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US Steel Košice planning Czech expansion

United States Steel Corp. (USS) has decided to take another step towards increasing operations in Europe, announcing an intention to bid for Czech steel firms on February 20.
USS daughter firm US Steel Košice boss John Goodish said the firm was looking to buy Nová Huť, Steel Vítkovice and Vysoké Pece Ostrava, the vital organs of the Czech steel industry, as they approach a government sell-off this spring.
Goodish also said his firm was looking to acquire another steel property in Europe with headquarters in the US, but declined to specify which one.


US Steel boss Usher was "exceptionally pleased" with US Steel Košice.
photo: TASR

United States Steel Corp. (USS) has decided to take another step towards increasing operations in Europe, announcing an intention to bid for Czech steel firms on February 20.

USS daughter firm US Steel Košice boss John Goodish said the firm was looking to buy Nová Huť, Steel Vítkovice and Vysoké Pece Ostrava, the vital organs of the Czech steel industry, as they approach a government sell-off this spring.

Goodish also said his firm was looking to acquire another steel property in Europe with headquarters in the US, but declined to specify which one.

Analysts said the move was a reaction by USS to falling markets in America, and one that hoped to capitalise on the success of US Steel Košice.

Tatra banka analyst Robert Prega: "USS is moving to the Czech Republic because of bad results in the US market. They are looking to diversify their activities, as the situation on the European market is somewhat better."

USS ended 2001 with a net loss of $257 million, with 29 US steel firms collapsing that year. US Steel Košice, which USS set up following a deal with the Slovak government to buy the best properties of steel mill VSŽ, recorded an operating profit of $123 million.

"We are exceptionally pleased with the performance of USSK in its first year as a unit of USS," said US Steel chairman Thomas Usher in late January.

Goodish said US Steel Košice (USSK) would start due diligence at Vitkovice February 25, and the same deep audit process at the other Czech targets once an exclusivity contract with global competitor Ispat expired in May.

The apparent expansion of USS activities in Europe is not expected to be problem-free, however.

For starters, the Czech Republic started negotiations three weeks ago with a daughter firm of the Indian Ispat on the Nová Huť property USSK is targeting. The exclusivity lasts until May, and was approved by the Czech cabinet.

"Ask the people who decided this," said Jana Višková, spokesman for the Czech FNM privatisation agency when asked whether the exclusivity would bar the Slovak bidder.

Ispat was a late but apparently serious contender for the VSŽ property in Slovakia in 2000.

Another factor is tensions between European Union member states and the US about steel dumping. Protectionism has risen since various global economic crises from 1997-1998, while steel imports reached a record in the EU last year.

Eurofer, an association of western European steel makers, at the end of last year lodged a complaint with the European Commission that USSK was selling its hot rolled product in Europe at cheaper rates that it was selling in Slovakia.

But Prega predicted that 2002 would bring better times for the steel industry, and less bitter conflicts.

"We should see a moderate turnaround in the second half of this year, of course depending on the overall global situation," he said. "That's why this USSK investment in the Czech Republic makes sense."

Jozef Marko, spokesman for USSK, agreed that there was a "certain tension" between European and US steel companies, but said it could be overcome.

Nor did he think the Ispat exclusivity could seriously interfere with USSK's ambitions.

"I don't think the exclusivity right can jeopardize (USSK's interests), although it might slow down our operations in the Czech Republic. However, much will also depend on what steps the Czech cabinet takes."

Marko added that expansion did not mean the Slovak-based daughter would abandon its labour and investment commitments to its host country.

"Nothing is going to change with our development promises," he said.

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