Public Comment and Response on Proposed Final Judgment, 17634-17686 [07-1321]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 72, Number 67 (Monday, April 9, 2007)]
[Notices]
[Pages 17634-17686]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-1321]



[[Page 17633]]

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Part II





Department of Justice





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Antitrust Division



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Public Comment and Response on Proposed Final Judgement; Notice

Federal Register / Vol. 72, No. 67 / Monday, April 9, 2007 / 
Notices

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DEPARTMENT OF JUSTICE

Antitrust Division


Public Comment and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comments 
received on the proposed Final Judgment in United States v. Mittal 
Steel Company, No. 1:06-CV-1360-ESH, which were filed in the United 
States District Court for the District of Columbia, on February 13, 
2007.
    Copies of the comments and the response are available for 
inspection at the Department of Justice Antitrust Division, 325 Seventh 
Street, NW., Room 200, Washington, DC 20530, (telephone (202) 514-
2481), and at the Office of the Clerk of the United States District 
Court for the District of Columbia, 333 Constitution Avenue, NW., 
Washington, DC 20001. Copies of any of these materials may be obtained 
upon request and payment of a copying fee.

J. Robert Kramer II,
Director of Operations Antitrust Division.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

United States of America, Plaintiff, v. Mittal Steel Company N.V., 
Defendant

[Civil Action No. 1: 06CV01360-ESH]

Response of Plaintiff United States to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. section 16(b)-(h) (``APPA'' or ``Tunney 
Act''), the United States hereby responds to the public comments 
received regarding the proposed final Judgment in this case. After 
careful consideration of the comments, the United States continues to 
believe that the proposed Final Judgment will provide an effective and 
appropriate remedy for the antitrust violations alleged in the 
Complaint. The United States will move the Court for entry of the 
proposed Final Judgment after the public comments and this Response 
have been published in the Federal Register, pursuant to 15 U.S.C. 
section 16(d).
    On August 1, 2006, the United States filed the Complaint in this 
matter alleging that the proposed acquisition of Arcelor S.A. 
(``Arcelor'') by defendant Mittal Steel Company N.V. (``Mittal Steel'') 
would violate Section 7 of the Clayton Act, 15 U.S.C. section 18. 
Simultaneously with the filing of the Complaint, the United States 
filed a proposed Final Judgment and a Hold Separate Stipulation and 
Order (``HSSO'') signed by plaintiff and Mittal Steel consenting to the 
entry of the proposed Final Judgment after compliance with the 
requirements of the Tunney Act, 15 U.S.C. section 16. Pursuant to those 
requirements, the United States filed its Competitive Impact State 
(``CIS'') in this Court on August 1, 2006; published the proposed Final 
Judgment and CIS in the Federal Register on August 24, 2006, see United 
States v. Mittal Steel Company N.V., 71 Fed. Reg. 50084, 2006 WL 
2431068; and published summaries of the terms of the proposed Final 
Judgment and CIS, together with directions for the submission of 
written comments relating to the proposed Final Judgment, in The 
Washington Post for seven days beginning on September 10, 2006 and 
ending on September 16, 2006. The 60-day period for public comments 
ended on November 15, 2006, and three comments were received as 
described below and attached hereto.

I. The Investigation and Proposed Resolution

    On January 27, 2006, Mittal Steel announced its intention to 
commence a tender offer to acquire control of Arcelor. At the same 
time, Mittal Steel announced that it would subsequently sell Arcelor's 
recently acquired Canadian subsidiary, Dofasco Inc. (``Dofasco'') to 
ThyssenKrupp A.G. (``ThyssenKrupp'') if it acquired control of Arcelor. 
For six months following the announcement of the tender offer, the 
United States Department of Justice (``Department'') conducted an 
extensive, detailed investigation into the competitive effects of the 
Mittal/Arcelor transaction. As part of this investigation, the 
Department obtained substantial documents and information from Mittal 
Steel and issued eight Civil Investigative Demands to third parties. 
The Department received and considered more than 45,000 pages of 
material. More than fifty interviews were conducted with customers, 
competitors, and other individuals with knowledge of the industry. The 
investigative staff carefully analyzed the information provided and 
thoroughly considered all of the issues presented. The Department 
considered the potential competitive effects of the transaction with 
respect to a number of steel products, obtaining information about 
these products from customers, competitors, and other knowledgeable 
parties. The Department concluded that the combination of Mittal Steel 
and Arcelor likely would lessen competition in one market--Tin Mill 
Products (``TMP'') sold to customers in the United States, east of the 
Rocky Mountains (``Eastern United States''.) TMP are finely rolled 
steel sheets, usually coated with a thin protective layer of tin or 
chrome. TMP include black plate, electrolytic tin plate (``ETP''), and 
tin free steel (``TFS''). Black plate is a light-guage cold-rolled bare 
steel sheet that serves as a substrate for production of ETP and TFS. 
Black plate is coated with tin to produce ETP and with chrome to 
produce TFS. Both ETP and TFS are used primarily in manufacturing steel 
cans for packaging a wide range of food products, such as soup, fruits, 
and vegetables, and non-food products, such as paints, aerosols, and 
shaving cream. For most TMP purchasers, particularly food can makers, 
there are no close substitutes for TMP. Packaging alternatives, such as 
plastic containers, are not viewed as close product substitutes. A 
small but significant increase in price would not likely cause 
sufficient TMP can customers to switch products or otherwise curtail 
their TMP usage so as to render the increase unprofitable.
    More than 89 percent of TMP sold in the Eastern United States is 
manufactured by firms located either in the Eastern United States or 
eastern Canada. A small but significant increase in price for TMP would 
not cause TMP customers in the United States to substitute purchases 
from outside the Eastern United States in sufficient quantities to make 
such a price increase unprofitable. Mittal Steel, Arcelor, and 
Arcelor's subsidiary Dofasco sell TMP to customers in the Eastern 
United States.
    As explained more fully in the Complaint and CIS, the acquisition 
of Arcelor and Dofasco by Mittal Steel would substantially increase 
concentration and lessen competition in the production and sale of TMP 
in the Eastern United States, giving the top two TMP producers, 
including Mittal Steel, a market share of more than 81 percent of 
sales. Therefore, the Department filed its Complaint alleging 
competitive harm in the TMP market in the Eastern United States and 
sought a remedy that would ensure that such harm is prevented.
    The proposed Final Judgment in this case is designed to preserve 
competition in the production, manufacture, and sale of TMP in the 
Eastern United States. The proposed Final Judgment requires the 
divestiture of sufficient assets to prevent the increase in 
concentration that resulted from the combination of Mittal Steel's 
capacity and Arcelor's capacity to supply TMP to the Eastern United 
States market. The proposed Final Judgment requires the

