China’s Hebei Iron and Steel (Hegang) has signed the contract to acquire Serbian state-owned steelworks Zelezara Smederevo for €46 million ($52m). Serbian Prime Minister Aleksandar Vucic says the flat steelmaker will consequently become the most competitive in Europe.

Earlier this month Serbia’s economy ministry accepted the sole binding offer submitted by Hegang in the tender for the privatisation (see Kallanish 6 April).

The deal is subject to approval from Serbian competition authorities, as well as the EU. It represents the culmination of Zelezara’s privatisation stretching back to 2012 when US Steel sold its former Serbian plant to the government for $1.

Charge d'Affaires of the Chinese Embassy in Serbia Lu Sung said at the signing ceremony that the Smederevo steel plant will be a model for cooperation between China and European countries.

The Chinese steelmaker will keep Zelezara’s current staff of 5,050. It also intends to invest $300m in the steelworks and plans to raise the annual crude steel output of the plant to 2.1 million tonnes.

Zelezara has two blast furnaces with a combined 2.4m t/year capacity of pig iron, but has been operating at well below this capacity. It re-started a 75,000 tonnes/month blast furnace last October. Its main products are hot and cold rolled coil.

Zelezara will be Hegang’s first European steelmaking capacity. The company bought Swiss trader Duferco earlier this year. The Chinese steelmaker is expanding its operations abroad at the same time as there is a surge in trade defence cases against China-origin steel.