“U.S. Steel has taken a $ 400 to $ 450 mm loss on the largest foreign investment in your country. If demand fell and U.S. Steel insisted on cutting production and reducing employment, the government should respect the decision of the private company”, said Tumazos. The American analyst is confident that U.S. Steel had gone from Serbia for good, and it will not return. He believes that the decision of the Serbian government to take over the steel plant from the U.S. Steel was a mistake, because the longer the factory is in state hands, the longer it will stay without capital investments and will be increasingly at a disadvantage in competition due to obsolescence.
Tumazos believes that the worst possible solution for Smederevo steel plant is to be state owned. According to him, in this case the taxes in the country will grow and the factory will fall apart because there will be no investment, and there is also the risk of a currency crisis, similar to the one that affected Greece.
After we had finished the interview, Mr. Tumazos contacted us saying that he spoke by telephone with the representatives of U.S. Steel company who conveyed to him that the representatives of the Serbian Government had been very polite and cooperative towards them.
“U.S. Steel’s decisions involved their judgment that European steel demand had fallen to a very low level and would not recover quickly, that European steel capacity is much too large and that the Serb steel plant disadvantage of not having raw materials was insurmountable. They stressed they were not pressured or “expropriated,” but rather voluntarily reached their own decision at U.S. Steel to walk away”, said Tumazos.
Why no one offered to buy the factory from Americans?
Serbian government bought the factory in Smederevo U.S. Steel from a U.S. company for one dollar. The purchase transaction could not have encouraged anyone with a common sense so much not to wonder how will a poor country amid the global economic crisis maintain the production of steel when this could not have been achieved by a powerful company with enormous experience.
And if it is true that U.S. Steel has been making an exit strategy to leave Serbia for several months, then the public’s imagination will continue be to tickled with a mystery why no other steel company offered to by the factory in Smederevo from U.S. Steel for one dollar, but eventually the state turned out to be the only buyer.
The motive of the Government to make such a move as a last resort, might seem to someone in Smederevo “and beyond” like a risky and courageous act used to temporary avoid the darkest scenario. However, the chances to save Smederevo by means of the steel plant, in the medium and long term, are not great. For, viewed from today’s perspective, there is hardly any strategic partner in the world that Serbian government can engage in the business with the steel plant. If, by any chance, there had been such interested buyers, it is certain that the former owner of U.S. Steel would have already sold the steel plant.
The steel plant is extremely important not only for Smederevo, but also for Serbian economy: half a percent of gross domestic product, five percent of total production, 14 percent of exports, 40 percent of rail transport. However, the central point and the public statements of the president Boris Tadic, Prime Minister Mirko Cvetkovic and State Secretary Dusan Nikezic are based on the social moment: what will happen with 5,500 employees, that is 20,000 workers in the “reproduction chain” and 100,000 of their dependents. Their lives will be ruined.
However, Smederevo and its residents should have thought about it. For two years, the gates of this city, like the gates of the medieval fortress, have been unsuccessfully visited by the American company Comico Oil willing to invest 250-300 million Euros in the oil refinery. And perhaps the people from Smederevo would not have experienced the closure of the steel plant. Or at least, it would not have been such a problem. Instead, Smederevo is now crying – “Serbia save us”.
To sell the steel plant as soon as possible
Has the government calculated how much money will be needed to fund the steel plant operation? If so, then the citizens of Serbia should know it. It is important that the government fulfills the promise and sells the steel as soon as possible. The only question is – to whom? No one believes that the state will be able to quickly find a new strategic partner these days. Foreign Investment Consultant Milan Kovacevic said that U.S. Steel closed the steel plant because “it did not have the market and because not all facilities have been used so everything was way to expensive per each ton.”
This is confirmed with the fact that steel from Russia and Ukraine is currently being sold at 500 Euros per ton, and it is cheaper than production cost of steel poured in Smederevo. The consultant who participates in several projects of the European Union stated, “If there was a 0.1 percent probability that the Smederevo steel plant will make a profit, U.S. style would not have left Serbia.” Undoubtedly, the Government is aware of this.
Zeljko Veselinovic, the president of the Union Trade Unions of Serbia “Unity” explained what the government and its employees can expect now: “They are all still not aware of what has hit them. Many of them are worried, they had some kind of security, salaries were regular and solid, they were protected by the collective agreement, and certain rules were applied. It is now important for the state to respond quickly and prevent the negligence that will arise because there are those who rejoice over the departure of Americans. Some even think of taking revenge against those who objected to them and those who were fired already think about returning.”
However, the most important thing is that Serbian government and its “Smederevo crisis staff” have the so-called Plan B, that is, the answer to the question – what if strategic partner does not appear any time soon? And there are small chances for this to happen while the valid reasons for which the U.S. Steel as a strategic investor had left Smederevo are still present (the market crisis, the decline in surrounding trends).
(Read more in the printed edition)