RG Steel afford to quote prices below their competitors in order to capture (or re-capture market share)?
Here are some of the comments left by those answering our questions regarding RG Steel:
“I may put PO's on with them but they will be backed up with duplicate orders at another mill and will need to be significantly cheaper.”
“We're not a direct customer, but I expect our suppliers will be even more cautious in their commitments to RG.”
“Not sure if this goes to any large users of tin mill products. It would be interesting to see their response. The major can makers have moved away from them and I don't think they will come back in 2012. Probably will have a tough time even operating one tin mill line.”
“Never bought much to begin with, but will continue to buy small spot buys when it makes sense.”
“Need to see what happens over the next 30-60 days.”
“Should have had an "unsure" button.”
“John, I thought it'd be nice of me to be "the one" that was brave enough to say "I don't know". Sparrows Point - a conundrum. So many saw this struggle coming. It's throwing good money after bad in my humble opinion.”