bne IntelliNews -

Serbia has reportedly received bids from nine international companies in the tender for the sale of 80% of steel mill Zelezara, one of the county's largest exporters and a former unit of US Steel, daily Blic reported on January 7.

The official opening of the bids will take place on January 9 and Prime Minister Aleksandar Vucic already told local media that at least two of the offers are valid.

The privatisation of Zelezara is considered a potential life saver for the company and the city of Smederevo where it is based, employing some 5,000 people. The government has committed to stop subsidising production at troubled state-owned firms as of 2015, as part of its austerity programme, therefore it is in urgent need of finding a new investor for Zelezara that would provide a future for the plant.

Vucic believes that a successful and quick sale could also have a crucial impact on the overall Serbian economy, which is expected to shrink further in 2015 following the catastrophic floods of May 2014.

The favourite to win the deal for Zelezara is US group Esmark, which promises to invest $400mn in Zelezara in the coming several years, and to retain its 5,000-strong workforce.

The government has pledged to clear Zelezara of its debts, some €370mn, once the sale is agreed. Vucic believes that the transaction could be completed by the start of February. According to him, the new owner could restart by the end of May or early June the plant's second blast furnace, which has been idled for years.

Zelezara's head Bojan Bojkovic says that Zelezara now operates at 30% capacity, generating an annual turnover of $320mn. He expects that with the planned investments in raising the production the turnover could jump to $1.4bn.

According to Blic, apart from Esmark, which is represented by its Dutch-registered arm Esmark Europe, the other bidders in the tender are two Russian companies - Krasny Oktyabr and United Machinery Corporation, two Swiss firms - Prominvest AG and Steel + Metal One Holding, Luxemburg-based Russian-Czech holding United Group, Poland's RE Alloys SP, UK-based North London Trade Centre Limited, and Bangladesh-based Rafflesia Trading Pvt.

In January 2012, Serbia bought back Zelezara from US Steel for a token price of $1 and has been seeking a new partner since then as two sales attempts have failed so far. Zelezara reportedly costs the Serbian budget some $10mn monthly, which is unsustainable for the depleted state coffers that struggle to curb one of the highest fiscal gaps in Europe amid a sharp 2% GDP drop in 2014 and an expected 0.5% contraction in 2015.

Yet, despite its financial difficulties, Zelezara still managed to generate €176mn worth of exports in January-November, ranking as Serbia's fourth largest exporter in the 11-month period.