Warren Steel Holdings Roars Back to Life

WARREN, Ohio -- A piping hot glow radiates across the top of the electric arc furnace at Warren Steel Holdings LLC as it roars into action, melting scrap steel at roughly 3,000 degrees.

Meanwhile, large ladles carrying molten metal are automatically guided across the plant, their contents poured into a continuous caster that produces round steel blooms.

"It's the sound of money," exclaims plant manager John Scheel as he stands just outside the plant, listening to the furnace kick in. "Everybody's happy to be making steel again."

Scheel spoke with reporters Monday after he and other executives hosted U.S. Sen. Sherrod Brown, D-Ohio, on a tour of the mill.

The steel mill in Champion Township restarted operations Aug. 7 after the management of Warren Holdings successfully negotiated a lower electric rate agreement with the Public Utilities Commission of Ohio. Terms of that agreement reduced the electricity costs of the mill by almost half. The mill had been shut down since late March, and while there were no layoffs, the future of the plant remained in doubt.

Now, some 170 workers are back in the plant cranking out steel to satisfy a filled order book, Scheel says. By September, the number of employees should exceed 200 and allow the plant to operate around the clock.

"We have lots of orders. It's a great thing," Scheel says.

The plant manager says it was critical for his company to secure “reasonable” electric rates because its electric arc furnace consumes so much power. Other mills throughout Ohio were afforded the same cut rates to remain competitive, he iterated.

Warren Steel was paying on average in excess of $75 per megawatt per hour, far more than other plants in Ohio or steel mills out-of-state, Scheel says.

"Fundamentally, this steel plant was the only one in the state that didn't have a $50 power rate," Scheel told reporters Monday. "And that was one of the reasons why it wasn't very cost-effective. The state of Ohio has fixed that."

In July, the PUCO approved a new six-year agreement that reduces Warren Steel's rate to $50 per megawatt per hour, or MWh, the first year, $51 MWh the second, and $52.5 in year three. Years four through six would have rates 20%, 10% and 5% respectively below the applicable Ohio Edison nonshopping rate.

As part of the agreement, Warren Steel pledged to invest $10 million this year into its operations, a process now underway. "It's already started,” Scheel says. “My intent is to go fast."

He also says the company has provided opportunities for younger people in the community, but concedes it's a challenge to find the workers who have the skills to perform this kind of work. "It's very difficult," he says. "We need people who can do math and science."

After the tour, Sen. Brown said Warren Steel is an example of how American manufacturing is making a comeback.

"This plant is growing with a significantly younger workforce. It's growing in part because the United States government is finally enforcing trade rules better than we used to," Brown told reporters. "This plant's also growing because we've been able to work things out with electric rates.”

Brown and U.S. Rep. Tim Ryan, D-13 Ohio, sent a letter to PUCO chief Tom Johnson in support of Warren Steel's request for reduced rates.

"Few companies use as much electricity as a steel mill like this," Brown says. "This company simply wanted to get a rate similar to any really big purchasers."

Brown also pointed to the importance of enforcing of U.S. trade law, especially as it pertains to oil country tubular goods, or OCTG, pipe. Last month, the Obama administration found that OCTG pipe shipped from South Korea was "dumped" on the U.S. market, driving down prices.

While that decision doesn't directly affect Warren Steel and the products it turns out, it does affect its customers such as Vallourec Star in Youngstown and U.S. Steel Corp. in Lorain.

Scheel reports that Warren Steel has a steady backlog of orders from its three major customers: Kentucky Electric Steel, Vallourec and U.S. Steel.

Throughout this year, he estimates that the company will produce on average between 20,000 and 25,000 tons of steel per month. "This furnace is the exact same furnace used by Vallourec, and they make 70,000 tons a month. And our goal is to get there."

Michael Salamon, president of a related company, Optima Specialty Steel, has oversight of the operations at Warren and says that the product manufactured there is eventually used mostly in the automotive and oil country tubular goods markets.

Steel sold to Kentucky Electric Steel, for example, is formed into special bar quality, or SBQ, steel products. Much of that steel goes into manufacturing components for the appliance, automotive and agricultural industries, such as steering gears for vehicles.

"The other primary market is oil country tubular goods," Salamon says. "The steel that comes out of here is further processed at piercing mills," such as Vallourec and U.S. Steel. These companies produce pipe used in drilling applications.

The resurgence of oil and gas exploration in the Marcellus and Utica shale plays has driven additional steel consumption, which puts the Warren mill in a choice place to grow. "Everything we can make will go out the door," he reports. "We want to make sure we have a solid footing, and that we're on time."

Employment at the mill is expected to eventually reach about 300, he reports.

Securing the new electric rate agreement was a critical component to more growth at the site, Salamon says. "We didn't ask for anything more, or anything less,” he remarks. “We just wanted to be treated fairly and the PUCO did a terrific job of understanding what we were asking for."

Warren Steel Holdings purchased the real estate, buildings and some key equipment from CSC Ltd. -- formerly Copperweld Steel Co. -- in 2001 after CSC filed bankruptcy and liquidated. Most important, Warren Steel purchased the company's then brand-new electric arc furnace and continuous caster, and started making additional investments in the operation.

Steelmaking resumed in 2009.

Today, the 396-acre site is still the home of older, dilapidated industrial buildings that once were part of the Copperweld campus.

"We'll take down most of them," Salamon says, noting that demolition of certain structures is in progress. This makes room for any new potential expansion at the site, he says.

"As the market permits, we'd like to bring this shop up to almost a million tons of steel production" per year, Salamon says. "And, add downstream rolling mills and processing plants that support it."

Pictured: Manufacturing resumes inside Warren Steel Holdings in Champion Township.

Copyright 2014 The Business Journal, Youngstown, Ohio.
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