The Serbian economy ministry launched a tender process for the sale of Zelezara Smederevo, the country’s only steel mill and its second-largest exporter, on March 4, setting the starting price at just €45.7mn.
Senior Serbian officials including prime minister Aleksandar Vucic have already indicated the mill is likely to be sold to China’s Hebei Iron and Steel Group (HBIS), which signed a memorandum of understanding with Zelezara Smederevo in November. Vucic said at the time that the memorandum was a step towards the Chinese company’s takeover of the mill, which employs 5,000 people.
The call for tender was published in Politika daily. According to the document, the estimated market price of the assets as of December 31 was €91.38, while the initial price is 50% of this amount.
Belgrade is putting all the mill’s assets up for sale, including its real estate, land and buildings, movable property, stocks, shares in capital and intangible assets.
All bids should submitted by March 30 at the latest, and the deadline for filing a request for the sale documentation is March 22. The opening of bids will take place on April 1 in the premises of the Serbian economy ministry.
This is the third attempt to sell Zelezara after failed attempts in 2012 and 2014. Zelezara was sold to US Steel for $33mn in 2003, but was bought back by the state in 2012 for a token price of $1. The latest privatisation attempt by US-based Esmark fell through in February 2015.
HBIS is expected to be the only bidder in the new round. Vucic announced recently, that the Chinese company plans to invest €120mn, though it needs EU approval for the investment.
After the US Steel withdrawal in 2012, keeping Zelezara alive cost Serbian taxpayers some €100mn annually. Brussels banned further aid to the company from February 2015, although just before the deadline, in late 2014, the Serbian Development Fund approved a further €110mn.
Representatives of the EU delegation to Serbia told Politika that Belgrade will have to demonstrate that the financial aid Zelezara was receiving from the Serbian government until February 1, 2015 was in accordance with EU rules, if the sale of the company if to go ahead.
However, Vucic said in February he was hopeful the EU would support the sale. “The Chinese want to privatise the steel mill and we expect EU to help us with that. If it doesn’t happen, we are in deep trouble and thus I want to believe that the EU ... will help us. All we need is the EU’s ok and nothing else, only the EU’s approval for the Chinese producer to be able to work in Serbia and sell steel on the European market,” Vucic said.
After the latest attempt to sell the company fell through in February 2015, Serbia launched a tender to find professional managers for Zelezara and Netherlands-based HPK Engineering took over its management in March 2015, pledging to boost production and make it profitable within six months, aided by $20mn of investments in raw materials. The new management has also been preparing the company for the next privatisation attempt.
In October 2015, work restarted at the second blast furnace, four years after US Steel shut it down in late 2011.
Zelezara is the main employer in the town of Smederevo, on the Danube river bank some 50km south of Belgrade. After being affected by devastating floods in May 2014 as well as changes to its ownership structure, in 2015 its exports were 58.8% higher in annual terms and amounted to €319mn, the latest data from the ministry of finance show.