[[Page 17635]]

divestiture of a significant steel mill that manufactures TMP for sale 
in the Eastern United States. Specifically, it directs a sale of 
Dofasco to ThyssenKrupp or an alternative purchaser acceptable to the 
United States. At the time the proposed Final Judgment was filed with 
the Court, Mittal Steel already had executed a letter of intent to sell 
Dofasco to ThyssenKrupp when and if Mittal Steel acquired Arcelor, at a 
price comparable to the price Arcelor itself paid to acquire Dofasco in 
early 2006. Dofasco, which has a history of successful operation as an 
independent entity, has not been integrated into Arcelor and thus 
remains a viable divestiture candidate.
    Mittal Steel's announced plan to sell Dofasco to ThyssenKrupp upon 
its acquisition of Arcelor would have mitigated the increase in post-
merger concentration in the Eastern United States that would have 
resulted from its acquisition of Arcelor. As part of an effort by 
Arcelor's Board of Directors to impede the tender offer, however, 
Arcelor sought to prevent any figure effort by Mittal Steel to divest 
Dofasco by transferring Arcelor's Dofasco legal title to an independent 
Dutch foundation, known as the Strategic Steel Stichting (``S3''). 
Since Mittal completed its acquisition of Arcelor, Arcelor and Mittal 
Steel have requested that the S3 dissolve itself so as to permit the 
sale of Dofasco to ThyssenKrupp. The board of the S3 nevertheless has 
decided not to dissolve itself.
    In negotiating the proposed Final Judgment, the parties recognized 
that the existence of the S3 could prevent Mittal Steel from divesting 
Dofasco in a timely manner. For this reason, the Department determined 
that alternative assets, owned by Mittal Steel and not burdened with 
any restrictions on sale, should be designated to accomplish the 
intended preservation of TMP competition in the event that Mittal Steel 
was unable to divest Dofasco within the time allowed by the decree. The 
proposed Final Judgment requires Mittal Steel to divest one of two 
steel mills--Sparrows Point or Weirton--if, despite its best efforts to 
do so, it has not been able to carry out the divestiture of Dofasco 
within the period allowed by the decree. Sparrows Point is a fully 
integrated steel mill located near Baltimore, Maryland, which produces 
a diversified portfolio of products, including hot-rolled sheet, cold-
rolled sheet, galvanized sheet, Galvalume, and TMP, for construction, 
steel service center, container, appliance, and other end-use markets. 
Weirton, located in Weirton, West Virginia, operates primarily as a TMP 
finishing facility, converting steel slabs obtained from Mittal's 
Sparrows Point and Cleveland plants.
    In the Department's judgment, divestiture of Dofasco to 
ThyssenKrupp or another qualified purchaser would remedy the violation 
alleged in the Complaint because Dofasco is an integrated steel mill 
that has the demonstrated capacity to make significant TMP sales in the 
Eastern United States. In the event that Mittal fails to sell Dofasco 
in a timely manner due to legal impediments arising from its control by 
the S3 and the S3's refusal to permit its sale, the proposed Final 
Judgment provides that the Department will determine whether Sparrows 
Point or Weirton should be divested to remedy the violation alleged in 
the Complaint. The Department is confident that these options allow it 
to select an alternate facility the divestiture of which to a viable 
qualified purchaser would remedy the violation. Each mill currently 
makes substantial TMP sales in the Eastern United States, and the 
successful continued operation of either mill by a viable qualified 
purchaser would remedy the violation. The Department is currently 
assessing which of these two mills is most likely to continue as an on-
going vigorous competitor for TMP sales in the event that Dofasco 
cannot be divested. Sparrows Point is an integrated facility that 
produces a variety of steel products in addition to TMP, and it 
manufactures its own steel slabs, which are the basic raw material for 
TMP fabrication. Weirton currently operates as a TMP finishing facility 
that converts slabs obtained from Mittal Steel's Sparrows Point and 
Cleveland mills. Mittal recently idled Weirton's slab-making facilities 
because they were considered to be less efficient than other slab 
manufacturing locations within the Mittal Steel organization, and the 
Department is assessing whether those facilities could be reactivated 
to produce slabs at Weirton on a cost-effective basis in the event of 
Weirton's divestiture. Even if the Department concludes that cost-
effective slab production at Weirton is not likely to be feasible, 
there still may be sources from which Weirton could obtain slabs with a 
degree of consistency and reliability, and at a cost that would enable 
it to compete successfully as an independent supplier of TMP to the 
Eastern United States market. The Department will consider the 
availability of slabs to Weirton and other relevant considerations in 
determining whether Sparrows Point or Weirton should be divested to 
remedy the violation alleged in the Complaint, and it will select the 
mill that is most likely to continue to compete successfully for TMP 
sales in the Eastern United States following its divestiture by Mittal 
Steel. The proposed Final Judgment would permit this process to go 
forward if Dofasco cannot be sold in a timely manner. Although entry of 
the proposed Final Judgment would terminate this action, the Court 
would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and punish violations 
thereof.\1\
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    \1\ The merger closed on August 1, 2006. In keeping with the 
United States's standard practice, neither the HSSO nor the proposed 
Final Judgment prohibited closing the merger. See ABA Section of 
Antitrust Law, Antitrust Law Developments 387 (5th ed. 2002) (noting 
that ``[t]he Federal Trade Commission (as well as the Department of 
Justice) generally will permit the underlying transaction to close 
during the notice and comment period''). Such a prohibition could 
interfere with many time-sensitive deals and prevent or delay the 
realization of substantial efficiencies. In consent decrees 
requiring divestitures, it is also standard practice to include a 
``preservation of assets'' clause in the decree and to file a 
stipulation to ensure that the assets to be divested remain 
competitively viable. That practice was followed here. Proposed 
Final Judgment Sec.  VIII. In addition, the HSSO has been filed and 
entered by the Court in this case. That Order requires Mittal Steel 
to preserve Weirton and Sparrows Point and to hold separate Dofasco, 
pending the divestiture contemplated by the proposed Final Judgment.
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II. Summary of Public Comments and Responses

    During the 60-day public comment period, the United States received 
comments from Silgan Containers Corporation (``Silgan''), ThyssenKrupp, 
and DaimlerCyrysler Corporation (``DaimlerChrysler''). Upon review, the 
United States believes that nothing in the comments warrants a change 
in the proposed Final Judgment or is sufficient to suggest that the 
proposed Final Judgment is not in the public interest. The comments 
include concerns relating to whether the proposed Final Judgment 
adequately remedies the harms alleged in the Complaint. The United 
States addresses these concerns below and explains how the remedy is 
appropriate.

A. Public Comment Submitted by Silgan

1. Summary of Silgan's Comment
    Silgan, the largest food can producer and the largest consumer of 
TMP in the United Stats, submitted a 42-page comment with 44 
attachments (attached hereto as Exhibit 1). Silgan's submission asserts 
that only the divestiture of Dofasco has any prospect for success, and 
that neither the divestiture of Weirton nor the divestiture of Sparrows 
Point will be effective.

