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China Acquisition of Unprofitable Serbian Mill Undermines Efforts to Reduce Global Overcapacity, Says EUROFER
06/17/2016 - As Chinese President Xi Jinping visits Serbia this week, the European Steel Association is raising objections over the sale of Serbia’s largest steel mill to a state-owned producer in China.
In a statement, Axel Eggert, the association’s director general, said state-owned Hebei Iron & Steel's acquisition of the Zelezara Smederevo works undermines efforts to eliminate the world’s excess steelmaking capacity and counters free-market forces.
“Market conditions do not prevail in China, and by promoting blank-check investments abroad, China shields its national champion companies from the commercial pressures that would prevent a private investor from making a similar purchase,” Eggert said.
“This is a new way of exporting the distortions in China’s market and only confirms that China cannot yet be granted market economy status at the WTO.”
Hebei, which was the sole bidder for the nationalized plant, acquired it for US$52 million in April. The company plans to invest US$300 million in the facility and raise its production to 2.1 million metric tons over the next three to four years. The mill posted a net loss of US$113 million in 2015, according to the Reuters news service.
At the time of the sale, the European Commission said it had been in close contact with Serbia and was reviewing whether the sale complied with an agreement related to its pending ascension into the union, according to Reuters.
The agreement said Serbian state aid to the steel sector must end by February 2015.
President Xi is in Serbia for the next three days, and the two countries are expected to sign more than 20 agreements, some economic, according to the Associated Press.
The visit is "a significant milestone for consolidating the traditional friendship between China and Serbia, deepening mutual political trust and promoting the practical cooperation between the two countries," Assistant Foreign Minister Liu Xinghai told the news service.
“Market conditions do not prevail in China, and by promoting blank-check investments abroad, China shields its national champion companies from the commercial pressures that would prevent a private investor from making a similar purchase,” Eggert said.
“This is a new way of exporting the distortions in China’s market and only confirms that China cannot yet be granted market economy status at the WTO.”
Hebei, which was the sole bidder for the nationalized plant, acquired it for US$52 million in April. The company plans to invest US$300 million in the facility and raise its production to 2.1 million metric tons over the next three to four years. The mill posted a net loss of US$113 million in 2015, according to the Reuters news service.
At the time of the sale, the European Commission said it had been in close contact with Serbia and was reviewing whether the sale complied with an agreement related to its pending ascension into the union, according to Reuters.
The agreement said Serbian state aid to the steel sector must end by February 2015.
President Xi is in Serbia for the next three days, and the two countries are expected to sign more than 20 agreements, some economic, according to the Associated Press.
The visit is "a significant milestone for consolidating the traditional friendship between China and Serbia, deepening mutual political trust and promoting the practical cooperation between the two countries," Assistant Foreign Minister Liu Xinghai told the news service.
