E. Europe's icons of progress: steel mills

Once a symbol of post-Soviet industrial decay, many are reviving and boosting local economies.

By Colin Woodard | Correspondent of The Christian Science Monitor

from the February 28, 2007 edition

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KOSICE, SLOVAKIA - Amid the roar of machinery, a quarter-mile slab of red-hot steel races through the hot rolling mill, midway through its transformation from coal and iron to sheets of galvanized steel.

Outside, workers are finishing work on a new $160-million galvanizing facility, while a locomotive pulls a train of steel-loaded flatbeds toward the gate of this sprawling, five square-mile mill, Slovakia's largest industrial facility.

A decade ago, prospects were dim for this and other Communist-era steel mills. Across Eastern Europe, they were seen as icons of an irrational economic system, industrial dinosaurs doomed to extinction. Dirty, wasteful, and poorly managed, few imagined they would survive into the 21st century.

Not only have the mills survived, many of them are thriving. The Kosice mill is earning big profits for US Steel, which bought the failing facility seven years ago, as is a second steelworks it purchased in Smedervo, Serbia, in 2003. The world's largest steel firm, Arcelor Mittal of Luxembourg, has snapped up 10 mills in Poland, the Czech Republic, Romania, Bosnia, and Macedonia, bringing a new lease on life for residents of the region's long-struggling industrial cities.

"It's been a win-win situation for everyone," says the president of US Steel Kosice, David Lohr, whose firm has invested more than $700 million in the mill. "Our East European investments have been a big contributor to our corporation's bottom line."

The region's mills have benefited from several factors. European Union membership made many of these countries attractive beachheads for steel producers, as they can enjoy free access to the European market while paying lower wages. More recently, explosive Chinese demand has driven steel prices to an all-time high, improving the industry's notoriously slim profit margins.

"It is definitely easier to make a profit in steel these days then it was before," says Arcelor Mittal spokesman Jean Lasar. "There's been a tremendous boom in China that is impossible to ignore."

Most of the mills also weren't as hopeless as outsiders assumed. "The basic industrial configuration of these big, integrated steelworks hasn't changed very much in forty years," says Christopher Beauman, a steel industry adviser at the European Bank for Reconstruction and Development in London. "If you looked at them with a clear eye, you could see that they had a reasonable chance for survival if they were correctly managed and modernized. But that was a big 'if.' "

"The mills were very smoky and dirty, and that tended to give people the impression that they were antiquated," says Mr. Lohr of US Steel, which has reduced particulate emissions at the Kosice facility by more than 75 percent since 2001.

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