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    Silgan's comments may be summarized in three points. First, Silgan 
argues that Weirton cannot long survive as an independent producer of 
TMP, because it cannot produce slabs--the essential TMP substrate--at a 
competitive cost and cannot obtain slabs from elsewhere at a 
competitive cost. Thus, Weirton should not be divested.
    Second, Silgan further asserts that, although Sparrows Point is 
capable of surviving as a stand-along producer of TMP, it currently 
provides 45 percent of the slabs used by Weirton. If Sparrows Point is 
divested, Weirton will be separated from a significant portion of its 
supply of slabs and will be unable to obtain a sufficient number of 
slabs from other sources. Thus, if Sparrows Point is divested, Weirton 
may cease TMP production even if it is kept in the Mittal Steel group.
    Finally, Silgan concludes that since divestiture of either Weirton 
or Sparrows Point likely will lead to the demise of Weirton as a TMP 
producer, neither Mittal Steel mill should be divested. Instead, Silgan 
argues that Dofasco should be divested even if accomplishing that 
objective must await the expiration of the S3, and that the Final 
Judgment should be modified to extend the period for divesting Dofasco 
by several years. This would require that the stipulated HSSo, under 
which Dofasco now is operating, be modified to extend for the entire 
duration of the S3.\2\
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    \2\ Silgan assets in its comment that the S3 has a 5-year term. 
Although the actual term of the S3 is not public information, it is 
many times longer than the period the proposed Final Judgment gives 
Mittal Steel to effect the divestiture of one of the three mills.
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2. Response of United States to Silgan's Comment
    The United States has carefully considered Silgan's concern that 
Weirton will go out of business if the United States chooses Weirton or 
Sparrows Point as an alternative divestiture, but disagrees.
    Silgan's conclusion rests crucially on an assumption that slabs 
suitable for use in TMP production would be readily or economically 
available to Weirton from sources other than Sparrows Point. The United 
States agrees that the supply of slabs is an important issue, but the 
concerns raised by Silgan are overstated. If Sparrows Point is 
divested, and Weirton remains part of Mittal Steel, for example, there 
would be no concern about the availability to the divested mill. 
Sparrows Point is a fully integrated steel mill that does not depend on 
other Mittal Steel facilities for significant operational resources or 
supplies and indeed, in recent years has produced more slabs than it 
consumes. With respect to Wierton, even if the new owner of Sparrows 
Point refused to sell slabs on reasonable terms to Mittal Steel for use 
at Weirton, Mittal Steel would still own even blast furnaces in North 
America, five of which are now operating, giving it ample ability to 
supply Wierton with slabs. Further, Mittal could obtain additional 
slabs for Weirton on the open market. If Weirton were divested from 
Mittal and sought to acquire all of its slabs from other sources, the 
supply of slabs would be somewhat less certain, but there is some 
indication that Weirton could obtain sufficient slabs, including from 
imports. Dofasco, as Silgan points out, obtains about 750,000 tons of 
slabs per year from other firms, 400,000 tons of which comes from CST 
in Brazil. Some of those slabs are used to make tin mill products. The 
fact that Dofasco itself successfully imports a significant volume of 
tin-quality slabs suggests that an independent Weirton might have 
sufficient alternative sources for such slabs. The Department continues 
to investigate the likelihood that a divested Weirton would be able to 
manufacturer or purchase tin-quality slabs on a cost-efficient basis. 
If the Department concludes for any reason that the lack of certainty 
regarding Weirton's viability makes divestiture of Sparrows Point 
preferable, the Final Judgment permits the Department to direct Mittal 
Steel to divest Sparrows Point.
    Silgan proposes that, in lieu of diverting Weirton or Sparrows 
Point, the proposed Final Judgment be amended to provide that Dofasco 
be held separate for five years, which Silgan asserts is the duration 
of the S3, after which it could and should be sold.\3\ This proposal 
presents significant problems. To ensure Dofasco's operation separately 
from Mittal Steel for such an extended period of time would be 
difficult, if not impossible. Moreover, under the HSSO, ordinary and 
customary business decisions that would be made promptly by an 
independent entity cannot be made by Dofasco without certain notices 
and approvals and, in some circumstances, Court permission. This 
situation is tolerable as a temporary solution to effectuate a prompt 
divestiture and to limit interference or collusion pending that 
divestiture. As a long-term operating arrangement, however, it could 
adversely affect the ability of Dofasco to operate efficiently. Given 
that a prompt remedy is in the public interest and that the Final 
Judgment provides a mechanism by which the Department can assure that 
adequate and viable Mittal Steel assets are divested, there is no 
reason to require the extraordinary and unprecedented imposition of a 
long-term HSSO.
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    \3\ The Department understands that Silgan's objective would 
require an extension only for the duration of the S3, but Silgan is 
correct that this would require an extension of multiple years.
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B. Public Comment Submitted by ThyssenKrupp

1. Summary of ThyssenKrupp's Comment
    ThyssenKrupp is a large German steel manufacturer that has an 
agreement in principle with Mittal Steel to purchase Dofasco. 
ThyssenKrupp currently exports TMP to customers in the United States. 
In its comment, attached hereto as Exhibit 2, ThyssenKrupp states that 
only the divestiture of Dofasco will adequately remedy the alleged 
anticompetitive effects set forth in the Complaint and that divestiture 
of Weirton or Sparrows Point cannot remedy those anticompetitive 
effects. ThyssenKrupp asserts that the proposed Final Judgment and CIS 
``make clear that divestiture of Dofasco to ThyssenKrupp is the 
preferred remedy for the competitive harm alleged to arise from Mittal 
[Steel]'s acquisition of Arcelor[.]'' Ex. 2, ThyssenKrupp Comment at 3. 
ThyssenKrupp's comment, however, does not address the question of what 
should be done if Dofasco cannot be divested due to the existence of 
the S3. ThyssenKrupp claims that neither Weirton nor Sparrows Point has 
sufficiently modern and efficient facilities to compete in the TMP 
market in a manner that would replace competition lost as a result of 
the challenged acquisition. In this respect, ThyssenKrupp's comments 
mirror those of Silgan.
2. Response of United States to ThyssenKrupp's Comment
    The response of the United States to the Silgan Comment is equally 
applicable to the comments made by ThyssenKrupp. In sum, for the 
reasons given in Part II.A.2 above, the United States believes that the 
Final Judgment provides a mechanism to ensure that assets sufficient to 
remedy the violation alleged in the Complaint will be divested.
    Notwithstanding ThyssenKrupp's evaluation of the equipment and 
facilities at Weirton and Sparrows Point, the Weirton and Sparrows 
Point assets have proved adequate consistently to supply large 
quantities of TMP to the Eastern United States market. In 2005, Weirton 
and Sparrows Point sold more

[[Page 17637]]

TMP in the Eastern United States than Arcelor and Dofasco combined. 
While capacity to manufacture TMP for sale in the Eastern United States 
is not the only factor, it is certainly a highly relevant factor in 
assessing the competitive significance of mill assets. In determining 
which alternate mill should be divested pursuant to the Final Judgment, 
the Department will focus on questions relating to the relative ability 
of Sparrows Point and Weirton to operate independently of Mittal Steel 
as future suppliers of TMP to the Eastern United States market. The 
fact that both mills have successfully supplied substantial quantities 
of TMP to the market with their current equipment supports the 
conclusion that the alternate mill that the United States selects to be 
divested would accomplish the objectives of the Final Judgment.
    As to ThyssenKrupp's statement that divestiture of Dofasco is the 
``preferred'' remedy, we agree. As discussed above, Dofasco is an 
attractive divestiture candidate for a number of reasons, and the 
proposed Final Judgment requires Mittal Steel in the first instance to 
use its best efforts to divest Dofasco. However, nothing in the 
proposed Final Judgment or the Competitive Impact Statement indicates 
that Dofasco is the only suitable divestiture candidate. Both Mittal 
Steel and the Department realized that Mittal Steel might be unable to 
accomplish the divestiture of Dofasco in a timely manner because the S3 
might prevent its sale. Accordingly, the parties crafted alternative 
relief--the divestiture of Sparrows Point or Weirton--that also would 
preserve competition. Although the United States is satisfied that 
divestiture of Dofasco would remedy the violation alleged in the 
Complaint, if Dofasco cannot be sold within the period prescribed by 
the proposed Final Judgment, the United States will decide which of the 
two alternatives should be divested.

