Even when Romania lagged behind Bulgaria in its European Union accession negotiations and the issue of decoupling the two countries was raised because of slow reform efforts by Bucharest, Romanian firms seldom lost contracts when in direct competition with their neighbours from south of the Danube.

Chalk one up for Bulgaria then, after the Port of Bourgas landed a major deal to handle transit shipping for the four steelworks that global industry leader ArcelorMittal owns in Romania.

Under the terms of the two-year deal, raw materials for the ArcelorMittal mills will be brought into Bourgas on heavy freight ships and moved to smaller vessels, which would then sail up the Bystroe channel in Ukraine to the Romanian port of Galati on the Danube River, Port of Bourgas chief executive Argir Boyadjiev told Bulgarian daily Dnevnik.

The decision has riled port operators in Romania, who claimed that they offered competitive prices and better facilities than Bourgas, accusing ArcelorMittal of undermining the Romanian economy.

Thierry le Gall, chief executive of ArcelorMittal Galati steel mill, the steel giant’s biggest asset in Romania, said in mid-July that ArcelorMittal had to look for an alternative after failing to agree a long-term deal with private port operator Comvex. Comvex owns the bulk handling terminal in the port of Constanta on the Black Sea.

"Our only problem with Comvex is security. If we could sign a long-term competitive contract with Comvex, there would be no problem," Le Gall said, as quoted by Romanian business weekly Capital. "Today, Comvex’ price is higher than the international average. We cannot ask the government for cheaper gas, cheaper energy and at the same time endanger this aid by buying expensive services from Comvex."

ArcelorMittal is the second-largest shareholder in Comvex with 36 per cent, but its efforts to acquire full control have run into opposition from majority owner Solidmet, which disagreed over how a buy-out offer was to be carried out.

Comvex, along with two state-owned companies, port operator CNAPM and a shipping canals operator CNACN, rejected Le Gall’s arguments that the decision was driven purely by price considerations. According to the three companies, costs in Constanta averaged about 5.77 euro a ton, while in Bourgas the price range was 16.13 to 19.13 euro a ton. At the same time, Constanta’s shipping terminal allowed to handle 45 000 tons an hour, compared to Bourgas’ capacity of 20 000 tons an hour.

"ArcelorMittal Galati has no economic argument in favour of shipping raw materials through Bourgas and Bystroe canal, to the detriment of the route through Constanta and the Danube-Black Sea canal," the three companies said in a joint statement, quoted by Capital.

Boyadjiev declined to disclose how much the Port of Bourgas was paid by ArcelorMittal for handling the shipping. The new custom, however, is expected to help the Bulgarian port make up for the loss of business after Bulgarian debt-laden steel mill Kremikovtzi had to cut production to a bare minimum.

Wringing hands
CNAPM stands to lose about three million euro unless the dispute between Comvex and ArcelorMittal is settled, CNAPM general manager Ioan Balan told Romanian daily Business Standard. Already the amount of iron ore handled by the port of Constanta in the first half of the year was down by 72 per cent compared to the same period of 2008, he said. Steel products shipping was down by almost 40 per cent.

CNACN general manager Valentin Zeicu told the daily that in the first half of the year, shipping through the Danube-Black Sea system of canals was down to 40 per cent of the volume recorded in the same period of 2008, forcing the company to cut salaries by 20 per cent.

Comvex itself has been the least affected, chief executive Viorel Panait told Business Standard. ArcelorMittal accounted for half of Comvex’ revenue in 2008, but the port operator has moved to diversify its business and reported a revenue increase of 60 per cent in the first quarter of the year.

Romanian port operators fear that ArcelorMittal wants to acquire control over all operators along the shipping routes to Galati, daily Evenimentul Zilei said, quoting unnamed industry sources. ArcelorMittal already owns the Romportmet operator in the port of Galati, set up during the communist era with the express purpose of handling shipments for the steel mill in Galati.

The steel giant has had to make hundreds redundant and the latest row has already prompted calls from labour unions for the state authorities to revoke the state aid given to ArcelorMittal. Dumitru Costin, leader of the BNS labour union, who said that the state aid reached $1 billion, suggested that the three Romanian operators should send a joint letter to the European Commission and Competition Commissioner Neelie Kroes and ask for a ruling.

The companies have already lodged a complaint with the Romanian Competition Council. Under Romanian law, the regulator now has 30 days to issue a ruling and if it found ArcelorMittal guilty of unfair competition, it could impose a fine of up to 10 per cent of the company’s turnover for the previous year. Data for 2008 is not yet available, but in 2007, ArcelorMittal Galati posted a turnover of 2.1 billion euro.