NEW YORK Esmark Steel
Group LLC expects to shave $10 million per year off operating
costs at its newly acquired Yorkville, Ohio, cold-rolling
facility "starting day one," keeping the mill competitive even
in todays challenging market environment, according to
James P. Bouchard, chairman and chief executive officer of
parent company Esmark Inc.
"Youre going to get all
these naysayers out there because of the steel market, but
weve restructured the company," Bouchard said of
Esmarks plans for the operation. "Its a different
Sewickley, Pa.-based Esmark,
which on Thursday closed into escrow on its purchase of RG
Steel LLCs Yorkville mill and its 50-percent interest in
Ohio Coatings Co.s tinplate facility, intends to reduce
expenses at the Yorkville mill through a number of cost-cutting
initiatives, including lower power costs and a more competitive
labor agreement, Bouchard said. He noted that the cost savings
will be realized even before the idled mills planned
ramp-up in early 2013 (
amm.com, Oct. 11).
Esmark is working to negotiate a
30-percent reduction in natural gas and electricity costs,
which likely will be settled Monday or Tuesday once all the
paperwork surrounding the sale has been finalized, Bouchard
The company also has been in
discussions with United Steelworkers union District 1 director
David McCall about a new collective bargaining agreement.
"Weve had great conversations with Dave McCall over the
last few months, and (we) have all the major economic points
agreed to. Well sit down with Dave and the local (soon)
to finish it up," Bouchard said, declining to comment on
specifics of the proposed contract.
Esmark also has been in talks
this fall with four potential domestic steel suppliers for the
Yorkville mill, which will buy 60,000 tons of hot-rolled
substrate in the fourth quarter ahead of its planned January
restart, Bouchard said. "We feel very comfortable with the
producers we have talked to. Theyre all top-quality U.S.
producers. We feel comfortable in the short- and long-term
supply for the mill."
Bouchard declined to identify
which mills might supply hot-rolled steel to Yorkville, but a
source familiar with the operation said U.S. Steel Corp.s
Edgar Thomson mill in Braddock, Pa., and ArcelorMittal USA
Inc.s Cleveland mill were among those being considered. A
spokeswoman for U.S. Steel declined to comment, while
ArcelorMittal did not respond to a request for comment.
After its initial 60,000-ton
buy, the Yorkville mill expects to purchase about 25,000 tons
of hot-rolled substrate per month, or about 300,000 tons per
year, Bouchard said, noting that Esmark intends to increase
that volume in the mid-term.
"Our plan is over the next two
years to get that up to 40,000 tons a month, or 500,000 tons a
year," he said, and that volume could rise further still if
market conditions warrant it. "When we owned Yorkville before,
we were doing 53,000 tons a month before we sold."
The nearby Ohio Coatings joint
venture with South Korea-based TCC Steel Co., which Esmark said
will be renamed Ohio Cold Rolling Co., will be allotted about
25,000 tons per month of Yorkvilles output for
tinplating. The remainder of Yorkvilles cold-rolled
production will be sold to the trade, he said.
"We will focus on 0.015(-gauge
material) and less. That market is now dominated by foreign
producers, so well be going after the light-gauge markets
the domestic guys dont really service. That will be our
niche," Bouchard said, citing end-use consumers in the
container, construction, distribution and original equipment
manufacturing (OEM) sectors.
Meanwhile, the tinplate
mills output will be sold on annual contracts. Esmark has
already kick-started negotiations with customers, Bouchard
said, noting that interest has been high, especially since the
closure of RG Steels Sparrows Point, Md., tinning line,
leaving just Pittsburgh-based U.S. Steel and Chicago-based
ArcelorMittal USA as the countrys only major suppliers.
And with both of those producers in labor discussions with the
USW until the beginning of September, some tinplate buyers were
hesitant to lock in 2013 deals early, giving Esmark a welcome
foot in the door, Bouchard said.
"We lucked out because of the
negotiations (at U.S. Steel and ArcelorMittal), and we lucked
out because the third-largest producer (RG Steel) disappeared,"
he said. "Steel prices are still going down, the steel market
is horrible, no one else is big on these things, but our timing
in the tinplate market and with this mill because of these two
aspects are very good."
James Ledgard, former chief
operating officer of Wheeling-Pittsburgh Steel Corp., will come
out of retirement to serve as chief executive officer of the
new Ohio Cold Rolling Co., while James Tennant, current chief
executive officer of the coating facility, will continue to
serve in that capacity, Esmark said.