Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, October 17, 1993 TAG: 9310150449
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: By GREG EDWARDS and SANDRA BROWN KELLY STAFF WRITERS
DATELINE: LENGTH: Long
Roanoke Electric Steel Co. epitomizes the tough issues of economy vs. environment.
All of its production comes from scrap. Since 1956, the Roanoke-based company has given new life to 8.9 million tons of throwaway metal.
The 38-year-old company that is the state's only steel mill is a recycler. The environmental irony is that the company also is one of the region's major polluters.
Don Smith, the company's chief executive officer, paints his business as a good neighbor, important contributor to the community and financially successful.
But to residents of the Cherry Hill Park and Signal Hill residential communities near the Northwest Roanoke plant, Roanoke Electric Steel is a company with uncommunicative leaders who do the right thing generally only when pushed or embarrassed in public.
Those residents this summer filed a request in Roanoke Circuit Court for a special investigation of actions of Roanoke Electric Steel, its hauler, Howard Brothers Inc., and Norfolk Southern Corp., which leases land to the hauler.
Helen Workman, a 73-year-old neighbor of Roanoke Electric Steel and among the petitioners who want the company declared a public nuisance because of the dust that comes from its operation, said the only response she has ever had from the company was a letter left at her door.
"I went down to the steel mill and tried to see Mr. Smith, but they claimed he was busy and didn't have time to talk to me," Workman said last week. "Inside the guard house is far as I got."
Smith declined to be interviewed, either by telephone or in person, for this article. He provided written answers to questions the newspaper submitted through the company's public relations consultant, Lambert Associates of Roanoke, and permitted a photographer to take pictures of him and the mill.
For years this has been standard behavior from the company founded by a native son who returned to Roanoke after a career selling bonds on Wall Street.
Smith merely was following the lead of founder John W. Hancock Jr., who in his 80s still serves as chairman of the board's executive committee and always has been reluctant to discuss business, even of his public, shareholder-owned company.
Asked why the company keeps such a low profile, Smith replied:
"Beginning with the formation of this corporation, it has been a management philosophy and policy to be a good, quiet corporate citizen that takes its obligations to its neighbors, employees and stockholders very seriously. We see no reason to change."
The aloofness, however, is in sharp contrast to a competitor in a similar situation. Florida Steel Corp. operates a mill in an older residential area of Knoxville, Tenn. An official there said the company tries to keep in touch with the community and even has "adopted" an elementary school three blocks from its mill as a community-service project.
Steel mills and residential sections are not compatible, said Terry Harris, an official with the air pollution office in Knox County, Tenn.
"A mill can be in compliance and still be a problem for residents," said Harris.
Founder Hancock may have shared the company's priorities when, in 1964, he told a citizens' group upset about smoke from the plant that the company hoped eventually to control the smoke, but "it won't be next month or next year. That's a terrific expense and we're a small company."
Its first smokestack filter was installed two years later.
Smith calls untrue charges that the company is not responsive.
"The history of this company is one of a company looking forward and preparing itself for the challenge of the future," he said in one of his written statements.
He said recently announced plans for a building to contain dust from the transfer of fly ash from the mill's furnaces to a recycler's trucks were made before the special grand jury began investigating the dust problem.
An inspector with the state Air Pollution Board suggested the enclosure in 1990, however, when the current dust complaint ballooned into a public issue.
The grand jury was impaneled in September at the request of residents in the Signal Hill community, who said they were fed up with the clouds of dust and grime that drifted from the steel mill and an adjacent business, Howard Brothers.
Howard Brothers is a private Ohio company that contracts with Roanoke Electric Steel to remove the slag or furnace ash from the steel mill's melt shop.
Howard Brothers operated on Roanoke Electric Steel's property until the mid-1980s, when it bought adjacent land and leased more from Norfolk Southern Corp.
Howard Brothers sells back to Roanoke Electric Steel metals it retrieves from the ash, and it dumps the remainder of the material in large outdoor piles to be sold for uses like road building.
During the investigation by the grand jury, experts have said that it was not clear whether the dust is coming solely from Howard Brothers.
A final report from the investigation is not expected before January, when the grand jury is to reconvene. The grand jury could decide that Roanoke Electric Steel has no involvement with the problem; it also could authorize civil action to have the operation declared a public nuisance.
Roanoke Electric Steel has tried to separate itself from complaints about the dust, saying that it has no control over the Howard Brothers operation.
In 1990, Smith told a reporter that Roanoke Electric Steel had no responsibility in the dust issue. He said Howard Brothers bought the ash, and "you'll have to find out from them what they do with the material."
