(Latest update)

(Updated 6 PM: Layoffs have begun at Sparrows Point, and steelworkers were advised tonight by Local 9477 to file for unemployment benefits next week.

(In a confidential memo obtained by The Brew tonight, RG Steel’s problems were described this way by an officer briefed by management: “The company has not been paying their bills and a lot of their creditors have cut them off. They have cut them off to the point that they couldn’t chance running. Raw material suppliers and power suppliers being the main creditors who seem to have had enough. This is being called a temporary idling [by] management.”)

As The Brew first reported this morning, steelmaking operations at Sparrows Point have been suspended due to “liquidity issues,” according to multiple sources.

The primary, or steelmaking, side of Sparrows Point is being idled immediately by parent company RG Steel. This includes “blowing down,” or emptying the contents, of the mammoth L blast furnace, the production center of the plant.

The finishing side of the mill, which produces steel coils and tinplate for the container and construction industries, will run off immediate inventory, sources said, and then be mostly idled.

(UPDATE: Crane operators and other production workers at the New Cold Roll Mill were told tonight the mill will be shut through New Year’s Day and have been placed on layoff. Maintenance and certain other employees will continue working as existing inventory is packed and shipped. )

RG Steel has not yet officially announced the shutdown, but has informed plant management and officials of Local 9477 of the United Steelworkers Union, sources said.

It is unclear whether the two RG Steel plants in the Midwest will be affected by the shutdown. Company spokesperson Bette Kovach has not responded to e-mails and phone calls seeking information.

In an e-mail to members today, Chris MacLarion, acting president of Local 9477 (president Jeff Mikula is dealing with a family emergency), said, “Your union and the company is hard at work to resolve this [crisis],” adding, “More info is to come later.”

MacLarion also told members: “Do NOT talk to the media.”

1,500 Mill Workers

More than 1,500 union workers are employed at the plant, which has suffered heavy operating losses for months. Suppliers and contractors have complained that bills are not being paid by the steel company.

The suspension of operations is eerily similar to the closing down of Sparrows Point operations 15 months ago by the plant’s prior owner, Severstal North America.

Severstal sold Sparrows Point and two other steel mills to Renco Group last March.

Bankers Face Losses

Renco Group is owned by the reclusive New York billionaire Ira Rennert. But much of the financing for Sparrows Point and the Warren (Ohio) and Wheeling-Pittsburgh mills was provided not by Rennert interests, but by a syndicate of bankers.

Wells Fargo Capital Finance and GE Capital put together a $750-million credit facility last March, according to a statement by RG Steel at the time. Twelve international banks and financial institutions are part of the syndicate.

Technically, RG Steel paid $1.25 billion for Sparrows Point, Warren and Wheeling-Pitt, but the payment was subject to various undisclosed adjustments based on debt and working capital issues.

In October, Severstal filed suit against RG Steel, claiming it was attempting to reduce the size of a scheduled payment on the deal from $124 million to $1.9 million by using improper accounting procedures.