VSŽ seeks tender for defunct Hungarian steel mill

Officials from both Hungary's state property agency and its privatization bureau have confirmed that VSŽ, the Košice steel mill, is moving to purchase both a steel mill and an industrial engineering firm south of Slovakia's border. In late February, the Hungarian daily Magyar Hírlap quoted the trade director of the Hungarian Association of Iron and Steel Industry as saying that VSŽ had taken steps to purchase a majority share of the ailing industrial engineering company Digép, located in the Hungarian town of Diosgyör, and then combine forces with Digép to privatize the defunct Ózda Steelworks, Ltd.
"To the best of our knowledge, VSŽ and Digép have purchased tender documents to privatize Ózda," said József Mezei, director of the Hungarian Association of Steel and Iron Industry, adding that the results of the tender will be announced on April 12.

Officials from both Hungary's state property agency and its privatization bureau have confirmed that VSŽ, the Košice steel mill, is moving to purchase both a steel mill and an industrial engineering firm south of Slovakia's border. In late February, the Hungarian daily Magyar Hírlap quoted the trade director of the Hungarian Association of Iron and Steel Industry as saying that VSŽ had taken steps to purchase a majority share of the ailing industrial engineering company Digép, located in the Hungarian town of Diosgyör, and then combine forces with Digép to privatize the defunct Ózda Steelworks, Ltd.

"To the best of our knowledge, VSŽ and Digép have purchased tender documents to privatize Ózda," said József Mezei, director of the Hungarian Association of Steel and Iron Industry, adding that the results of the tender will be announced on April 12.

Bolstering that statement, László Kantor, a press spokesman for the Hungarian State Property Agency, told The Slovak Spectator that VSŽ's president, Ján Smerek, raised the subject of VSŽ privatizing Digép and Ózda during a personal visit in January with officials at the Hungarian Ministry of Privatization.

"What they negotiated for over an hour I don't know exactly," Kantor said, "but I know that Mr. Smerek wrote a letter to our privatization minister [saying], 'Thank you very much for your cooperation. We would like to express our interest in the privatization of Digép,' and, 'We would like to participate in the tender to privatize Ózda Steelworks with Digép.'"

Representatives at VSŽ's press office refused to confirm the steel giant's activities in Hungary and did not return answers to faxed questions on the matter.

Despite Smerek's statement of intent and contrary to what Mezei said, Kantor said VSŽ still has not formally entered the tender to privatize Ózda. "I have read in Hungarian newspapers that VSŽ is interested in Ózda," Kantor said, "but until now VSŽ has not been here to sign the tender documents." Kantor did confirm that Digép signed tender documents to privatize the Ózda plant, "but not in cooperation with VSŽ," he added. "That's why I cannot say if VSŽ will take part in the tender."

"Our opinion is that VSŽ is so large that they can afford to privatize Ózda without [engaging in] any [joint partnership]," Kantor continued. "That is only our opinion. We do not want to influence VSŽ's decision."

What's at stake

Digép Holding, which produces steel "long products," such as wire rods, bars, culverts and steel-reinforced sections, could provide VSŽ with the technology the Slovak steel mill needs to improve its access to the long products market, Mezei said. "Slovakia imports all its long steel from Ukraine, Czech Republic and Russia," he added.

Despite lower worldwide demand for such steel, Mezei said, VSŽ's reported interest in purchasing the financially troubled Digép and the six-years' defunct Ózda is nevertheless consistent with the company's penetration of all levels of the region's steel market.

"Who knows how the steel market will look in the future," he asked. "If they have the money for it, why not?" Mezei noted that VSŽ has no rolling mill facilities at its Košice headquarters and is physically located about 80 kilometers from the Ózda mill. Pointing out the proximity, Mezei said VSŽ may be aiming to establish Digép "as a new company to manage VSŽ's investment [in Ózda]."

Asked what impact the deal would have on the Hungarian steel market, Mezei said: "Maybe it would be very good. Ózda used to produce one million tons of crude steel per year, but about six years ago this production completely stopped. Step-by-step, [Ózda] was destroyed because of low demand."

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