LONDON Steel industry observers are skeptical about the Serbian governments plans to restart production at Zelezara Smederevo d.o.o. (ZS) after a Russian company failed to place a bid to buy the beleaguered flat products producer.
"Nobodys going to sell raw materials to them," one European analyst told AMM sister publication Steel First March 1.
Zelezara Smederevo director Ivan Milosevic announced the restart plans following an early Friday meeting with Serbian economy and finance minister Mladan Dinkic, who on Feb. 28 had said that he would unveil a "Plan B" for ZS if the deadline for interested parties to submit a bid passed with no outcome.
The Serbian government has sought a buyer for the plant over the past year, after Pittsburgh-based U.S. Steel Corp. sold it back to the state for the equivalent of $1 after it suffered what it called "unacceptable losses" (amm.com, Jan. 27). The government also vowed that it wouldnt run the plant.
ZS has two blast furnaces and three basic oxygen convertors that can produce 2.2 million tonnes of crude steel annually to be cast into slab and subsequently rolled into hot- and cold-rolled coil. The plant can also produce tinplate at its Sabac Works.
The plant planned to reinstate contact with raw material suppliers March 4, targeting an April restart of one blast furnace and an eventual output of 70,000 tonnes per month of flat-rolled products, a source at the site told Steel First.
But a second European analyst questioned whether ZS would be able to acquire the necessary stockpiles to restart, considering the state of Europes steel industry.
"The trend in Western and Eastern Europe is idling and closing," the second analyst said.
The Serbian government has agreed to act as a guarantor on raw materials purchases, a ZS executive said.
But that is unlikely to be very attractive to potential sellers, as recovery of state-guaranteed debts can take considerable time and might require the debtor to accept a write-down on the original value of its investment, sources warned.
Another factor potentially hindering ZS potential acquisition of raw materials is the lack of markets to which the plant could sell its material, a third analyst said, noting that a restart of the furnace itself would also mean a "massive cost" for ZS.
That cost could go as high as $10 million, according to a Serbian press report last week quoting a source close to the plant.
A version of this article was first published by AMM sister publication Steel First.