U.S. Steel leaves Serbia but sees opportunities in Canada, Slovakia
Weak demand in Southern Europe, competition from cheap imports, raw materials issue and other factors prompted U.S. Steel to sell Serbain mills, including its Smerderevo mill overlooking the nearby village of Radinac.
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Its recent retreat from Serbia notwithstanding, U.S. Steel still has a formidable presence outside the United States.
About a third of its 29 million tons of steelmaking capacity is in Canada and Slovakia.
The Pittsburgh steelmaker also has a number of joint ventures outside the United States: Canadian ventures that put paint on steel coils and provide equipment used to flatten steel slabs into sheet; a 40 percent interest in Acero Prime, a Mexican steel processor and distributor serving auto and appliance makers and other manufacturers; and a 50 percent stake in Apolo Tubulars, a Brazilian venture that supplies tubing to the energy industry.
Southern Europe's ongoing economic woes prompted U.S. Steel to sell its mills outside Belgrade to the Serbian government at the end of January. The company had operated the plants since it purchased them from the Serbian government in 2003 for $33 million.
However, weak demand in Southern Europe, competition from cheap imports, raw materials issues and other factors generated more than $200 million in losses from the Serbian operations last year. U.S. Steel said it sold the Serbian mills, which employ 5,500 and are capable of producing 2.4 million tons of steel annually, for a "nominal" amount. The Serbian government said it was $1.
"We simply could not continue to incur operating losses in Serbia," Chairman and CEO John P. Surma told analysts in January.
Instead, U.S. Steel will focus on its more promising operations in Slovakia. It has been there since 2000, when it acquired the state-owned producer. Unlike the Serbian mills, which produced low-margin commodity sheet, the mill outside the Slovak city of Kosice produces higher-margin sheet steel used by the automotive and other industries. The plant has an annual capacity of 5 million tons.
U.S. Steel entered the Canadian market in 2007 when it acquired Canadian producer Stelco for $1.1 billion. The purchase included the Lake Erie Works in Nanticoke, Ontario, and the Hamilton Works in Hamilton, Ontario. The facilities have a combined annual capacity of 4.9 million tons.
As part of the acquisition, U.S. Steel promised the Canadian government it would maintain certain production and employment levels.
The global financial crisis that intensified a year after the Stelco purchase prompted U.S. Steel to idle operations at both Canadian plants. The Canadian government took U.S. Steel to court in 2009 to enforce those agreements. The dispute was settled in December, with U.S. Steel agreeing to invest an additional $50 million in the Canadian facilities by 2015.
Meanwhile, a labor dispute with the United Steelworkers over pensions shut down the Hamilton plant after a labor agreement expired in July 2010. Workers there ratified a three-year agreement in October that puts the company pension plan off limits to new workers and eliminates a pension plan provision that provided cost-of-living increases.
First Published March 20, 2012 12:00 am