Serb Steelmaker’s New Managers Aim to Break Even in Six Months

The new management at Zelezara Smederevo DOO expects to turn Serbia’s sole and unprofitable steelmaker around and break even within six months on rising output and improved outlook for the industry as raw-material prices drop.

Serb Prime Minister Aleksandar Vucic hired HPK Engineering BV, a Dutch-registered company, to manage the plant after failing to sell it to Esmark Europe BV. The new management, which vowed to retain all 5,000 workers, plans to cut costs and focus on traditional markets, Peter Kamaras, the plant’s new supervisory board chairman, said in a March 25 interview in Bratislava, Slovakia.

Zelezara’s overhaul is a key part of the government’s plan to end subsidies for the facility that drains more than $100 million from public finances each year. The steelmaker, in state hands since 2012, is one of the biggest of 500 companies Serbia needs to sell or close down to narrow the budget gap and rein in public debt under a stand-by program with the International Monetary Fund.

“Our two biggest tasks are to streamline procurement and focus on sales,” said Kamaras, a native from Slovakia, who is also one of HPK’s owners.

To carry out the plan, he has teamed up with John Goodish, a former U.S. Steel Corp. vice president, who headed the company’s unit in Slovakia from 2000 to 2003.

U.S. Steel controlled the Serbian facility for eight years before selling it to the government for $1 in 2012. U.S. Steel, which turned the former idle steelmaker into Serbia’s single largest exporter, gave up on the business as economic growth eroded and raw material costs rose.

Full Capacity

The plant’s new management targets production of 1.5 million tons in 2016, inching toward the facility’s full annual capacity of 2.2 million tons, Kamaras said.

The second furnace, idle since 2012, should restart “within six, seven months,” he said, adding that the current output of about 30,000 tons a month is poised to reach 85,000 tons in coming months.

“We are able to break even at 90,000 tons” a month, he said. Unlike other steelmakers, Zelezara won’t attempt to push its way into the Chinese and U.S. markets, he said.

“We will focus on Europe, on neighboring countries, where transportation costs are reasonable,” Kamaras said. We’ll “focus on more basic products with higher added value.”

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