By Anil Mathews (ScrapMonster Author)

April 20, 2016 07:47:22 AM

BEIJING (Scrap Monster): The Chinese steel major, Hebei Iron and Steel (Hegang) has signed an agreement with Serbian government to acquire the state-owned Zelezara Smederevo steel plant. The loss-making steel making facility, earlier operated by Pittsburgh-based US Steel has been acquired for $52 million.

The Serbian government has been struggling for many years to find a buyer for the plant. The facility currently employs around 5,000 workers. After operating the plant from 2002 to 2012, US Steel had sold it to Serbian government for a symbolic price of $1. The Serbian government had floated tender for privatization, for which only Hegang had submitted binding offer.

Serbian Prime Minister Aleksandar Vucic stated that the deal was important for the nation, which has been desperate for foreign investment. Charge d'Affaires of the Chinese Embassy in Serbia Lu Sung said the acquisition will serve as a model for cooperation between China and European countries. The deal is subject to final approval by Serbian competition authorities and the EU.

Hegang announced that all 5,050 staff of Zelezara Smederevo will be retained. The company plans to make additional investment of $300 million in the facility, which is expected to raise the plant’s steelmaking capacity to 2.1 million tonnes per year. The plant currently has two blast furnaces with a combined capacity of 2.4 million tonnes per year of pig iron. It also contains a 0.9 million tonnes per year blast furnace. The plant mainly produces hot and cold rolled coils.

Zelezara will be Hegang’s first European steelmaking capacity. The acquisition is considered as part of the company’s plans to expand its operations in overseas countries.

Hebei Iron and Steel Group Company Limited was established on June 30, 2008 with the merger of Tangsteel and Hansteel in Hebei province, China. It is the largest steel producer in China and the third largest in the world.