Slovakia wary as Russian and Chinese suitors eye US Steel Kosice

Slovakia wary as Russian and Chinese suitors eye US Steel Kosice
US Steel Kosice is reported to have even put a limit on company car use as it pushes to cut costs.
By Ben Cunningham in Bratislava August 2, 2016

Amid the European Commission's announcement on July 28 that it will impose anti-dumping duties of up to 22.5% on Chinese steel imports, speculation about an impending sale of Slovakia’s US Steel Kosice is heating up.

As the largest employer in eastern Slovakia with some 10,000 employees, control of the steelplant — based in the country’s second biggest city — has traditionally translated into significant political clout. Hence, speculation that Chinese and Russian bidders are eyeing the asset is raising no little concern.

For now, the Slovak government looks to be holding back, keen to see if private buyers are willing to keep the plant afloat. However, the likelihood of a bid from the east could push Prime Minister Robert Fico into action. 

The PM has illustrated in the past just how strategic he considers the plant. In 2013, his government stepped in at the eleventh hour, as it fought the plans of parent US Steel to either implement severe cutbacks or sell. Bratislava eventually handed over a package of €15mn in incentives over 15 years.

Although US Steel Kosice still holds symbolic political weight, low global steel prices and new employers in the region — including IBM and AT&T — leave the region and country less exposed in real terms than they were just a few years ago. Yet a buyer from the east would still prove tricky to sell politically.

South Korea's Posco is speculated to be mulling a bid, as is Moravia Steel, led by Prague-based Slovak mogul Tomas Chrenek. But it is the potential Chinese and Russian investors that remain the focus of intrigue.

Serbian model?

“Who else wants to come? Nobody, it is part of yesterday’s economy,” stated Milan Nic, research director at the Globsec Policy Institute. At the same time, however, he notes that he is “more worried about the resulting social factors and bad management than geopolitics.”

Still, geopolitics makes for a good headline. Slovak daily Korzar, based in Kosice, has reported that potential Russian investors visited the facility on July 19 and 20. The next couple of days saw Chinese suitors entertained. The new anti-dumping measures adopted by Brussels only add to the incentives for Chinese firms to gain footholds within the EU.

Alisher Usmanov, an oligarch of Uzbek origin who is part owner of Britain's Arsenal football club, is one of the reported Russian bidders. He controls Russia’s largest iron ore producer, Metalloinvest.

Kosice-based businessman Peter Kamaras, who formerly led the Smederevo steel plant in Serbia, told Korzar: “I have seen real interest in Kosice’s steel works from Metalloinvest, they would receive an entry point to the EU and find an outlet for their iron ore.”

However, the Russian company denied to bne IntelliNews that it has any interest in the Slovak plant. “Metalloinvest is a long-standing iron ore supplier to US Steel Kosice. Metalloinvest confirms that it is not interested in acquiring US Steel Kosice assets and that it has not been in negotiations to acquire these assets,” a company spokesperson said.

According to reports, US Steel — hamstrung by confidentiality clauses — told employees that the white-helmeted visitors touring the facility were there in connection with Slovakia's EU presidency, which launched on July 1. However, that appears to have fooled nobody. “Everyone knows that if you are viewing the company you are interested in buying it,” commented trade union leader Mikulas Hintos.

The sale of the aforementioned Serbian mill could yet prove a model for what will transpire in Slovakia. China’s Hebei Steel and Iron Group paid $46mn for Smederevo, which was previously owned by US Steel before being sold to the Serbian government in 2012 for $1.

The Serbs moved to sell the plant, the country’s largest exporter in 2003-2012, to private investors, but ended up holding it for nearly four years. A bid from US firm Esmark was rejected due to the suitor's refusal to offer a guarantee against job cuts or closure. Hebei has promised it will not lay off any of the 5,050 working at the plant, although it is not clear how long that pledge will last.   

Due diligence

Back in Kosice, there is no indication Usmanov himself visited, and the whole process looks to be in the early stages. One US Steel worker told Korzar that all the visitors  “certainly were not people from the top management [of the Russian company], but perhaps some middle managers from the factory.”

“Their questions to our people in the operation were quite to the point, it was also seen as relevant to production technology,” the source continued.

US Steel has remained tight-lipped on reports that it is seeking to offload the Slovak plant this year. However, signs that the facility is on the auction block are everywhere, including detailed belt-tightening measures as US Steel Kosice struggles with weak markets. Top executives were recently limited in their use of company Volkswagens and Audis. Middle management has seen monthly fuel allowances dropped to just €80 per month.

Though Fico’s 2012 state aid deal precludes cuts to production staff through 2016, trade unions have confirmed that the company has asked them to consider transitioning from 8-hour to 12-hour shifts. A majority of members rejected the proposed change.

Then there is added due diligence in upkeep. “I tell you, this place has not been as clean as it is now for a long time,” one US Steel Kosice worker told Korzar.

Yet as much as the US owner may try to impress suitors, it is unlikely to have a free say on the fate of the plant. The Slovak government noted in May how closely it is watching, with Economy Minister Peter Ziga claiming Bratislava stands ready to seek a blocking stake should the facility be sold.

"I am worried about a possible change of the owner, if it were a non-standard owner," the minister said. "I can imagine that the government would join talks and seek a share ... to prevent a new owner buying the plant only to close it. A 34% share would ensure a blocking mechanism so that the state can have a say."


Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.