It also rained state aid for opening or expansion of plants in various sectors of the economy, from home appliances to automotive components, investment projects conducted by foreign-held companies.
A question remains, though, and that is what will happen with the biggest shipbuilder in the country, Daewoo Mangalia, whose shareholders grew tired of losses and are thinking of liquidating their local operations.
1. Daewoo Mangalia almost shipwrecked
July was more difficult than ever for Daewoo-Mangalia Heavy Industries (DMHI) shipyard, the largest shipbuilder in Romania held by South Korea’s Daewoo (51%) and the Romanian government (49%). The reason was the announcement Korea Development Bank, the largest shareholder of Daewoo Shipbuilding & Marine Engineering Ltd. Korea (the entity that controls DMHI) that the liquidation of the company was unavoidable due to the huge $2.5 billion losses.
Regarded as a company of capital economic and social importance, DMHI posted huge losses in 2014, 700 million lei (EUR156 million), almost seven times higher than in 2013. Other shipyards boast RON726 million worth of orders, taking advantage of the decline in the oil price, which caused small shipyards to leave the market and concentrated orders in the hands of several major players.
2. A bargain no one wants
After Russia’s Mechel left Romania by selling all its five steel plants in the country for RON230 in 2013, some of the five went insolvent. Those that are still operational, operate at low capacity. The new owners of the former Mechel assets are trying to sell liquid steel maker Otelu Rosu but have been unable to find any buyers despite having almost halved the asking price to EUR25 million. This can be partly explained by the unfavorable conditions on the market, that is the steel price drop and the production overcapacity in Europe.
3. Vulcan sends Elephants to conquer the Persian Gulf
Bucharest-based Vulcan, now insolvent, held by businessman Ovidiu Tender, invested EUR350,000 in the design and building of an oil drilling equipment it hopes to sell to companies drilling for oil in the Persian Gulf area. With this particular type of equipment (nicknamed the ‘Arab Elephant’), the Bucharest company inaugurates a new class of products designed to be 30% more efficient that the equipment made so far. Vulcan went insolvent on a EUR37 million debt in 2013, which has since risen to EUR55 million.
4. Jam-packed Danube
The year 2015 was the hottest on record since weather measurements began. This became visible in the summer, when the Danube level dropped and caused jams and queues of ships on the river, which drove transportation time up by one week. The 50 to 60-strong ship queues happened in seven points. The main commodities carried on the Danube in the Romanian section thereof are ore, coal, oil products and grain. This is nothing new, as jams happened in 2011, 2012 and 2013 and were due to the lack of dredging on the Danube.
5. State aid fuels growth
Delegations of major military and aerospace industry groups kept coming throughout the year. In mid-2015, an Economy Ministry state secretary announced no fewer than six such groups were planning to open or relocate plants to Romania. Two of them, Sonaca Belgium and Airbus Helicopters have already done it, once they got state aid.
Sonaca, which operates in the aerospace industry, will build a EUR11.8 million production facility in Moldovenesti, Cluj County, where it will make parts for Airbus and Embraer. It got about EUR5.4 million state aid for the project. Airbus Helicopter got RON23.5 million state aid for a total investment of more than RON47 million, in a plant where it will make attack helicopters.
6. Steel production might rise
After having sunk from 17.6 million tons in the past twenty-five years, steel production might rebound this year and increase by 5%. This production segment has been dwindling in the past three years but is expected to reach 3.14 million tons in 2015, less than half the 2007 level, though.
The largest companies in the steel industry posted more than RON10 billion revenue together in 2014, up 1.7% on 2013. Despite the attempts to revitalize the industry through privatization, it was a partial success and the companies that survived the 2008 economic crisis or the less inspired management decisions are being challenged by China, which is flooding the market with millions of tons of steel at lower prices.
7. Uptick in steel price, gloomy forecast for industry
While Romania expects a higher steel production, largely from ArcelorMittal Galati, which covers half the market, the price of the metal on the international market remains low, $170 per ton at the end of the year, according to the London Metal Exchange. Although higher than in July, when it stood at $100, it is still low compared with the $500 in January. This made the World Steel Association admit in November that the European steel industry will have to shrink to half of what it is today over the next fifteen years for the sector to become sustainable. The low-priced steel imports from China prompted the management of ArcelorMittal Galati to cut the working hours of the 6,400 employees by two to six days in the first quarter of 2016.
8. Timken expands in Romania
The rising worldwide demand for ball bearings made US-held Timken contribute RON99.5 million for the share capital of a new company in Romania, Timken PWP, the largest company set up this year by share capital.
Construction should begin in the first half of 2016 so production should start in the early 2017. The other plant Timken has near Ploiesti posted almost RON370 million revenue last year, an increase of 30% on 2013, as well as RON65.5 million net profit, 63% higher than the RON40.2 million in 2013.
9. No one takes the tractor to the mall
French-held Immochan opened a new mall in Brasov on the former site of the Tractorul Brasov tractor plant at the end of the first quarter. A EUR60 million investment, the new mall named Coresi attracted 4 million visitors in the first six months in business, as many as the entire population of Bucharest and the nearby villages. Brasov, one of the most deindustrialized big cities of Romania has a population of about 220,000 people. Immochan has already started work on the second phase of the project.
10. More and more ‘Made in Romania’ home appliances
The year 2015 was a very good year for the investors looking to build plants on the local market who applied for state aid, because the government was generous with everybody. One such example is Germany’s Kaercher, which announced a EUR20 million investment in a home appliances plant in Curtea de Arges, for which it will get RON37 million state aid. The state aid will go to CER Cleaning Equipment, a research and development center of the German group in Curtea de Arges. Kaercher had bought a five-hectare plot in that city in 2010 and weighed its decision to build a plant there in the past few years. (EUR1=RON4.4994)
(English version by Loredana Fratila-Cristescu)