Scrap Industry News

North American Steelmakers Fight for Survival

Chapter 11 bankruptcy filings and an exceptionally low steelmaking capacity rate are among the conditions adding up to tough times for the North American steel industry.

Northwestern Steel & Wire Co., Sterling, Ill., and LTV Corp., Cleveland, both filed for Chapter 11 Bankruptcy in the closing days of 2000. Each company cited dumped foreign steel and low steel prices as culprits for their fiscal woes.

Figures compiled regarding the operating capacity of steelmakers and the overall manufacturers’ index in the U.S. did nothing to cheer the attitudes of steelmakers and the scrap companies that supply them.

Northwestern Steel & Wire became the seventh U.S. steel producer in the 1999-2000 timeframe to enter federal bankruptcy protection. The company filed for Chapter 11 bankruptcy in mid-December, citing unfair foreign competition as a primary culprit.

Leaders of the 1,450-employee company say they don’t expect to remain under Chapter 11 protection for long, aiming for a June 2001 emergence. To remain on that timetable, the company must procure further financing.

Despite a federal Steel Loan Guarantee Act, the Chicago Tribune reports the company is having trouble finding a lender willing to loan it the $170 million it needs, even though the federal government has agreed to guarantee 85% of the loan.

Northwestern says it will continue operations during the course of the reorganization.

Just days after the Northwestern announcement, LTV Corp. sought Chapter 11 Bankruptcy Protection in a federal court in Ohio. LTV Corp. The company operates several mills, including plants in Cleveland, Warren and Youngstown, Ohio; Chicago and Hennepin, Ill.; Aliquippa, Pa., and East Chicago, Ind.

Northwestern and LTV joined six other U.S. steelmakers in filing for bankruptcy in a two-year span: Geneva Steel Co., Vineyard, Utah; Laclede Steel Co, St. Louis; Wheeling-Pittsburgh Steel Corp., Wheeling, W.Va.; Gulf States Steel Co., Gadsden, Ala.; Acme Steel Co., Riverdale, Ill.; and Qualitech Steel SBQ LLC, Pittsboro, Ind., have all fallen prey to the current industry crisis, filing for Chapter 11 protection. And in Canada, Co-Steel has closed its Whitby, Ontario, facility after management and labor leaders were unable to reach an agreement on steps to take to keep the plant open during the “current unfavorable environment.”

After competing with an onslaught of foreign-made steel that North American producers say has been unfairly dumped into their markets, a slowing economy has proven to be an unwelcome second act for steelmakers.

According to the American Iron and Steel Institute, Washington, America’s steel mills are now using less than two-thirds of their capacity—a steep drop from the 91% rates of just nine months ago.

The low capacity rates can be especially troublesome for integrated steel-makers, who cannot easily shut down blast furnaces or cancel long-term iron ore contracts.

Steel industry analysts believe prices and demand are still being held down by excess steel inventories in warehouses and plants.

One barometer of economic activity also points to slow conditions. The Purchasing Managers’ Index of the National Association of Purchasing Managers , Tempe, Ariz., indicates the U.S. manufacturing economy failed to grow during each of the last five months of 2000.

The December index figure of 43.7 was the lowest figure since a 42.9 was recorded in April of 1991.

Recycling Industries Appears Finished

Recycling Industries Inc., a name that rose quickly in the ranks of America’s consolidating scrap companies in 1997 and 1998, seems to have left the scene just as abruptly.

The inability to put together a bankruptcy plan acceptable to its creditors may have signaled the end of the Englewood, Colo., company, whose scrap facilities were located primarily in the southeastern U.S. Among those facilities are Brenner Iron & Metal, Republic Alloys and United Metal Recyclers yards in North Carolina; Central Metals Co. and Addlestone Recycling sites in Georgia; Jacobson Metal Co. and Peanut City Iron & Metal sites in Virginia; William Lans Sons Co. facilities in Illinois; and the Weissman Iron & Metal yard in Iowa.

A bankruptcy judge in Colorado dismissed a plan the company filed in early December, and it began shutting down the next day. The Denver Post estimates 400 workers have been laid off at the affected facilities. The plan was reportedly unacceptable to lead creditor GE Capital.

It remains unclear what will become of the individual scrap processing facilities. As of early January, phones at many of the facilities were answered by security personnel, who indicated the yards were indefinitely closed.

Mike Brenner of the former Brenner Iron & Metal Recycling Industries subsidiary in Winston-Salem, N.C., says his family members and co-workers are awaiting further word from GE Capital. The lender has sent appraisers to each of the former Recycling Industries sites, and may begin offering them for sale or auction.

Brenner notes that his family has 70 years of involvement in the business, including 30 years in the business himself. “We’re looking at all our options, but this business is what we know. We’re certainly waiting for GE Capital to make up their minds and we’re anxious to see if there will be any opportunities for us.”