C. Public Comment Submitted by DaimlerChrysler

1. Summary of DaimlerChrysler's Comment
    DaimlerChrysler is an automobile manufacturer in North America that 
sources its steel from a number of North American steel producers, 
including Mittal Steel and Dofasco. See DaimlerChrysler Comment 
(attached hereto as Exhibit 3). DaimlerChrysler does not use TMP in the 
production of automobiles and does not purchase TMP. It does, however, 
use another type of flat steel product called hot dipped galvanized 
steel, which it buys from Mittal Steel and Dofasco, and DaimlerChrysler 
claims that the proposed acquisition will adversely affect competition 
for that product. DaimlerChrysler asserts that consolidation in the 
steel industry since 2001 has reduced the number of North American 
manufacturers of hot dipped galvanized steel from nine to five, and 
that after the acquisition of Dofasco, Mittal Steel will have 
approximately 47 percent of North American capacity for this product. 
DaimlerChrysler also states that there are no adequate substitutes for 
this product, and that foreign producers are not suitable suppliers. 
DaimlerChrysler asserts that the alleged harm to competition would be 
alleviated if Mittal Steel were required to divest Dofasco, but that 
the divestiture of either Sparrows Point or Weirton would not remedy 
the harm because neither facility produces hot dipped galvanized steel 
suitable for automotive purposes.
    Although DaimlerChyrsler has no direct interest in the TMP market, 
the company nevertheless asserts that the divestiture of Weirton or 
Sparrows Point will not restore competition in TMP because neither 
facility is capable of operating as a stand-alone facility. 
DaimlerChrysler cites past financial troubles of Weirton when it was a 
stand-alone company and Sparrows Point when it was operated by the 
former Bethlehem Steel Company. DaimlerChrysler asserts that either 
alternative facility is likely to close after divestiture. The result, 
according to DaimlerChrysler, would be less competition in the market 
for TMP.
2. Response of United States to DaimlerChrysler's Comment
    DaimlerChrysler's principal argument is that the United States' 
focus on TMP is misplaced, and that the United States should also have 
alleged harm to competition for hot dipped galvanized steel. During its 
investigation, the United States carefully and thoroughly reviewed the 
competitive implications of Mittal Steel's acquisition of Arcelor (and 
Dofasco) for a number of different potential relevant geographic and 
product markets, including hot dipped galvanized products. Upon 
completion of its review, the United States determined that it should 
allege a violation and seek relief only with regard to sales to TMP in 
the Eastern United States, and the Complaint filed in this case 
reflects that determination. The decision regarding the filing of a 
complaint as to any particular market lies within the prosecutorial 
discretion of the United States.
    With respect to the market for TMP, the United States disagree with 
the DaimlerChrysler comments relating to the adequacy of a divestiture 
of either of the alternative assets. As discussed more thoroughly 
above, the United States has considered the capabilities and economic 
viability of each of the alternative facilities and is confident that 
these options allow it to select an alternate facility the divestiture 
of which to a viable qualified purchaser would be sufficient to restore 
competition to the market for the sale of TMP in the Eastern United 
States.

III. Conclusion

    The issues raised in the public comments were among the many 
considered during the United States' extensive and through 
investigation. The United States has determined that the proposed Final 
Judgment as drafted provides an effective and appropriate remedy for 
the antitrust violations alleged in the Complaint, and is therefore in 
the public interest. The United States will move this Court to enter 
the proposed Final Judgment after the comments and response are 
published.

    Dated: February 13, 2007.

Respectfully submitted,

Lowell R. Stern (D.C. Bar 440487),
Attorney, United States Department of Justice, Antitrust Division, 
Litigation II Section, 1401 H Street, NW., Suite 3000, Washington, 
DC 20530, Telephone: (202) 307-0924, Facsimile: (202) 307-6283.

Certificate of Service

    I hereby certify that on the 13th day of February, 2007, I caused a 
copy of the foregoing Plaintiff United States's Response to Public 
Comments to be mailed, by U.S. mail, postage prepaid, to the attorneys 
listed below and I caused the attachments thereto to be delivered by 
electronic transmission to the attorneys listed below:

Lowell R. Stern,

For Mittal Steel Company N.V.:
    Mark Leddy, Esquire; Brian Byrne, Esquire; Jeremy J. Calsyn, 
Esquire; Cleary Gottlieb Steen & Hamilton LLP., 2000 Pennsylvania 
Avenue, NW., Washington, DC 20006.
For Arcelor S.A.:
    John M. Nannes, Esquire; Michael V. Sosso, Esquire; Skadden, 
Arps, Slate, Meagher & Flom LLP., 1440 New York Avenue, NW., 
Washington, DC 20005.
For Silgan Containers Corporation:
    Daniel L. Porter, Esquire; Vinson & Elkins LLP., 1455 
Pennsylvania Avenue, NW., Suite 600, Washington, DC 20004-10009.
For ThyssenKrupp A.G.:
    Steven K. Bernstein, Esquire; James F. Lerner, Esquire; Weil, 
Gotshal & Manges LLP., 767 Fifth Avenue, New York, NY 10153-0119.


[[Page 17638]]


    A. Paul Victor, Esquire; Dewey Ballantine LLP., 1301 Avenue of 
the Americas, New York, NY 10019-6092.
For DaimlerChyrsler Corporation:
    Thomas B. Leary, Esquire; Janet L. McDavid, Esquire; Hogan & 
Hartson LLP., Columbia Square, 555 Thirteenth Square, NW., 
Washington, DC 20004.

Exhibit 1

Willkie Farr and Gallagher LLP

Theodore Case Whitehouse, 202 303 1118, whitehouse@willkie.com, 1875 
K Street, NW., Washington, DC 20006-1238, Tel: 202 303 1000, Fax: 
202 303 2000.

23 October 2005

By Hand Delivery

Maribeth Petrizzi, Esq., Chief, Litigation II Section, Antitrust 
Division, U.S. Department of Justice, Suite 3000, 1401 H Street, 
NW., Washington, DC 20530

Re: Comments of Silgan Containers Corp. on Proposed Consent Decree 
in United States v. Mittal Steel Co., NV, No. 1:06-CV-01360-ESH 
(D.D.C.)

Dear Ms. Petrizzi:

    Transmitted with this letter, on behalf of Silgan Containers 
Corporation (``Silgan'') and pursuant to the Antitrust Procedures 
and Penalties Act (15 U.S.C. 16), are Silgan's comments on the 
proposed consent decree submitted by the Division to the United 
States District Court for the District of Columbia in August 2006.
    Silgan and its counsel would be pleased to enlarge upon or 
explain any aspect of Silgan's comments and would be pleased to meet 
with you and your staff to discuss any issue or concern relating to 
this matter.

