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Esmark, Partners in Steel sign SBQ deal

Keywords: Tags  Esmark, Partners in Steel, John Foster, James Bouchard, flat-rolled, Yorkville, Ohio Coatings, tinplate SBQ

NEW YORK — Esmark Steel Group LLC, Chicago Heights, Ill., has entered into an agreement with Partners in Steel International LLC to sell its special bar quality (SBQ) assets as the service center effectively exits the steel bar business.

The purchase of the assets, inventory and other equipment at Esmark subsidiary Chicago Steel & Iron Bar was finalized late June 6 for an undisclosed amount, according to Partners in Steel, which said the terms of the deal were in the multi-million-dollar range, a figure that was confirmed by Esmark.

As for the future of Chicago Steel & Iron Bar, the company will be dissolved within the next week, according to James P. Bouchard, chairman and chief executive officer of Sewickley, Pa.-based parent Esmark Inc.

"One of the reasons for the sale is because Esmark is exiting the bar business. Our focus will be on the flat-rolled side, which has kind of been our expertise for years," Bouchard told AMM. "Obviously, our next focus will be getting Yorkville (Ohio) fired up and ready for the 2014 tin season."

Esmark’s Yorkville facility, originally part of defunct steelmaker RG Steel LLC, will supply substrate to Ohio Coatings Co., a 50-50 tinplate joint venture with Seoul, South Korea-based TCC Steel Co.

Bouchard said that while the bar business had been relatively resilient despite a softer steel market, it recently suffered from shorter lead times and oversupplied markets. "It’s just a different type of business than what we’re used to in the flat-rolled side," he said. "We got uncomfortable with the bar side because it’s just not in our expertise. We built (Chicago Steel & Iron Bar) up from scratch and deployed a tremendous amount of working capital—approximately $30 million—and didn’t have the returns we expected."

But while Esmark continues to focus on the flat-rolled side, Partners in Steel managing director John D. Foster said that the future looks bright for the bar market. Foster, a former president and chief executive officer of steel trader Coutinho & Ferrostaal Inc., created the consulting, marketing and investment services company in 2011.

"We’re not buying the company, but we’re buying certain assets of it. I see significant value in specialty steels. I think the challenge in the sector has tremendous upside potential," Foster told AMM.

Foster declined to specify what the purchased assets will be used for, but confirmed that he will not be entering the distribution business himself and instead advising further transactions.

"I think the market has reached a turning point. We’re buying at a time when there’s a lot of upside potential," he said.

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