The Roanoke company has long been enveloped in environmental issues, especially dust problems - be they due to fly ash dust, which rises when the hot ash or slag is dumped by Howard Brothers onto outdoor piles, or to bagdust, which is captured from Roanoke Electric Steel's ventilation system.
When the metal is heated to be made into steel, emissions from the process are sucked through a ventilation system - which works much like an exhaust hood over a home stove - into "bag houses," where the dust is packaged for disposal.
From 1955 until 1976, Roanoke County - where the plant operated before its property was annexed to the city - hauled the bagdust to its landfill at Dixie Caverns. That landfill eventually was declared a Superfund cleanup site, and Roanoke Electric Steel agreed to pay up to $400,000, half the cost, to detoxify 9,000 cubic yards of steel furnace fly ash that was in it.
The company was one of 25 industries that used the landfill.
From 1976 to 1982, the bagdust was hauled to a private landfill at Statesman Industrial Park, just off U.S. 460 on the eastern edge of Roanoke. In the spring of 1982, the Environmental Protection Agency shut down that site because it violated laws governing the handling and disposal of hazardous waste.
The steel company then tried to get permission to bury the material on its property, but near some homes. The homeowners rebelled and halted that plan. Now, the bagdust is shipped out of state, where zinc is retrieved from it.
Throughout the years, the company has contended that it is environmentally aware and runs a clean operation, for a steel mill. In 1970, Roanoke Electric Steel was one of four Virginia companies cooperating with a Federal Water Quality Administration study of the nation's water quality.
The company said its problems were the result of its proximity to a residential area, which was developing about the time the mill was set up.
Still public records show that when it comes to environmental issues, Roanoke Electric Steel appears to react rather than lead:
In 1971, the company agreed to complete installation of air filter equipment after residents in Cherry Hill Park appealed to a government air pollution control officer to help them get the company to act.
In 1974, it ran oil trucks from the mill through residential streets to a storage tank on another part of its property. It stopped the trucks after residents appealed to Roanoke city officials to stop the company from using residential streets.
In October 1989, a fire began in a dump for nonmetal car materials at Shredded Products Corp., a subsidiary in Montvale. The fire burned for 38 days, sending a cloud of gray smoke over the area. The company was fined $95,625 for operating a dump without a permit.
In 1990, Roanoke Electric Steel was listed among the Environmental Protection Agency's significant water polluters in Virginia and was required to modify its water permit to include plans for controlling discharges of copper, lead, silver and zinc, according to the Water Control Board.
The company then began to treat the waste water and cut the amount it discharged into Peters Creek.
But, files with the State Department of Environmental Quality show the company also exceeded the level of zinc allowed in the water it discharges into Peters Creek on 12 occasions from December 1989 to April 1993.
The Office of Enforcement and Compliance Auditing assessed Roanoke Electric Steel's compliance history and found 23 violations at the Roanoke plant; there were no violations at the Salem facility.
Five of the Roanoke violations were for failure to report data; 18 were violations of effluent limits, 12 of those were for zinc.
In 1992, the State Water Control Board asked the company to submit and implement a plan to correct violations in the levels of lead and zinc allowed in water it releases into Peters Creek.
The company signed a consent order agreeing that it would identify pollutants in all water flowing from its site, determine a management plan and implement it by June 1996.
Smith said Roanoke Electric Steel over the years has spent $6.5 million on pollution-control equipment, and shelled out $10 million in the past decade to operate and maintain the equipment.
He said the company has a 10-person environmental staff that includes five professionals and technicians.
"We are in compliance with all rules and regulations and have never knowingly violated any regulations regarding the environment. We live by our policy on the environment," Smith said.
"It is important for the government and the community to understand the benefits of having our company here in the valley," he added.
"I hope the community would feel a source of pride that Mr. Hancock came back home and risked all his resources to build a successful company here.
"Over 38 years, this corporation has been a major asset to the community. And corporate officers are involved in leadership responsibilities in the community. The community should hope the company continues to do well," he said.
Roanoke Electric Steel officials have long been conspicuous in the valley's economic and civic leadership.
Smith, for example, serves on the New Century Council, a group of governmental and business leaders attempting to develop an economic plan for the region.
He also serves on the board of Center in the Square, the downtown Roanoke arts complex.
Smith, who has been with the company more than 30 years and was once its office manager, assumed the multiple titles and jobs of chairman, president, chief executive officer and treasurer in August 1989, succeeding William Meador. He is only the third person to head the company.
Hancock, a graduate of Virginia Tech, also is a major supporter of the university. Tech named a building in his honor and he gave $1 million in 1988 to endow an engineering faculty chair for Paul Torgerson. Torgerson, now acting president at the school, is a member of the company's board.
Despite its tangles with environmental regulations, Roanoke Electric Steel has been on the leading edge within its industry. It was the first commercial continuous-casting steel operation in the United States. That plant, built by Babcock and Wilcox Co., still stands and was operated until 1990.