Sincerely,

Theodore Case Whitehouse

cc (w/encl.): Kerrie J. Freeborn, Esq.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

United States of America, Plaintiff, v. Mittal Steel Company N.V., 
Defendant

[Civil Action No. 1: 06CV01360-ESH]

Comments of Silgan Containers Corporation on the Proposed Final 
Judgment and Competitive Impact Statement Regarding Competition in the 
Tin Mill Products Market

Willkie Farr and Gallagher LLP., 1875 K Street, NW., Washington, DC 
20006-1238, (202) 303-1000.

Thomas Prusa, Ph.D., Professor of Economics, Rutgers University, New 
Brunswick, New Jersey.

October 23, 2006

Table of Contents

Introduction and Summary of Comments

I. Divestiture of Dofasco is the Best Option
    A. Dofasco Has a Proven Track Record of Operating as a Highly 
Profitable, Independent Company
    B. Dofasco Is Far Better Suited To Operate as a Stand-Alone 
Facility Than Either Weirton or Sparrows Point
    C. Dofasco Is More Committee To Investing in the Future of the 
Tin Mill Steel Market
    D. The Decree Should Be Amended if Necessary To Require 
Divestiture of Dofasco on the Earliest Date on Which It May Legally 
Be Divested Free of the Stichting Arrangements, and the Hold-
Separate Order Should Continue in Effect Until That Divestiture Is 
Accomplished
II. A Stand-Alone Weirton Operation Will Fail in the Immediate 
Future and Undermine the Departments Objective of Preserving 
Competition in the Market
    A. Weirton's Ironmaking and Steelmaking Assets Are Not 
Competitive
    1. Weirton Has Small, Inefficient Blast Furnaces
    2. Weirton's Steelmaking Operations Are Also Antiquated and High 
Cost
    3. An Independent Weirton Operating Its Ironmaking Facilities 
Would Lack Any Captive Raw Material Supplies
    4. Weirton's Geographic Location Guarantees Higher Costs for 
Basic Inputs
    5. Weirton's Limitations as a Fully-Integrated Steel Maker 
Producing Tin Mill Steel Are Recognized by Mittal and Outside 
Observers
    B. Prospects for a Stand-Alone Weirton Enterprise Operating as a 
Rolling and Finishing Operation Are Limited
    1. Weirton's Rolling and Finishing Assets Require Substantial 
Investment To Be Competitive
    2. Weirton Would Be Committed To Producing Primarily Tin Mill 
Steel, Limiting Production Flexibility
    3. Weirton Would Have Difficulty Securing the Quality and Volume 
of Slab Necessary To Maintain Its Operations
    4. Even if a Stand-Alone Weirton Rolling and Finishing Operation 
Found a Consistent Source of Slab Supply, the Market Dynamics for 
Tin Mill Steel Would Limit Profitability
    5. A Stand-Alone Weirton Enterprise Running Only Its Tin Line 
Would Have Difficulty Securing Sufficient Volumes of Black Plate
    C. There Are No Legitimate Suitors for Weirton
    D. Divesting Weirton Will Have an Adverse Impact on Competition
III. A Divestiture of Sparrow's Point Would Also be a Far Less 
Effective Remedy Than Divesting Dofasco
    A. Divestiture of Sparrows Point Is Unlikely To Enhance 
Competition Over the Long Term
    1. Dofasco Is an Unlikely Replacement for Sparrows Point in 
Supplying Slabs to Weirton
    2. It Is Unlikely That Mittal Steel's Other North American Slab 
Producers Will Divert Scarce Feedstock to Weirton
    3. It Would Make no Economic Sense for Mittal's Brazilian 
Affiliate CST To Supply Slabs to Weirton
    B. Divesting Sparrows Point Will Have an Adverse Impact on 
Competition in the Medium to Long Term
Conclusion

Introduction and Summary of Comments

    Silgan Containers Corporation, the largest U.S. food can producer 
and single largest consumer of tin mill steel products in the United 
States, hereby provides comments on the proposed final judgment in 
United States v. Mittal Steel Company, the civil action concerning the 
effects of Mittal Steel's acquisition of Arcelor in the tin mill steel 
market in the Eastern United States. These comments are submitted in 
response to the invitation of the Antitrust Division of the United 
States Justice Department set forth in the August 24, 2006 edition of 
the Federal Register. Silgan appreciates the opportunity to submit 
comments.
    Silgan wholeheartedly agrees with the Department's conclusions that 
(1) Mittal Steel's acquisition of Arcelor ``further consolida[tes] an 
already highly concentrated market'' and (2) ``the likely effect of 
this acquisition would be to lessen competition substantially'' among 
suppliers of tin mill steel products in the Eastern United States, and 
(3) ``this loss of competition would likely result in higher prices, 
lower quality, less innovation and less favorable delivery terms to 
customers'' of tin mill steel.\1\ Silgan submits that such conclusions 
are amply supported by the evidence.
---------------------------------------------------------------------------

    \1\See United States v. Mittal Steel Company, Proposed Final 
Judgment and Competitive Impact Statement, 71 Fed. Reg. 50084, 
50085, 50093 (August 24, 2006) (Attachment 1).
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    The proposed decree provides for two alternative divestiture 
scenarios. The first is to require divestiture by Mittal of Dofasco, a 
Canadian integrated steel producer. The alternative remedy, to be 
available only if Mittal is ``unable'' despite ``best efforts'' to 
accomplish the divestiture of Dofasco, would be divestiture of either 
the Sparrows Point integrated steel operation or the Weirton steel mill 
operation (which includes only a rolling mill capability at this time). 
Silgan wholeheartedly agrees with the Department that the preferred 
remedy to address this lessening of competition in the tin mill steel 
market is to require the divestiture of Dofasco. Indeed, Silgan submits 
that a proper understanding of both the market participants and the 
competitive dynamics affecting the market participants demonstrates the 
following:
     Weirton would not be able to survive as an independent 
operation.
    Given its location, its old, small, and currently inoperative blast 
furnaces, and the limited capabilities of Weirton's rolling facilities, 
Weirton cannot survive as an independent producer. Neither

