Wheeling-Pitt Prepares for a Brave New Future

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Researched by Industrial Info Resources (Sugar Land, Texas). Wheeling-Pittsburgh Steel Corporation (NYSE:WPSC) (Wheeling, West Virginia) is a bulldog in the steel industry, having survived two Chapter 11 bankruptcies since 1998 and the longest strike against a major U.S. steel company, and it shows no signs of letting up in its dogged pursuit of keeping up with the latest technologies in the industry.

The company’s Follansbee, West Virginia coke plant has been undergoing a coke battery rebuild of its #1, #2, and #3 batteries since late 2005, and is over halfway finished with the project now, with the newer end already up and running. The whole project is expected to be operational by June 2007, a little later than what the company had originally planned, due to an unanticipated delay in shipping the lining brick, which is coming from China. Additional through-wall brick replacement work has raised the original anticipated cost nearly $20 million to $125.5 million. Half of the coke produced will eventually go to Wheeling-Pitt’s partner in the Follansbee coke plant (now known as Mountain State Carbon, LLC), Severstal North America, a U.S. subsidiary of Russian steelmaker OAO Severstal.

Since 2004, the Steubenville works has shut down its #1 blast furnace and replaced it with a $250 million electric arc furnace (EAF). The Mingo Junction works also has ongoing upgrade projects, as well as environmental (MACT) compliance projects.

As if the constant upgrades weren’t enough to keep them occupied, Wheeling-Pitt has become the object of a takeover battle. Earlier this month, the company announced a working agreement with Companhia Siderurgica Nacional (NYSE:CSN) (Sao Paolo, Brazil), which includes plans to undertake a $225 million upgrade of the hot strip mill to expand it to four million tons per year (tpy), as well as upgrade and expand production at CSN’s 900,000 tpy cold-rolling Terre Haute, Indiana facility, the former Heartland Steel, by adding a new 350,000 tpy hot-dip galvanizing line.

To further complicate the plot, Esmark, Incorporated (Chicago, Illinois), a privately-held steel service center group founded in 2003, has recently stepped in with a double-barreled hostile takeover attempt, threatening to elect its own slate of directors in order to approve the takeover. While the United Steelworkers’ union is siding with Esmark on this issue, the fact remains that Esmark is not a steel producer, while CSN is, and the latter appears to be by far the better choice of the two for Wheeling-Pitt’s future stability.

Esmark has embarked on a very aggressive program of takeovers and mergers in the last few years.

The whole issue, with its dramatic cast of characters and various thematic strings and the comic-relief presence of the union chorus, would lend itself well as fodder for a Philip Glass opera – what he did for Columbus and for Galileo, he could surely do for Wheeling-Pitt. Mr. Bradley: be advised.

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