Steel Mills

Esmark Moves Closer to Acquisition of Serbian Mill

January 5, 2015

Bidding has closed for Serbian steel mill Zelezara Smederevo with a decision due around February 1.

Esmark Steel Group is considered the leading contender out of the 10 bids submitted to the Serbian government. The eventual buyer of the mill will be obligated to ramp up production of Zelezara’s second blast furnace to fifty percent capacity by the end of 2016 while maintaining full production on the first furnace.

Esmark says it will invest $400 million in the Serbian plant over the next few years and preserve current jobs if it wins the bid. Of that $400 million, $28 million will be invested in 2015 to bring the second blast furnace back into production and upgrade the central plant.

Esmark has already put together a management team to for the mill in anticipation of a successful tender. Mark Whalen, former Vice President of Operations for U.S. Steel Kosice and former General Manager of Operations for ArcelorMittal U.S., has been tapped as Chief Executive Officer for the newly formed Esmark Europe.

Zelezara Smederevo debt totals approximately EUR 525 million ($626 million) owed to banks, suppliers and for raw materials. Currently the government provides a monthly subsidization of around $10 million for Zelezara. The Serbian government says it will direct state creditors to write off the debt recorded as of December 31, 2013, upon the completion of privatization of the company.

The value of steel production at full capacity is estimated to be worth EUR 1.5 billion ($1.8 billion). The state would retain 19.9 percent ownership of the company which directly contributes 0.6 percent to the country’s GDP and 1.2 percent indirectly.

Zelezara Smederevo was sold to US Steel in March 2003 for $23 million and was bought back by the Republic of Serbia in January 2012 for one dollar.

The flat rolled mill has two blast furnaces and three basic oxygen convertors for a potential production capacity of 2.2 million tonnes (2.43 million tons) of crude steel that is rolled into hot and cold-rolled coils. The company also produces tin plate at its facility in Sabac. Until 2012, Zelezara accounted for 13 percent of Serbian exports.