ArcelorMittal halts output at Bosnia mine after railway deal fails

ArcelorMittal halts output at Bosnia mine after railway deal fails
FILE PHOTO: Steel bars are seen during production at ArcelorMittal steel factory in Zenica, Bosnia and Herzegovina, February 9, 2016. REUTERS/Dado Ruvic/File Photo -
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SARAJEVO (Reuters) - ArcelorMittal will halt production at its Bosnian mines, with "far-reaching consequences" for employees and earnings at its ArcelorMittal Prijedor unit, after a transportation deal with a regional railway company collapsed, it said on Friday.

The world's largest steelmaker operates a steel plant in the central Bosnian town of Zenica which processes iron ore from its Omarska mines in Prijedor in the north of the country.

After the collapse of negotiations with the Zeljeznice RS railway company, the transportation of iron ore from Prijedor to Zenica will be halted immediately and production at the Omarska mines stopped, the company said.

"This will have far-reaching consequences for employees in ArcelorMittal Prijedor and the company's business results," it said, adding that production at its Zenica steel plant will not be immediately affected.

It also said negotiations would continue with the railway company over transportation costs and quantities of iron ore shipped, and that it hoped a solution would be found to enable the production at the mines to resume.

In January, ArcelorMittal's application to bid for the Bosnian government's stake in the nearby Ljubija iron ore mine was rejected over procedural issues, prompting the company to warn of risks to the future of mining in the area.

The company's steel-making unit in Zenica is Bosnia's largest steel exporter and accounts for 2.5 percent of the country's GDP. It employs about 3,000 people.

(Reporting by Daria Sito-Sucic; Editing by Jan Harvey)

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