[[Page 17639]]

running Weirton's ironmaking and steelmaking operations nor purchasing 
slab in the merchant market would be a viable strategy. Consequently, a 
remedy allowing the divestiture of Weirton would simply cause 
substantial tin mill steel capacity to exit the market, which would 
make the available tin mill steel supply even more concentrated.
     No existing integrated steel mill has a serious interest 
in acquiring Weirton, because it makes no economic sense.
    Weirton's only realistic hope of surviving is to operate as one 
facility within a large, diversified enterprise capable of supplying 
Weirton with key inputs and averaging costs across a larger production 
base. Weirton currently enjoys that status as part of Mittal. No viable 
alternative integrated steel mill is likely to come forward to replace 
Mittal.
     Although Sparrows Point Is a Superior Mill to Weirton, It 
Is Uncertain Whether Divesting Sparrows Point Would Preserve 
Competition Over the Mid- to Long-Term.
    Within the Mittal system, Sparrows Point is a key supplier of slab 
for Weirton. A Sparrows Point facility operating outside the Mittal 
system would eliminate a guaranteed supply of this key feedstock to 
Weirton and thereby threaten the ongoing viability of Weirton. Without 
Sparrows Point's slab capacity, the likelihood that Mittal will ration 
Weirton's slab supply is greatly increased because Weirton will not be 
the best use of Mittal's limited slab supply in the Midwest that can be 
used in more profitable operations. Such fact is evidenced by the 
statements of Mittal Steel officials that Weirton is the least 
desirable facility among Mittal Steel's North American operations. In 
short, divesting Sparrows Point would almost certainly lead to 
Weirton's demise even within the Mittal enterprise, thereby diminishing 
overall capacity to the detriment of consumers and frustrating the goal 
of the decree.
    In the pages below, Silgan discusses and documents these factual 
conclusions in considerable detail. Silgan submits that these factual 
conclusions require the Department to adopt the following approach in 
designing an appropriate remedy to address the reduced competition in 
the tin mill steel market. First, the Department should make every 
effort to accomplish the divestiture of Dofasco. Press reports 
immediately after publication of the consent decree suggest a lack of 
interest by Mittal-Arcelor of seriously pursuing divesting Dofasco. The 
Department needs to push Mittal-Arcelor to accomplish the divestiture 
of Dofasco.
    Second, if immediate divestiture is not possible, Silgan strongly 
recommends the consent decree be modified to wait the five years 
reportedly necessary to eliminate any existing legal impediments to the 
divestiture of Dofasco. An independent Dofasco in five years is better 
than any of the other alternatives for preserving competition. A long 
run solution to the issue is better than a short term fix.
    Silgan makes this recommendation because the other options under 
consideration--divesting Weirton or divesting Sparrows Point--will not 
accomplish the Department's objective of enhancing competition in the 
tin mill steel market. These other options will only protect 
competition if one believes that Weirton has better than a 64% chance 
of surviving over the next two or three years, either outside or within 
the Mittal enterprise. However, no knowledgeable industry observer 
would give Weirton better than a 10-20% chance of surviving if either 
Weirton or Sparrows Point is divested. Therefore, the only appropriate 
remedy is to divest Dofasco as soon as possible, even if this means 
waiting for the alleged legal impediments to such a divestiture to 
expire.
    To summarize:

     Divestiture of Dofasco is the most pro-competitive 
outcome.
     If divestiture of Dofasco is not possible now (because 
of the stichting arrangements reportedly engineered by Arcelor), the 
second best option is continued independent operation of Dofasco for 
the life of the trust, (reportedly 5 years) followed by divestiture 
to a firm not a U.S. tin-mill producer.
     A less desirable but feasible outcome would be 
divestiture of Sparrows Point to a firm not a U.S. tin-mill producer 
(with appropriate assurance that Sparrows Point's tin-mill activity 
will be continued).
     Divestiture of Weirton under any scenario would be 
counterproductive from a competition perspective and would hurt the 
market because Weirton would not survive and its capacity would be 
permanently lost.

I. Divestiture of Dofasco Is the Best Option

    A combined Mittal-Arcelor would have three tin mill steel 
production facilities supplying the Eastern United States market, 
resulting in an excessively concentrated supply situation. To remedy 
that undesirable outcome, the Department has determined that Dofasco 
should be divested.\2\ The Department is correct in that determination: 
Divesting Dofasco remains the preferred remedy to address the loss of 
competition in the tin mill steel market resulting from the Mittal-
Arcelor merger.
---------------------------------------------------------------------------

    \2\ Id.
---------------------------------------------------------------------------

    In assessing divestiture options the Department must consider 
whether the divested firm can operate independently and serve the 
changing needs of consumers. Any divested tin mill steel entity must be 
viable on its own, making Dofasco the most logical choice for 
divestiture.

A. Dofasco Has a Proven Track Record of Operating as a Highly 
Profitable, Independent Company

    In sharp contrast to Weirton or Sparrows Point (both of which are 
discussed below), Dofasco is recognized as one of the best steel mills 
in the world. A leading steel consultancy and benchmarking firm, World 
Steel Dynamics (``WSD''), ranked Dofasco in the Top 25 of all global 
steelmakers. The same assessment ranked Dofasco the highest of all 
North American producers.\3\ Dofasco scored a remarkable 9 out of 10 in 
the WSD analysis for profitability over the 2000-04 period.\4\
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    \3\ World Steel Dynamics (2005) (Attachment 2).
    \4\ Id.
---------------------------------------------------------------------------

    The WSD analysis, which covers the period through June 2005, 
presents an independent, expert assessment of Dofasco prior to its 
acquisition by Arcelor, when the facility stood as a fully independent 
entity. Dofasco's performance during that period provides a strong 
indication of its likely performance if separated from Mittal.

B. Dofasco Is Far Better Suited To Operate as a Stand-Alone Facility 
Than Either Weirton or Sparrows Point

    Compared to either Weirton or Sparrows Point, Dofasco is far better 
suited to survive and thrive as a stand-alone facility. Four 
differences stand out: (1) Dofasco has a much deeper product line, (2) 
Dofasco has a larger scale operation, (3) Dofasco owns its own raw 
materials, and (4) Dofasco has much more cold-rolled capacity to feed 
its tin mill steel production. Silgan discusses these below.
    First, Dofasco has production capability that covers the full 
spectrum of flat-rolled products, from hot-rolled steel to cold-rolled 
and galvanized, as well as tin mill steel. Dofasco also produces 
tubular products in operations that consume the hot-rolled and cold-
rolled steel it produces. Indeed, Dofasco Tubular Products is the 
largest and most diversified producer of tubular products in North 
America.\5\ Finally, Dofasco is a significant player in the high margin 
auto sheet market, in which there are

[[Page 17640]]

few significant North American suppliers.\6\
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    \5\ See https://www.dofascotube.com/Default.htm (Attachment 3).
    \6\ The leading North American suppliers are Mittal (non-
Sparrows Point production), U.S. Steel, AK Steel and Dofasco. See 
Peter Marsh, Massive Bids on Table as Giants Fight for Dofasco, 
Financial Times (January 13, 2006) (Attachment 4). According to 
long-time steel analyst Charles Bradford, Sparrows Point ``doesn't 
have those (automotive) grades.'' Scott Robertson, Mittal Sparrows 
Point Mill May Be On Auction Block, American Metal Market (June 2, 
2006) (Attachment 5).
---------------------------------------------------------------------------

    This breadth of production capability allows Dofasco to remain 
viable even if the tin mill steel market turns down. Neither Weirton 
nor Sparrows Point has the same breadth of production. Weirton's 
product line is quite limited. Indeed, Silgan's understanding is that 
the vast majority of Weirton's total steel production is just tin mill 
steel. Sparrows Point is not much better. Other than tin mill steel, 
Sparrows Point predominantly focuses on commodity grades of cold-rolled 
and galvanized flat-rolled steel.
    Second, Dofasco is also a larger scale operation, with just over 4 
million of tons of steelmaking capacity compared to 3.4 million tons at 
Sparrows Point and zero operating steelmaking capacity at Weirton. 
Dofasco also has larger rolling assets, with 4.9 million tons of hot 
strip capacity available compared to 3 million tons at Sparrows Point 
and 3.8 million tons at Weirton.\7\ This larger scale allows Dofasco to 
operate more efficiently and profitably than either Weirton or Sparrows 
Point.
---------------------------------------------------------------------------

