Serbia bought back the Smederevo steelworks from U.S. Steel Corp. for a token amount of $1 as the biggest U.S. producer of the metal by volume is cutting losses.
Serbia’s government will seek a new buyer for the country’s only steel mill with “multiple targets in mind,” including Ukrainian, Russian producers and “some from the far East,” Prime Minister Mirko Cvetkovic said in Belgrade today at the signing of the buy-back agreement with David Rintoul, U.S. Steel’s vice president for European operations.
U.S. Steel will leave no debts for the steel plant and will assist in the temporary takeover by the state, Cvetkovic said. The Pittsburgh-based company said on Jan. 30 that it will take a loss of $350 million to $400 million in the first quarter on the sale. The total charge may be as much as $450 million, including some $50 million from currency adjustments in Serbia.
“This is the value of the plant that we have on our books,” Rintoul said, describing the Jan. 30 announcement as a “non-cash event” which has “no impact on the company that the government inherits.”
U.S. Steel bought the unit from the state for about $23 million in September 2009, investing “hundreds of millions of dollars” in upgrades and making profit until 2009, Cvetkovic said.
“The global crisis and particularly the crisis in Europe is continuing” cutting demand, Rintoul said.
Repurchasing the plant is an “unwanted move” for Serbia to avoid the steelworks’ shutdown and job losses for its 5,400 workers, as well as for some additional 15,000 people involved with supplier companies.
The state may have to borrow bank loans to keep up production at the loss-making mill, Cvetkovic said. Its current annual output fell to 1 million metric tons of steel, compared with a capacity of 2.2 million tons a year. The cost of operating the steel factory will not widen Serbia’s 2012 budget gap from the projected 4.25 percent of gross domestic product, Cvetkovic said.
“Buying back the steelworks is simply a lesser evil than abandoning it,”Cvetkovic said.
U.S. Steel has recently offered the plant to ArcelorMittal for $300 million, then cut the price to $200 million, while ArcelorMittal was willing to pay only the original price of $23 million from Serbia’s asset sale, Vecernje Novosti reported today, citing an unidentified source.