China's Hebei Iron & Steel Group eyes investment in Serbia's steel mill

12 October 2015

China's Hebei Iron & Steel Group is considering a strategic partnership in Serbia's only steel plant and an investment of at least 300 million euros, Serbian Prime Minister Aleksandar Vucic said on Friday.

The loss-making Zelezara Smederevo plant, which has two furnaces, has been swallowing $120 million a year in subsidies since 2012, when Serbia's government bought it back from U.S. Steel for $1 to avert its closure and save more than 5,000 jobs.

The government is looking to sell the plant or find a strategic partner for it, and offload other heavily subsidised state-run firms, as a condition of its 1.2 billion euro precautionary three-year loan deal with the International Monetary Fund.

"They (Hebei Iron & Steel) are interested, as they say, to give at least 300 million euros ($340 mln) in investments, into a galvanization factory," Vucic said in a live TV broadcast from a ceremony in the central Serbian town of Smederevo to mark the resumption of production at the plant's second furnace. "People in Serbia should know this," he said.

After a sale to U.S. steel firm Esmark collapsed in March, Serbia appointed the Netherlands-registered HPK Engineering BV to run the plant and make it profitable until its privatisation.

The plant on Friday restarted its second furnace, shut down since 2011, with a monthly capacity of 75,000 tonnes, to boost both output and prospects for a sale.

Earlier this week, Vucic told reporters that a "major Chinese company" was eyeing Zelezara Smederevo.

In August, Serbia's state RTS TV reported that a delegation form Hebei Iron & Steel Group had visited the plant four times in July to analyse its operations.

Vucic also said that the plant would now generate $400 million in revenues over the next year.

"I cannot conceal my joy, I've said before, there will be fireworks when we find a strategic partner for the Zelezara and it will happen," Vucic said.