|
Schnitzer decision welcome news for mill |
Published: January 14, 2006
By YVETTE SAARINEN
Of the News-Register
With steel prices soaring and steel profits soaring with them, Schnitzer Steel Industries has shelved any thought of selling Cascade Steel Rollings Mills. The McMinnville mill, the only one in Schnitzer's lineup, is off the block.
Confirmation came from mill President Jeff Dyck. It coincided with an announcement from the mill's Portland-based parent company of record quarterly income for its steelmaking arm.
During the third quarter of fiscal 2003, the mill recorded a $300,000 loss.
In the spring of the following year, Schnitzer hired the New York Investment firm Bear, Stearns & Co. to explore options for the mill, including expansion, sale or merger. It said it was open to selling the property if it could find an interested buyer at a reasonable price.
Then demand for steel took off, and prices and profits took off in tandem.
During the third quarter of fiscal 2004, the mill netted a record $7 million.
Steel was bringing an average price of $293 a ton in mid-2003. It was bringing an average price of $448 - a whopping 53 percent increase - by mid-2004.
At that time, then-President Kurt Zetzsche, who has since retired, said, "All of a sudden, steel is a hot commodity. The market has really improved and we're selling everything we can produce."
The mill was able to plow $3 million of its record earnings into upgrades positioning it to compete more effectively.
The key acquisition was a new state-of-the-art electric arc furnace, costing $2.5 million by itself, but the mill also made some major environmental improvements. They promise to pay off in terms of productivity and efficiency.
"With those improvements, we have strengthened our position in the West Coast market," Dyck said. "They have allowed us to be more competitive. Consequently, that has led us to being in a stronger position in the company."
Another key component was the mill's negotiation last summer of a new three-year contract with its union workforce that narrowly averted a strike. It includes a bonus plan based on hitting production targets.
That was a positive contributing factor, Dyck said.
Finally, Schnitzer is under new leadership. And its new president and chief executive officer, John D. Carter, sees the mill fitting into company plans.
"The steel mill continues to see the benefits from the new furnace installed last year, production incentives recently negotiated with the steelworkers union, and other improvements in business practices," he said.
Carter said company revenues from steel manufacturing rose 27 percent to $89 million during the first quarter of fiscal 2006. That's up from $70 million during the same quarter of 2005.
Operating income ran $16 million, up from $13 million. That represents a 26 percent increase
While steel prices were down slightly on a year over year basis, they were up from the fourth quarter of fiscal 2005. Carter said that reflected strong West Coast demand for steel products, particularly rebar.
"West Coast consumption of finished steel long products continues to remain strong and the company is seeing good demand for rebar and merchant bar," he said. "Based on current market conditions, the company expects average prices for the second quarter to be slightly higher than both the first quarter of this year and the second quarter of last year."
Reflecting the strong demand, Dyck said the mill is planning to add another shift in the spring. He said it is in the process of adding 20 to 30 workers, pushing employment to about 480.
The company's move to take the mill off the market is certainly good news locally, Dyck said.
"We're excited that Schnitzer Steel made the decision," he said. "We're definitely a part of the team. We have a good opportunity to help out the company." |
