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Mittal kin's Bulgarian steel unit faces closure
Nevin John in Mumbai |
November 05, 2008 11:24 IST
Bulgaria's debt-laden steel company Kremikovtzi, which is owned by Pramod Mittal of Ispat Industries [Get Quote], is on the brink of a complete shutdown after Ukrainian company Vorskla Steel discontinued raw materials supply to the company.
The steel plant will be closed down in 25 days unless an investor takes it over, operative executive director of the Bulgarian metallurgic enterprise Plamen Stoyanov told the Bulgarian media.
Bulgaria's biggest steel plant has already shut down some of its production facilities, including two of its blast furnaces, and plans to stop operations completely by the end of this month.
A Bulgarian court in August ruled that the ailing steelmaker was insolvent, after its debt ballooned to $1.35 billion, opening the way for its sale.
Earlier this year, Pramod Mittal, the younger brother of steel tycoon LN Mittal, had planned to sell off 73 per cent stake in Bulgarian steel plant.
The officials of Ispat said that Global Steel Holdings, the holding company of Kremikovtzi and Ispat, has nothing to do with the current situation.
"Kremikovtzi has filed bankruptcy. Now, the court and the Bulgarian government have to decide the fate of the steel company," they added.
From July, Kremikovtzi was supplied with raw materials by Ukrainian company as per the subcontract agreement with the Bulgarian steel maker.
With the supply from Vorskla, Kremikovtzi was producing 70,000 tonnes a month. But the downturn of the steel prices has put pressure on Vorskla, prompting it to stop supply to Kremikovtzi, said sources. Vorskla is controlled by Ukrainian Billionaire Konstantin Zhevago.
Vorskla was supplying iron pellets and was being paid for their processing to keep the bankrupt steel plant afloat while bankruptcy court was proceeding with sell-off plans.
Zhevago, which also controls iron ore producer Ferrexpo, was one of the two bidders interested in buying Kremikovtzi along with LN Mittal-controlled ArcelorMittal.
The global financial crisis also hurt the operations of Indian companies abroad.
Tata Steel-owned Corus had decided to cut its production by 20 per cent a fortnight back due to drops in demand from its main customers in the automotive, construction and engineering sectors.
A week ago, Essar Steel's [Get Quote] Algoma posted layoff notices for all its 3,500 employees.
Sofia-based Kremikovtzi provides 10 per cent of Bulgaria's exports, employs 8,000 personnel and ensures indirectly the income of 1,00,000 people.