As Russian steel group leaves, Romanians fear layoffs

The disposal by Russian metal group Mechel of five plants in Romania for $70.00 to an obscure trading company has raised fears of a new wave of layoffs in the struggling European steel industry. "We fear that the sale of five steel plants in Romania to a firm without any experience in that field will translate into massive job cuts", union leaders said in a statement. After ArcelorMittal's decision to close plants in France, Belgium and Luxembourg, it is now Romania's turn to be hit by painful restructuring plans. Mechel, a Russian metal group with revenues totalling $12.5 billion in 2011, announced on February 19 the sale of its Romanian assets, citing "unfavourable prices on the European markets" and the need to concentrate on its core business. The 4,000 employees of Mechel Romania heard the news from the media, and the identity of the buyer, a tiny, unprofitable firm without any experience in the steel industry named Invest Nikarom, triggered controversy. With 340,000 euros ($442,000) in annual revenues, Invest Nikarom will control five of Romania's main steel plants which together report some 850 million euros in annual sales. "An aquarium fish has swallowed a whale", the daily newspaper Adevarul concluded. Nikarom told AFP it also took over the 500-million euro ($650 million) debt accumulated by the five plants where production was temporarily suspended in December. But "the transaction raises doubts as Nikarom does not seem to have the financial capacity to resume production", the economic newspaper Ziarul Financiar noted. Despite assurances from Romanian Economy Minister Varujan Vosganian that the new owner would relaunch production in the towns of Targoviste and Buzau, hundreds of employees still fear for their future. And no plan was outlined for Campia Turzii and Braila, where hundreds of people have already been laid off. "We fear that Invest Nikarom is just a cover for Mechel to proceed with massive layoffs without bearing any social cost," said Constantin Iarca, the union representative at the Braila plant. "We also fear the equipment will be sold as scrap as has already happened in some units", Iarca told AFP. Nikarom is owned by the Chumakov family, and in particular the parents of Mechel's former representative in Romania. "Our intention is to keep as many jobs as possible. The final number will depend on restructuring measures to restore efficiency", Nikarom said Tuesday in an e-mail sent to AFP. In Braila, a major Romanian port on the Danube River, the mood at the steel rolling mill was gloomy. Among other products, the unit has produced iron for the shipbuilding industry since 1920 but its workforce has slumped from about 700 people in 2011 to 380 at present. "How do I feel," repeated 55-year-old Gheorghe Serbanescu when asked the question. "Like a man who fears he will lose his job after 33 years in the same company and who does not know what tomorrow will bring. "My daughter studies at the university. I do not know how I will support her if we lose our jobs", Serbanescu told AFP. His colleague Victor Mazilu who started to work at the plant in 1980 was another of those who worried. "At the moment, the pay comes late but the bills for heating and the mortgage for my house cannot wait. What will I do if I lose my job?", Mazilu wondered. From Braila to Campia Turzii, workers accused Mechel of deliberately acting to bring the former crown jewels of Romania's steel industry to ruin. "The plant in Braila used to buy raw materials at a price exceeding the market average from a Mechel subsidiary called Mechel Services. But finished products were then bought by another Mechel daughter company, Mechel Trade, for less than the market value", Iarca said. In general, the workers in Romania also felt abandoned by political leaders. "In France, the ministers and even the president tried to put pressure on Mittal when the company wanted to close plants", Mazilu recalled. "Here, when we talk to state representatives, mayors, they all say: this is a private transaction, we cannot do anything", his colleague added. Social-Democrat Prime Minister Victor Ponta held the same position. Iarca urged authorities to check if privatisation commitments had been respected. He emphasised that regulations had been violated since employees were not informed directly about the sale. The Romanian economy ministry told AFP that it was "preoccupied" with the future of the Mechel plants. The crisis in the Romanian steel sector is in part the result of unfair competition from obscure firms that import steel without paying VAT, it added. Between 2008 and 2012, Romania's legal steel industry lost 10,000 jobs and production slumped from five to three million tons, according to official figures. Despite the discouraging trend, Serbanescu says hope "will die last." Although production has been suspended at Braila, he goes every day to the plant. "I cannot help it. I hope a serious investor will come because we want to work," he said.