    \7\ See generally 2005 Directory of Iron and Steel Plants, 
Association for Iron and Steel Technology (2005) (Attachment 6).
---------------------------------------------------------------------------

    Third, Dofasco has access to captive supplies of both coke and iron 
ore, reducing its exposure to price volatility in raw material markets. 
Neither Weirton nor Sparrows Point has any such assets. Like the larger 
scale, these captive supplies of key feedstock allow Dofasco to operate 
more cost effectively and profitably than Weirton or Sparrows Point.
    Finally, as detailed in the chart below, Dofasco has a much more 
favorable ratio of tin mill steel capacity to cold-rolled capacity.

                          Figure 1.--Ratio of Tin Mill Capacity to Cold-Rolled Capacity
----------------------------------------------------------------------------------------------------------------
                                                                      Dofasco     Sparrows Point      Weirton
----------------------------------------------------------------------------------------------------------------
Cold-Rolled Capacity (000 tons).................................            3100            1580            1000
Tin steel production (000 tons).................................             418             828             800
Fraction of tin mill capacity to cold-rolled....................           13.5%           52.4%             80%
----------------------------------------------------------------------------------------------------------------

The ratio of tin mill capacity to cold-rolled capacity at Dofasco is 
just 13.5 percent. In contrast, the ratio of tin mill steel capacity to 
cold-rolled capacity at Sparrows Point is greater than 50%, and is 
roughly 80% at Weirton. Dofasco's more limited tin mill steel capacity 
relative to its cold-rolled capacity means a much larger portion of its 
cold-rolled capacity is immediately available for sale in often more 
profitable cold-rolled or galvanized markets. Weirton and Sparrows 
Point, on the other hand, have limited opportunity to serve cold-rolled 
and galvanized markets while at the same time keeping their more 
substantial tin mill steel lines operating at efficient capacity 
utilization rates.

C. Dofasco Is More Committed to Investing in the Future of the Tin Mill 
Steel Market

    A key factor for the Department's consideration should be which 
entity will support the tin mill steel market for the long term. It is 
Silgan's opinion that Mittal is not interested in this product and will 
not support the tin mill steel market, whereas Dofasco has demonstrated 
a concrete willingness to support the product.
    Prior to its acquisition of International Steel Group, Mittal had 
no significant involvement in the tinplate market from any of its 
worldwide operations. With ISG, Mittal acquired the former Bethlehem 
Steel tinplate operations at Sparrows Point, MD and the former Weirton 
Steel tinplate operations in Weirton, WV. Since the acquisition of ISG, 
these operations have been scaled back, not expanded, and Mittal has 
shown little or no interest in their long-term viability. As 
importantly, since its acquisition of ISG, Mittal has met is 
contractual volume commitment to Silgan, but has declined to ship 
additional volumes requested by Silgan. Efforts to engage Mittal in 
discussions toward extending the current supply commitment to Silgan 
have not been successful.
    The experience with Dofasco has been much different. Time and again 
Dofasco has demonstrated a willingness to commit to the long term 
production and supply of tin mill steel. For example, Dofasco 
understood the desire of can companies for wider and wider coils to 
enhance can making productivity. Dofasco, unlike other suppliers, 
decided to invest in additional wide coil capacity, and now is one of 
the few suppliers in the world to offer extra-wide coils. Another 
example is Dofasco's willingness to talk about and agree to longer-term 
supply arrangements. There is no question that producing tin mill steel 
is in Dofasco's long term plans.

D. The Decree Should Be Amended if Necessary To Require Divestiture of 
Dofasco on the Earliest Date on Which It May Legally Be Divested Free 
of the Stichting Arrangements, and the Hold-Separate Order Should 
Continue in Effect Until That Divestituture Is Accomplished

    Because of the obvious superiority, from the standpoint of 
competitive supply of tin mill steel products, of a divstiture of 
Dofasco over either alternative divestiture contemplated by the 
proposed decree, the Decree should be amended to ensure that Dofasco is 
divested and that any short-term impediment to that divestiture arising 
from the stichting arrangements erected by Arcelor to frustrate 
Mittal's efforts to acquire Arcelor does not wind up producing long-
term harm to the tin mill steel market in the Eastern United States. 
Dofasco's long history of successful operation as a stand-alone entity 
and its modern plant and facilities make it highly likely that Dofasco 
could exist and prosper under the hold-separate order now in place for 
at least five years and remain a viable and attractive divestiture 
candidate at the end of that period. Thus, there is no reason for the 
Department or the Court to accept the plainly less effective--and 
potentially counterproductive--alternatives of divesting either 
Sparrows Point or Weirton.

[[Page 17641]]

II. A Stand-Alone Weirton Operation Will Fail in the Immediate Future 
and Undermine the Department's Objective of Preserving Competition in 
the Market

    There is no viable business model for a stand-alone Weirton 
operation that ensures even the intermediate term survival of the 
company. As a fully-integrated steel producer making raw steel through 
to tin mill products (``tin mill steel''), Weirton is not competitive. 
The Weirton facility's ironmaking and steelmaking assets are antiquated 
and effectively unusable. Indeed, the ironmaking and steelingmaking 
assets are currently not operating for this very reason.\8\ The lack of 
any captive raw material assets and the costs associated with 
transporting bulk raw materials such as iron ore to the Weirton site 
only make the prospects for restarting the ironmaking and steelmaking 
assets in a stand-alone configuration that much more untenable.
---------------------------------------------------------------------------

    \8\ See Mark Reutter, The Strange Case of Weirton Steel, 
MakingSteel.Com (April 25, 2006) (emphasis aded) (Attachment 7).
---------------------------------------------------------------------------

    As a finishing operation consuming either slab or more advanced 
downstream inputs (i.e., hot-rolled band or black plate), it is also 
highly doubtful that Weirton would survive as a stand-alone entity. 
First, the proposition that a stand-alone Weirton operation would have 
access to the quality or volume of steel inputs at the cost necessary 
to run the facility efficiently is highly speculative. Second, 
limitations at Weirton's rolling operations would further hinder the 
facility's ability to operate a flexible production base or meet the 
ever-increasing quality demands of tin mill steel consumers.

