Warren Steel Seeks Lower Electric Rates to Restart Mill
WARREN, Ohio -- Warren Steel Holdings LLC has filed documents with the Public Utilities Commission of Ohio requesting the agency approve a reduction in its electricity rates so it can resume production at its idled mill in Champion Township.
Should the company's request not be approved, it would likely result in the permanent closing of the plant and the loss of more than 180 jobs, Warren Steel says in its filing.
"Warren Steel cannot sustain its current losses indefinitely and needs a competitive electric rate in order to remain in business," the filing states.
In a statement released late Wednesday, Warren Steel acknowledged the PUCO filing. "There is an administrative process we will follow as we seek a quick decision on our application for a reasonable arrangement," the statement said.
Warren Steel submitted its request June 4, noting that the Mahoning Avenue plant -- formerly CSC Steel -- was forced to shut down in late March because of the high energy costs the company was forced to pay.
"The rate that Warren Steel paid for electricity when operating was much higher than the rates paid by its predecessor, CSC, or any of its competitors," the PUCO filing says. "Without a competitive power rate, Warren Steel does not have a near-term plan to restart operations."
The company says its electric costs stood in excess of $75 per megawatt an hour, or MWh, while in-state and out-of-state competitors were paying rates of $48 MWh, based on May 2012 data.
Warren Steel is requesting a rate reduction over a six-year period. Under the company's proposal, Warren Steel would pay $50 MWh the first year, $51 MWh the second year, and $52.5 MWh during year three, documents say. Years four through six would constitute a rate 20%, 10%, and 5% respectively below the applicable Ohio Edison non-shopping price.
According to PUCO documents, Warren Steel employs 180 wage and salary workers, plus another 66 full-time contractors. When overtime is taken into account, those jobs translate into 309 full-time equivalent positions, the company says.
There are no layoffs at the plant yet, the company noted, but warned layoffs "are likely unless Warren Steel restarts operations."
Annual payroll at the company is $51.4 million, plus $5 million in benefits, and last year the company purchased $81 million worth of materials from Ohio vendors.
Matt Schilling, spokesman for the PUCO, reports the agency has in the past approved reasonable rate arrangements for other companies such as Timken Co. in Canton, and Republic Steel's Loraine plant.
"Typically, our interest is tied to job numbers and how many would be saved," he says.
Once a request is filed, a 20-day comment period follows, Schilling notes. "Once that ends, we should know the timeline in considering this case."
Warren Steel is requesting that the reduced rates take effect on the first of the month following the commission's approval, and no later than 30 days of after PUCO approval.
Warren Steel, formed as an LLC in 2001, purchased the 369-acre site after CSC, formerly The Copperweld Steel Co., filed for bankruptcy that year and closed the mill. Warren Steel also purchased CSC's newly installed melt shop and continuous caster before the bankruptcy and began making investments at the location, the filing says. The startup was financed by the Privatbank, a conglomerate based in Ukraine that owns metallurgy and manufacturing companies in Ukraine, Russia, Romania and the United States. Privatbank and its majority owner, billionaire Igor Kolomoisky, are political enemies of Russian rebels fighting in Ukraine and Russia's president, Vladimir Putin.
In 2007, Warren Steel began hiring and training a new workforce, and steelmaking operations resumed at the site in 2009.
Since 2009, the company has pumped in $90 million worth of ownership capital contributions, has loans exceeding $60 million, provided other capital investment of more than $24 million, and has tallied working capital expenditures of $125 million, documents say.
Approval from the PUCO would enable Warren Steel to restart operations, make substantial upgrades and expand its production, the filing says.
The company is in negotiations to strike up a strategic partnership with a major steel producer to supply product from northeastern Ohio, but is in competition with another electric-arc furnace operation in the southern United States that pays $50 MWh, the filing says.
A second strategic partnership is also in the works with an Ohio company that would increase production by 6,000 tons a month at the plant, documents say. The company was producing 240,000 tons of steel each year, but has the capacity to produce one million tons, according to the PUCO document. To reach capacity, the company would have to invest $10 million the first year, and then another $33 million over the next three to four years, the filing says.
Warren Steel also says it would add employees as production improves to "374 full-time equivalent jobs," according to the request.
In October, workers at Warren Steel Holdings were informed during an informational session at Kent State Trumbull Campus that their hours would be cut back because of reduced business (READ STORY).
In February 2013, the company announced that it renovated its existing rail siding and introduced several key pieces of analytical equipment, including a scanning electron microscope. “These capital investments will ensure that we can continue to produce and deliver the highest quality goods for our clients with greater cost efficiencies,” said Steve Clancy, Warren Steel Holdings vice president commercial, in that news release.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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