A new coke oven at the Sparrows Point steel mill might help the plant?s bottom line, create jobs and even generate electricity for the state but isn?t part of an initial five-year investment plan for its new owners, Russian steelmaker Severstal.
But the Point?s inability to create one of the key elements in the production of steel may be one factor driving up its operating costs, according to steel industry expert Chuck Bradford, who said Severstal likely pays high costs to bring in the material.
Coke ovens at the Baltimore County steel mill were shut down nearly two decades ago by state and federal agencies that feared the plants belched carcinogens and other harmful pollution into the local environment.
Company executives mentioned the possibility of securing a local supply of coke, used to fire the blast furnaces that smelt iron ore, during a conference call in March.
The idea was touched on again during a site visit two months ago, the company said.
“It?s something that?s being considered along with any number of things that are being considered to improve the plant?s cost competitiveness,” Severstal spokesman Michael Henson said. He said Severstal executives and plant management would not speak further on the issue Thursday.
The current generation of coke ovens, which bake coal into coke, eliminate carcinogens and other pollutants by burning them in the oven rather than releasing them into the air, said Thomas Golembeski, spokesman for SunCoke, a division of Sunoco.
SunCoke holds the only coke oven technology approved by the U.S. Environmental Protection Agency.
The company operates three plants in Ohio, Virginia and Indiana, and one in Brazil, and just broke ground on a $290
million coke oven facility in Illinois.
Severstal plans to invest $500 million in Sparrows Point over the next five years asit brings the plant to its full capacity of 3.6 million tons of steel per year.
Henson said Severstal considers the plant in overall good condition with its hot mill process in greater need of improvements than its cold milling process.
The company plans general maintenance and improvements during that five-year time frame, and while construction of a coke plant and other major projects are possible, he said, they
aren?t on the drawing board just yet.
“They?re worried about making sure … everyone?s e-mail works and things like that than large-scale things like a coke plant,” he said. “It?s not even at a stage where there?s a plan in place
before any public or city agency.”
BALTIMORE COKE SOURCE IDEA IS NO SURPRISE
While Severstal said there were no immediate plans for the construction of a coke plant at Sparrows Point, it?s no surprise that the company is interested in a local source of coke, said Chuck Bradford, a steel industry expert with Soleil Securities in New York.
“It makes eminent sense, but it may be impossible,” he said. “The company that has the technology [SunCoke] is pretty busy right now.”
Bradford said SunCoke has already committed to several other projects around the country in the next few years.
And even if it?s able to build the coke plant, it might face challenges from state and federal legislators looking to curb carbon emissions ? while the new technology burns the worst pollutants, it still lets off carbon dioxide.
Henson said the plant currently brings in coke through existing contracts that run through 2020, but added that exact figures for the amount, sources and cost of the supply were not immediately available.
But with the cost of coal tripling worldwide since April 1, Bradford said coke is likely one of the biggest expenses to operate Sparrows Point, along with the iron ore the plant must also ship in.
The combination and expense for both may have turned off potential buyers in the steel mill?s recent sale, he said.
“The coke costs at the Point have to be outrageously high these days, that might be one of the reasons the plant did so badly last year,” Bradford said. “They?re totally exposed to coke prices, and they?re totally exposed to iron ore prices. They are the absolute worst off of anyone in the U.S. when it comes to raw materials. That?s why you didn?t have many bidders for the Point.”
