Serbia May Keep Zelezara Open Amid Losses, Minister Says

Serbia is struggling to avoid a shutdown of unprofitable Zelezara Smederevo d.o.o., its sole steel plant, even as the company continues to generate losses, the country’s economy minister said.

The government “won’t let the production come to a standstill,” Economy Minister Nebojsa Ciric told reporters in Belgrade today. He added that the Smederevo-based plant is still “making a loss month after month.”

A complete closure would seriously jeopardize hundreds of small- and medium-sized companies that rely on the products from Zelezara, once the country’s top exporter, Ciric said. The plant, which makes hot- and cold-rolled steel products, has an annual production capacity for 2.2 million tons, according to the company’s website.

The minister’s comments came in response to media reports that the government plans to switch off the last of the two furnaces at Zelezara on July 5. Former owner U.S. Steel Corp. (X) halted one of the two furnaces last year before selling the plant back to Serbia in January for a token $1.

The government, which has twice extended the deadline in a tender for the sale of Zelezara, giving potential investors until Sept. 10 to make an offer, is looking for a partner who would acquire a stake, prop up sales and provide raw materials at lower costs, Ciric said.

Operating Loss
Zelezara’s operating loss widened to 12.53 billion dinars ($136.6 million) in 2011, from 11.04 billion dinars in 2010. Its accumulated losses exceeded its capital by 34.8 billion dinars, according to financial reports submitted to the Serbian Business Registers Agency.

Three Serbian trade unions will meet with Zelezara’s workers on June 26 to work out a set of measures the government should take to overcome the crisis and continue production, the Association of Free and Independent Trade Unions, or ASNS, said in an e-mail today. Ciric has also been invited to meet the trade unions, ASNS Vice President Dragan Milovanovic said.

Serbia needs to rein in its budget deficit, which expanded 80 percent over the first five months to 89.2 billion dinars, or 7.3 percent of gross domestic product. Public debt has reached 51.1 percent of GDP, above the agreed limit of 45 percent, while the country awaits a new government following inconclusive May 6 elections.