A. Weirton's Ironmaking and Steelmaking Assets Are Not Competitive

1. Weirton Has Small, Inefficient Blast Furnaces
    It is generally agreed within the steel industry that blast 
furnaces with an annual production capacity of less than 1.5 million 
tons per year are not of efficient scale. Most, if not all, world-class 
blast furnaces exceed 3 million tons in annual capacity. While blast 
furnace size is not necessarily dispositive with respect to cost 
competitiveness, it is considered among the most important factors.\9\
---------------------------------------------------------------------------

    \9\ Other competitiveness factors one might consider include the 
coking rate of the furnace and any alternative charging technologies 
utilized by the furnace to reduce that rate and increase 
productivity. For a discussion of these alternative techniques, see 
William T. Hogan and Frank T. Koelbe, Fewer Blast Furnaces, But 
Higher Productivity, New Steel (November 1996) (Attachment 8). Note, 
however, that reliance on alternative charging techniques has 
presented new cost problems for some blast furnace operations. In 
particular, for those blast furnaces relying on natural gas 
injection to reduce coking rates (including Weirton), they 
successfully lowered their coking rates and boosted productivity, 
but were later hit with heavy costs as natural gas prices rose 
dramatically.
---------------------------------------------------------------------------

    The U.S. Domestic steel industry's own trade association 
acknowledges the weaknesses and fate of small blast furnaces, as does 
the U.S. Department of Energy (``DOE''). According to an article posted 
on the American Iron and Steel Institute's web page, ``[b]last furnaces 
will survive into the next millennium because the larger, efficient 
furnaces can produce hot metal at costs competitive with other iron 
making technologies.'' \10\ Similarly, a study of alternative 
ironmaking technologies funded by DOE concluded that ``the primary 
problem (sic) the Blast Furnace approach is that many of these Blast 
furnaces are relatively small, as compared to newer larger furnaces; 
thus are relatively costly and inefficient to operate.'' \11\
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    \10\ See How a Blast Furnace Works, AISI (emphasis added) 
(Attachment 9).
    \11\ Ironmaking Process Alternative Screening Study--Volume I, 
Summary Report, Lockwood Greene study for the Department of Energy 
(Oct. 2000) at 1-1 (Attachment 10).
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    Weirton's blast furnaces--none of which is currently in operation--
are among the smallest blast furnaces in North America. Weirton's 
primary No. 1 furnace has a rated annual capacity of 1.46 million tons. 
The facility's No. 4 furnace, the only other furnace at the Weirton 
site in any condition to be restarted,\12\ has a rated capacity of just 
1 million tons.\13\ By contrast, the would-be competitors of a stand-
alone Weirton enterprise operate the largest blast furnaces in North 
America.\14\
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    \12\ Weirton's No. 4 furnace needs repairs before being 
restarted. Weirton's former owner ISG intended to make such repairs. 
See Jim Leonard, ISG To Repair, Restart Second Blast Furnace at 
Weirton Unit, American Metal Market (July 12, 2004) (Attachment 11). 
With Mittal's acquisition of Weirton, it was determined that Weirton 
would no longer produce raw steel and the repair work was never 
initiated. See Mark Reutter, The Strange Case of Weirton Steel, 
MaingSteel.Com (April 25, 2006) (Attachment 7).
    \13\ While age is less indicative of the efficiency of a 
furnace, Weirton's furnaces are very old. The No. 1 furnace was 
built in 1919; the No. 4 furnace was built in 1953. Through rebuilds 
and modifications, these furnaces have been made more efficient, but 
they remain high cost. Indeed, by Mittal's own admission, Silgan 
knows they are at least the highest cost furnaces in the Mittal USA 
system. See Mark Reutter, The Strange Case of Weirton Steel, 
MakingSteel.Com (April 25, 2006) (Attachment 7).
    \14\ Capacity data for the Weirton blast furnaces derived from 
2005 Directory of Iron and Steel Plants, Association for Iron and 
Steel Technology (2005) (Attachment 6). Capacity data for Mittal, 
Sparrows Point ``L'' furnace derived from Mittal Steel USA Works to 
Restore Furnace at Sparrows Point, PRNewswire (July 14, 2006) 
(Attachment 12). Capacity data on Mittal, Indiana Harbor No. 7 
furnace derived from Ispat Inland Accelerates Maintenance Outages, 
Ispat Inland Press Release (March 7, 2005) (Attachment 13).

                                   Figure 2.--Comparison of Blast Furnace Size
----------------------------------------------------------------------------------------------------------------
                                                                                                 Annual capacity
            Company/operation                        Blast furnace               Year built      (million tons)
----------------------------------------------------------------------------------------------------------------
Mittal, Indiana Harbor...................  No. 7............................              1980               4.0
U.S. Steel, Gary Works...................  No. 14...........................              1974               3.4
Mittal, Sparrows Point...................  ``L''............................              1977               3.2
    Weirton..............................  No. 1............................              1919               1.5
    Weirton..............................  No. 4............................              1953               1.0
----------------------------------------------------------------------------------------------------------------

Weirton's furnace limitations have long been known; in 1982, National 
Steel proposed shutting down Weirton's furnaces and operating Weirton 
as a rolling mill.\15\
---------------------------------------------------------------------------

    \15\ Weirton Workers Buyout from Online NewsHour, September 23, 
1983; https://www.pbs.org/newshour/bb/business/july-dec83/steel_9-
23-83.html. (Attachment 14).
---------------------------------------------------------------------------

    In any case, assessing the competitiveness of the Weirton blast 
furnaces is strictly an academic exercise. Both the Weirton No. 1 and 
No. 4 furnaces are no longer hot banked, but now sit completely cold. 
The costs of restarting the furnaces from a cold state are uncertain, 
but could be significant depending on any damage resulting from the 
cool down. Such costs may in fact be prohibitive to any would-be 
investor.
2. Weirton's Steelmaking Operations Are Also Antiquated and High Cost
    Weighed down by the high cost of its ironmaking operations, the 
Weirton facility inherently is a high cost steel

[[Page 17642]]

producer. Leaving no doubt, Weirton's slab costs have been rated by a 
leading steel consultancy as the highest in the world.\16\ These 
results are consistent with Mittal's own top-down review of the Mittal 
USA system, which found the Weirton steelmaking assets to be the least 
economical among its many U.S. facilities.\17\
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    \16\ High Production Costs Hamper AK Steel's Middletown Works, 
Steel Business Briefing (Aug. 10, 2006) (Attachment 15).
    \17\ See Mark Reutter, The Strange Case of Weirton Steel, 
MakingSteel.Com (April 25, 2006) (Attachment 7).
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    Weirton's continuous caster is also an old, four-strand caster.\18\ 
A new, single strand caster is necessary to achieve better yield loss 
and quality control in important tin mill grades of steel.
---------------------------------------------------------------------------

    \18\ 2005 Directory of Iron and Steel Plants, Association for 
Iron and Steel Technology (2005) at 130 (Attachment 6).
---------------------------------------------------------------------------

3. An Independent Weirton Operating Its Ironmaking Facilities Would 
Lack Any Captive Raw Material Supplies
    A stand-alone Weirton enterprise utilizing its ironmaking assets 
does not fit the paradigm of successful integrated steel makers (i.e., 
those operating blast furnaces and basic oxygen furnaces to produce 
steel) operating in the U.S. market. That paradigm includes access to 
captive supplies of at least some raw material requirements (coal, 
coke, or iron ore).
    Integrated steel producers consume massive amounts of raw materials 
in the form of coal, coke, and iron ore to run their blast furnaces. To 
insulate themselves from volatility in raw material markets, integrated 
producers tend to maintain captive supplies of at least some of their 
raw material needs. Although a