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Justice Dept. Orders Sale of Baltimore Steel Mill
Decision to Divest Sparrows Point Was Condition of European Firms' $33 Billion Merger

By Anita Huslin
Washington Post Staff Writer
Wednesday, February 21, 2007

The Justice Department yesterday ordered international steel conglomerate Arcelor Mittal to sell off the venerable Sparrows Point mill near Baltimore, to preserve competition in the eastern U.S. tin mill market.

The divestiture of the 116-year-old plant, which in its heyday was the world's largest steelmaker, is not expected to have an immediate impact on its workforce or operations, union officials said. The plant once employed 30,000 people at the mill and nearby shipyards, and produced millions of tons of steel for guns, airplanes and warships during World War II.

Justice Department officials ordered the divestiture of Sparrows Point as a condition of Mittal Steel Co.'s $33 billion acquisition of Arcelor SA. The department had originally called for the Dutch company to spin off a Canadian subsidiary that makes tin mill products. But after that deal proved impossible for legal reasons, the Justice Department said Mittal would have to sell one of its other mills -- Sparrows Point or its plant in Weirton, W.Va.

Yesterday, the department decided it should be Sparrows Point, which manufactures rolled steel sheets primarily used to make cans for food, aerosols, paints and other products. Unlike Weirton, Sparrows Point produces the steel slabs used to manufacture tin mill products and would not have to develop new supply sources for the material if Mittal sold it, Justice Department officials said.

"With the divestiture of Sparrows Point, competition in the market for tin mill products in the eastern United States will be preserved," said Thomas O. Barnett, assistant attorney general in charge of the Justice Department's antitrust division.

Mittal officials did not return calls for comment about the order.

Bill Barry, director of labor studies for the Community College of Baltimore County, said that the decision was not unexpected and that the community is hoping the new owner will invest in the plant for the future.

Bethlehem Steel owned Sparrows Point from the early 1900s until it declared bankruptcy and was bought in 2003 by International Steel Group, which merged it with LTV Steel to create the largest steel producer in the United States. In 2004, Indian billionaire Lakshmi N. Mittal bought ISG for about $4.5 billion, merging it with his Rotterdam-based Ispat International NV and LNM Holdings NV. The new company, based in the Netherlands, exceeded Luxembourg-based Arcelor SA as the world's largest steelmaker.

"The old Bethlehem Steel was reluctant to spend money for capital improvements, and this is one reason that there are 2,000 workers instead of 31,000 at The Point," Barry said in an e-mail. "The frantic development of the global steel industry requires equally consistent capital investments."

David R. McCall, chairman of United Steelworkers' Mittal Steel committee, said the Justice Department's order will erode Mittal's market dominance.

"It makes Mittal USA not as strong as it could be, and does not assure Sparrows Point or Weirton a secure future," McCall said in a statement. "We will ask for a review and will assure our members who are employed at Sparrows Point that we will make a dedicated and strong effort to reverse the decision."

The USW represents 2,106 production workers at Sparrows Point; about 275 salaried nonunion employees also work there. In the mid-1950s, Sparrows Point's furnaces poured hundreds of thousands of tons of hot metal a day and was Baltimore's primary employer.

The order highlights the continued volatility of an industry that in recent years has been marked by myriad mergers and acquisitions, as U.S. and European manufacturers consolidate to compete in a growing global steel market, particularly to meet demands in India and China.

Before Mittal bought Arcelor, Mittal and U.S. Steel sold nearly 75 percent of all tin mill products in the eastern United States. An Ontario subsidiary of Arcelor provided competition in that market. But that rivalry would have been eroded by the merger, according to the Justice Department.

Analysts said there is likely to be interest in Sparrows Point from several other steel conglomerates, such as Brazilian steelmaker CSN, which had previously explored buying Sparrows Point from Bethlehem Steel; or Russia's Severstal, which had bid for Arcelor and has been aggressively seeking steelmaking assets in North America.

Sparrows Point offers international companies a deep-water port for easy import of steel-making materials and access to land-based transportation, analysts said.

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