Phoenix Services, a Radnor, Pennsylvania, company that keeps the largest U.S. steel mills running by recycling their molten slag, is in its sixth month of bankruptcy reorganization, as tons of waste pile up at its clients' plants.

But why? Was Phoenix forced to seek Chapter 11 protection by inflation, Fed rate hikes, the Ukraine war and other factors beyond its control that have made familiar business arrangements unsustainable?

Or did Phoenix and its financiers, led by its private-equity owner Apollo Global Management, use economic conditions as a pretext to rip up contracts and try to pass rising financial costs along to steelmakers, protecting profits of its billionaire investors at consumers' expense?

Since Phoenix filed for Chapter 11 reorganization in September, those are the rival stories lawyers have told in the fight over the future of the slag disposal company. Phoenix's fleet of 1,700 custom-built machines clears off hot waste at mills owned by Nucor, U.S. Steel, ArcelorMittal, Cleveland-Cliffs and other big steelmakers and sells it for construction and road material. Past buyers include PennDOT.

Phoenix is using the bankruptcy to force new terms on the steelmakers. Nucor, the largest U.S.-based steelmaker, is fighting back, refusing Phoenix's pricing proposals and demanding the court set up a detailed plan for removing Phoenix's bulky, specialized vehicles and on-site recycling facilities — or leave them so someone else can take over the work.

If there's not a plan soon, Nucor says a growing slag backlog at its large Southern mills may force it to cut production, threatening potential shortages or price hikes on the carmakers and other manufacturers who rely on American steel.

Phoenix has balked at Nucor's proposal and its claims, arguing there will be adequate steel available even if it pulls out, and that it needs flexibility to move its equipment to new clients at its own pace.

Bankruptcy and private equity

The Philadelphia region is home to a string of steel-mill service companies that handle the stony, metallic waste that steelmakers call slag. These include industry leader Harsco, a publicly traded company based in Philadelphia; TMS International, owned by Chicago's billionaire Pritzker family, which has offices in Horsham and Pittsburgh; and Phoenix, a major provider in both the U.S. and at mills in Europe, Brazil and South Africa. Only Phoenix's U.S. operations are in bankruptcy.

It's a cyclical business, to be sure. Harsco made a half-billion dollars in 2019, posted modest losses in 2020 and early 2021, then a small profit last fall. TMS doesn't disclose financial results.

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