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Wednesday, Mar. 24, 1999

Qualitech Steel files for Chapter 11 bankruptcy

Company: No layoffs planned at newly opened local plant

By ANDREA JARES
Staff Writer

   Qualitech Steel Corp., which operates an iron carbide plant in Corpus Christi, has filed Chapter 11 bankruptcy in Indianapolis federal court.
   The Pittsboro, Ind.-based company will continue to operate as it seeks protection from creditors. No layoffs are planned at the company's two iron facilities in Corpus Christi and Pittsboro, said Steve Emerson, vice president and managing director of Qualitech's Corpus Christi's facility.
   Emerson said he broke the news Monday afternoon, the same day as the filing, to the 45 employees at the company site at 200 Marvin L. Berry Road. The Pittsboro site 15 miles west of Indianapolis employs 350 people.
   "It's a very painful process and certainly we want to continue operations," Emerson said.
   Company officials at the corporate headquarters in Pittsboro did not return phone calls Tuesday.
   The company has 90 days to reorganize or find a buyer of the privately held firm, he said. He expects a buyer to emerge.
   "We've had a dozen different companies that have looked at either one or both of the sites," Emerson said. "Yes, I'm confident there will be a sale and it will continue as either a stand-alone or part of another company."
   One of the suitors is Mitsubishi, which is an investor in the privately held company. Other investors include Enron Corp., Steel Dynamics and J.H. Whitney and Co.
   The company's major creditors are Banque Nationale de Paris, National City Bank in Indianapolis, Mellon Bank and LaSalle National Bank, Emerson said.
   Qualitech has $486 million in liabilities and $247 million in assets, The Indianapolis Star-News reported Tuesday.
   These creditors invested about $500 million for building and start-up costs at the two plant sites. The Star-News reported that some companies have extended a $30 million credit limit to the company.
   

Result of eroding prices

   The Corpus Christi plant uses $100,000 a day in iron ore and $30,000 a day in natural gas, Emerson said. Hydrogen, electricity and salaries are also part of the daily costs of the plant. The total daily cost to run the plant was not available Tuesday.
   The company is one of several to suffer nationwide with the erosion of steel prices, Emerson said. Foreign countries, desperate for venues to sell steel after the downfall of Asian markets, have been selling steel below the market price in the United States. This has caused hardship for domestic steel producers.
   

Capacity down as well

   "What it's done is reduced the demand for scrap for furnace steel-making companies in the U.S.," he said.
   It also has reduced the capacity for the plants.
   "They used to run at 100 percent," he said. "Now we see them at 70 percent utilization."
   The Corpus Christi plant is one of two plants in the world that are capable of producing iron carbide using a type of roasting method to convert iron ore. The other plant, owned by Nucor Corp. and located in Trinidad, has halted production, Emerson said.
   Iron carbide has fewer impurities, making it instrumental in making high-quality steel. Iron carbide and scrap iron affect the same market, Emerson said.
   

Local plant since December

   The Corpus Christi plant was built in 1998 and went into partial production in late December. During that time the plant produced 400 tons of iron carbide, Emerson said. By mid-February, plant officials discovered that some of the plant's parts were not functioning properly, Emerson said.
   The matter was corrected, and the entire 18-acre site went into full production on March 3, he said.
   That day, a gas release caused a flash fire that injured three people. The plant was shut down to re-evaluate the safety operations of the plant.
   The site will go back into full production by the end of the week, Emerson said.
   The iron carbide is used at the Pittsboro plant to make round bars of high-quality steel. The steel is used to make car parts such as pistons, gears and crankshafts.
   Business writer Andrea Jares can be reached at 886-3678 or by e-mail at jaresa@caller.com
   

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