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Hesteel to spend $120 mln in 2017 on Serbian steel plant upgrade
December 15, 2016 / 2:45 PM / 10 months ago

Hesteel to spend $120 mln in 2017 on Serbian steel plant upgrade

SMEDEREVO, Serbia, Dec 15 (Reuters) - China’s Hesteel plans to invest $120 million in 2017 to upgrade Serbian steel mill Zelezara Smederevo, which it bought from the Serbian government this year in the first major Chinese acquisition of a Serbian company.

On a visit to the plant southeast of Belgrade, Chairman Yu Yong said the plant had turned a profit last month - its first for seven years - and expects to make a pretax profit of 20 million euros ($21 million) next year.

Zelezara Smederevo is the first European steel plant to be bought by a steelmaker from China, which accounts for about half the world’s steel production and whose cheap exports have been blamed for a slump in steel prices.

But prices have rallied in the past few months as Beijing has curbed overcapacity and embarked on a domestic infrastructure spending programme to stimulate flagging economic growth. U.S. and European anti-dumping measures have also helped.

Hesteel, China’s biggest steelmaker, paid 46 million euros to take over the loss-making plant, pledging to preserve the jobs of its 5,050 workers and invest in a total of $300 million in its future.

“The money will be used to renew equipment, improve technology and modernise the production process,” Yu told reporters after a tour of the plant with Serbian Prime Minister Aleksandar Vucic.

Zelezara Smederevo is capable of producing 2.2 million tonnes of crude steel annually but produced just 875,000 tonnes last year. Hesteel has said it plans to raise production to 2.1 million tonnes in three or four years.

The plant was bought back by the Serbian government from US Steel in 2012 for the token price of $1 to prevent its closure.

But the Balkan country is under pressure from the International Monetary Fund to privatise inefficient state firms as a condition of a 1.2 billion-euro IMF loan. Serbia’s previous attempts to sell off its biggest state companies have failed.

China has invested more than $1 billion in Serbia, mostly in the form of soft loans to finance highway and energy projects, as part of its so-called belt and road initiative to open new foreign trade links.

Vucic invited China, whose ambassador to Serbia also took part in the steel-plant visit, to buy heavily indebted state copper mine RTB Bor.

“I know I may sound pushy, but I have to make a plea one more time to speed up talks about RTB Bor. China is the only country that can help us with it,” he said.

Serbia has begun the formal process of joining the European Union but is not expected to become a member until the 2020s. It also has friendly relations with Russia. ($1 = 0.9604 euros) (Reporting by Georgina Prodhan. Editing by Jane Merriman)

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