Roanoke Electric Steel has "a good reputation" for costs, quality and service, said John Correnti, president of Nucor Corp., a Charlotte, N.C., steel company that is regarded as one of America's best-run.
Nucor's Darlington, S.C., plant competes for business with Roanoke Electric Steel's Florence, S.C. operation.
"They keep us running faster," Correnti said.
Every company has to run fast in the steel-making business, Smith suggested.
"This industry changes rapidly. When production began in 1956, there were fewer than five minimills; today there are 80. We must be on our toes and ready to respond to change to remain a leader in a highly competitive industry," he said.
Smith said Roanoke Electric Steel's strategy is to continue to focus on innovation in production - "We are a low-cost producer because of our history of innovation" - to look for companies to buy and to purchase new equipment or upgrade existing equipment.
Smith said most of the company's employment growth in the past two decades came from acquisitions - Shredded Products in 1973, the Hancock plant in Salem in 1975 and Socar in 1985.
He said production is at 85 percent capacity in the company's rolling mill and at 92 percent capacity in the melt shop.
Roanoke Electric Steel was in the black when some mills weren't, according to a list of companies published in September by Iron Age, a trade magazine.
Smith said the company resumed exporting steel billets in 1992, after having done some exporting in the 1970s and early 1980. He said "a significant number of billets" have been shipped to Mexico, Taiwan, Ecuador and Colombia.
In his address to stockholders last year, Smith stressed that in the past couple of years the company had faced poor economic conditions and intense competition.
He said costs were cut through reduced overtime, use of part-time labor and a wage freeze implemented in 1991. The company also reduced executive salaries in 1990 and 1991, but moved them back up in 1992.
The company declared its 136th consecutive quarterly dividend at last year's annual meeting. It has been nonprofitable in only two quarters since it was founded.
\ ROANOKE ELECTRIC STEEL\ The company: The parent company and four subsidary companies make speciality steel products for commerical and industrial uses:
Roanoke Electric Steel Corp., based in Roanoke, melts scrap metal in electric furnames and casts the metal into angles, reinfocing bars and other products. All of its production comes from recycled scrap metal at the rate of 3.5 million pounds a day.
John W. Hancock Jr. Inc. of Salem makes steel joists used to support roofs, ceilings and floors in construction of commercial and industrial buildings. It merged into Roanoke Electric Steel in 1975.
Socar Inc. of Florence, S.C. and Continental, Ohio makes products for markets similar to the Hancock company. It was acquired by the company in 1985.
RESCO Steel Products Corp. of Salem makes steel used to reinforce concrete. It cuts and bends bars to contractors' specifications. The company was started in 1986 and expanded in 1988.
Shredded Products Corp., Montvale, produces scrap steel and other metals from junked automobiles and other waste. It was purchased by Roanoke Electric Steel in 1974
Headquarters: 102 Westside Blvd. in Northwest Roanoke
Employees: 1,000 employees, none of which are represented by unions. The company said it paid $24.5 million in wages in the area in its fiscal year ended Oct. 31, 1992.
History: The company was founded in 1955 to provide steel products to\ manufacturers and distributors in the metals industry. It was the nation's\ first so-called minimill to use a continuious steel casting process. Since its\ beginnings the company has melted 8.9 million tons of scrap metal and recycled\ 2 million cars at its Shredded Products division.
Ownership: Roanoke Electric Steel is a public company with common stock traded by the Nasdaq National Market system. It's ticker symbol is RESC. It is listed in the Roanoke Times & World-News as a stock of regional interest, abbreviated as RoanEl. Recently the stock has traded at about $12 a share.
Approximately 874 shareholders held 5.3 million shares of the company stock at the end of 1992, with 10 million shares authorized for sale.
Board of directors:
Frank A. Boxley, president Southwest Construction Inc. of Vinton.
T.A. Carter, a Salem architect and developer.
George B. Cartledge Jr., president of Grand Piano & Furniture Co. of Ronaoke.
John W. Hancock Jr., chairman of the company's executive committee, of Ronaoke.
Charles I. Lunsford II, a Roanoke insurance broker.
William L. Neal, president of John W. Hancock Jr. Inc.
Thomas L. Robertson, president of Carilion Health System of Ronaoke.
Donald G. Smith, the company's chairman, president, treasurer and chief executive officer.
Paul E. Torgersen, acting president of Virginia Tech and president of the Virginia Tech Corporate Research Center Inc., Blacksburg
Gordon C. Willis, chairman of Rockydale Quarries Corp., Roanoke County.
John D. Wilson, president, Washington and Lee University, Lexington.
Source: The company
by CNB