Daily Independent (Ashland, KY)

Local News

February 20, 2013

KES sold to Florida company

PRINCESS — Kentucky Electric Steel has been sold to a Florida-based Optima Specialty Steel.

Optima plans to invest in the plant to expand its production, but will most likely close the melt shop, officials said.

Earlier this month, Optima Specialty Steel, based in Miami, Fla., paid $112.5 million in cash for KES, which had been owned by ALJ Regional Holdings, Inc. since 2003.

KES employs approximately 150 workers at its a “mini-mill” along U.S. 60 in Princess. The mill produces more than 2,600 different bar flat items, which are mostly used for leaf-spring suspension components in light and heavy duty trucks, mini-vans, utility vehicles and trailers.

KES General Manager John Scheel called the merger positive on Tuesday. “We are being bought by our largest customer. That is good,” he said. Optima also owns Niagra LaSalle, which purchases most of the flat bar items from KES, he explained.

ALJ, Scheel explained, was “basically a hedge fund. They were financial investors, they were not a steel company. Their goal was always to buy it and sell it. That was always their objective and now a steel company has bought it,” he said.

“I will expect that everybody will stay employed. There will probably be differences, that is likely, (but) in the long run, we will have more business,” Scheel said of the merger.

 “We have a melt shop and it is likely to be shut down. That does not mean anybody will lose their employment. We’ll just jiggle folks around. I think that work will be there,” he said, noting the plant does have a “fairly old work force. We’ll have to take that into account as well.”

Optima, he said, owns a large melting shop in Warren, Ohio, and will likely those types of materials from them.

“Of the steel that we rolled in the mill, we made about one-third of it and bought about two-thirds of it from outside. Now we’ll likely buy the rest of it,” said Scheel. “We are actually North America’s largest buyer of billets, what are semi-finished for steel we use at the rollermill. We are the largest buyer and will pretty much continue to be the country’s largest buyer.”

Scheel said Optima is preparing to invest in the plant so that it can manufacture steel rounds as well as flat bars.

“We’ll be expanding our product,” said Scheel.

Plans for adding that capacity are still in the engineering phase but could represent an investment of “several million dollars” into the plant, according to Scheel.

“In the long run, I think everyone will make out pretty well. In the end it gives you a little more longevity. What I am most concerned about is that you have a steel mill that lasts for years and years and years so that the kids of our employees have a chance to work there, too. That out to be more doable with a steel company owning us,” said Scheel.

“It is definitely going to be a positive for the community and the area, giving Kentucky Electric Steel more options and a broader portfolio of things that they will be able to sell,” said Ashland Alliance Director of Business Development Bob Hammond. “Optima looked at KES and definitely saw the value in it and its employees, its operations and felt it was of value to add to their company,” Hammond said. He added, “Hopefully, like John (Scheel) is saying, they will have longevity.”

CARRIE STAMBAUGH can be reached at cstambaugh@dailyindependent.com or (606) 326-2653.

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