March 1, 2013 / 1:51 PM / in 5 years

Serbia says to restart production at sole steel mill

* Tender for sale of loss-making steel mill fails

* Employs 5,500 workers

By Jaksa Scekic

SMEDEREVO, Serbia, March 1 (Reuters) - Serbia plans to restart production at its sole steel mill and issue sovereign guarantees for fresh borrowing to avert its closure after failing to find a buyer, the finance minister said on Friday.

The Balkan country has been trying to offload the loss-making Zelezara Smederevo mill since buying it back from U.S. Steel in late 2011 for $1, but a third deadline for offers expired on Thursday without any interest.

“There’s a possibility that the furnace could be operational in April,” Finance Minister Mladjan Dinkic told reporters in Smederevo after meeting the company’s leadership and unions.

“It’s much better for people to work instead of sitting at home on 60-percent pay.”

U.S. Steel paid $33 million for the plant in 2003 in Serbia’s first major privatisation deal following the fall of late strongman leader Slobodan Milosevic in 2000.

But it ran well below annual capacity of 2.4 million tonnes for years.

The government halted production in July last year and sent most of the 5,500 workers home on reduced pay financed from the budget.

Serbia had been hoping to offload the mill, and a number of other loss-making assets, with Dinkic trying to slash a budget deficit of 6 percent of national output last year to 3.6 percent in 2013. But an offer from Russian tank and railcar manufacturer Uralvagonzavod never materialised.

Dinkic said the government remained open to investors in Zelezara “without conditions, tenders and formalities.”

He said government’s Development Fund would issue sovereign guarantees for fresh commercial borrowing to fund production.

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