Hebei Iron & Steel Group (HBIS) bid 46 million euros ($52.2 million) for a loss-making Serbian steel mill and pledged to invest $300 million in expanding production, Serbia's Economy Ministry said late Tuesday.
Hebei Iron & Steel Co, the Shenzhen-listed arm of the Chinese steel group, closed at 3.11 yuan ($0.48) on Wednesday, up 0.97 percent.
HBIS submitted the only valid bid for the state-run Zelezara Smederevo steel plant, which posted a net loss of $113 million in 2015, and the Serbian government said the bid met all its conditions.
HBIS will not cut any of the plant's 5,050 staff, the ministry said. It plans to raise production, which was 875,000 tons in 2015, to a maximum of 2.1 million tons a year, the Economy Ministry said. It didn't give a date.
The potential deal could boost Prime Minister Aleksandar Vucic, who is seeking re-election on April 24.
The deal would be the first major privatization since he took office in 2014, allowing him to fulfill a central economic reform pledge.
Europe's steel industry is suffering from overcapacity, which European steelmakers blame partly on a glut of cheap Chinese steel exports. Britain is battling to save its steel industry after India's Tata Steel put its British operations up for sale.
The contract with the Chinese company will be signed after the state commission against money laundering gives the green light, the Economy Ministry said.
The Chinese company pledged to invest in expanding the production line into galvanization and to improve the plant's environmental performance, the ministry said.
"They (HBIS) plan to offer employment to all those who are currently working in the plant (5,050 people)," the ministry said.
Any deal will need the approval of the European Commission, as Serbia is seeking to wrap up membership talks with the EU in 2019.
Zelezara Smederevo Chief Executive Bojan Bojkovic told Reuters that the $300 million promised by HBIS was a "minimum investment over the next two years."
North China's Hebei Province, where HBIS is based, produces one-quarter of China's steel but its mills are struggling with a huge price-sapping capacity surplus.
The province has repeatedly urged its steel companies to shut capacity at home and replace it with projects overseas.
