The announced planned sell-off of steelworks U.S. Steel Kosice this week has produced at least two bidders, according to Hospodarske Noviny.
One of the two interested parties is allegedly Russian oligarch Roman Abramovich, better known to most as the owner of Chelsea football club. Abramovich’s interest is due to his metallurgy company Evraz, as it is planning expansion on the East-European market, and the plant in Kosice would be an ideal acquisition.
Another bidder could be Ukrainian steelworks holding Metinvest, which sent a team of inspectors there in June, according to HN.There are also speculations that German company ThyssenKrupp is interested in the acquisition.
The plant of U.S. Steel Kosice is huge, which is why it is the biggest employer in the country with 11,000 employees. It received various advantageous 10-year tax breaks and stimuli as a result, which have now run out (2010), and the US owners are now doing the same. They put the decision down to its first losses and stronger market competition.
The reality of these heavy industries that in every country and every jurisdiction governments are providing handouts, tax breaks, r & d tax credits or in China’s case FREE money from their banks and Below Cost raw materials etc. If anything getting a Russian or Ukrainian owner may be advantageous in the long run because the former USSR/CIS present day Russia Ukraine Belarus have over 120 million residents and they will protect their production assets even if they may be located in Kosice. If anything one of Kosice VSZ greatest advantages is the fact it has Russian Width Gauge Railroad tracks directly into the plant and thus it can both import raw materials from Russia as well as export finished product without having to switch trains at the border with Ukraine. Tax breaks will have to be given, but it is advantageous to do this rather than end up with probably 15,000 unemployed people in the Kosice region. Without a proper highway linking Kosice to Bratislava or any point west or east of it, these people will be stranded and no industry or company will invest in the region. Transportation links are critical and that is why the greenfield investments by car companies have been made in Zilina or Zvolen or Bratislava, because they are near the completed highway system. However, the economic under-investment by the Slovak (Bratislava) State in Eastern Slovakia is a story for another day. Fingers crossed that the plant will be bought soon.
If Mr. Mittal doesn’t want to buy it then it probably isn’t worth buying without major tax incentives and free handouts. It is not just the plant workers, but the huge number in associated industries that would be at risk of unemployment.
The employment model in Slovakia often means many men share the salary 1 man gets in Germany for example. The subsequent sale price of the produced material is virtually the same. Efficiency is a measure of the profitability of the end product, and the distribution of salary is a social issue.Heavy industries are very susceptible to global downturns in the marketplace and it’s a bad time for steel manufacturers.
Alec – All very true. Simple fact is the only expanding steel industries are in China, India and Brazil, the rest are contracting. China produces more in two days than Slovakia does in a year so the loss of the plant in Kosice would have neglible effect on supply. The job losses would be devastating and I hope a buyer can be found.
I wouldn’t hold my breath waiting for a buyer. The Kosice plant is grossly inefficient in terms of the employee production ratio. Posco in South Korea produced 28 million tons last year while Kosice with a larger workforce produced less than 5 million tons. The tax breaks were the only thing that made it a profitable proposition as illustrated by the posted losses. If it is bought then massive job losses will almost certainly follow unless the govt. offers sweetners again.
Still US Steel was absolutely not a bad thing for Kosice by itself….
10 years of profit without being taxed, now the high tax rate causes a loss and the US Steel board members see why they got rich over the past 10 years and now don’t want to see their money disappear. I wonder if the tax breaks will be given to the new owners? Time will tell, but the sale will go on regardless who the new owner will be.