Serbia could sell former US Steel unit to ArcelorMittal - report.

By bne IntelliNews February 1, 2012
India's ArcelorMittal might be the most likely future owner of the Smederevo-based steel mill, which Serbia bought back from US Steel for USD 1, daily Novosti reported, quoting unofficial sources. ArcelorMittal has been interested in the Serbian company since 2003. US Steel offered them two months ago to take over the Smederevo-based plant for USD 300mn but ArcelorMittal was ready to give only USD 23mn - matching the amount the US firm paid for the plant when it acquired it back in 2003, the report said. It added that the talks ended two weeks ago with ArcelorMittal abandoning them even after US Steel had lowered the asking price to USD 200mn. US Steel also held unsuccessful talks with Chinese investors on the sale of the Serbian plant and was ready to close down the loss-making company, the source said. Serbia, however, stepped in to prevent the closure, aiming to save one of its largest exporters and employer of some 5,500 workers. It agreed to buy US Steel Serbia for a token price of USD 1 and the two parties signed a sales contract on January 31, a statement on the government's website said. Prime Minister Mirko Cvetkovic said at the signing ceremony the government hopes to find soon a strategic partner for the plant, adding investors from Ukraine, Russia and the Far East have shown interest. Cvetkovic said the USD 1 price was not unusual since U.S. Steel Serbia recorded losses in the past two years. He added the government will have to bear the costs until a new owner is found. It plans to find the resources either through bank loans or via redistributing the budget. News agency Beta quoted state secretary Dusan Nikezic as saying on January 30 that the Smederevo plant needs some EUR 100mn a year to maintain its production. He said the government will try to find a buyer within six months. US Steel Serbia said in January it was not happy with its financial results and was determined to find the most appropriate solution for improving the steel mill's position. On January 9, the company reduced its working week to four days, saying the employees will receive only 60% of their regular pay for the fifth day. The Smederevo-based steel mill generates 5% of Serbia's total production and around 14% of the country's exports. In December, news agency B92 quoted a Morgan Stanley forecast, which saw US Steel shutting down its Serbian unit in case the group's European operations continue to report loss. The December report said US Steel Serbia could become the first of the group's companies outside the US that could be closed if the recession and the loss-making trend persist. US Steel acquired in 2003 insolvent Serbian steel company Sartid. The acquisition included a steel plant and a river port located in Smederevo, central Serbia, a tin mill in the western town of Sabac and a limestone mine and processing unit in the eastern town of Kucevo. The US group also owns US Steel Kosice in Slovakia and is involved in several steel finishing joint ventures in the US, Brazil, Canada and Mexico.

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