A Tirana court has officially launched bankruptcy proceedings against Kurum, one of the largest steel producers in Southeast Europe.

The move was expected after the company, which is a unit of Turkey’s Kurum Holding, unexpectedly filed for bankruptcy in 2015. Kurum faced huge competition mainly from China, which produces steel at lower costs. The global steel industry is expected to make a very gradual recovery from a serious crisis largely blamed on Chinese companies selling surplus stocks of steel at low prices. This saw prices hit a 10-year low in 2015.

Kurum will be put under the management of administrator Lindita Kikino, who will need to submit a reorganisation plan for the company, business news provider Monitor said on April 18.

Claims of creditors should be submitted to the administrator by mid-June.

It is estimated that the company has debts of some $300mn.

The duration of the crisis in the steel industry and the banking sector may cause a reduction of cash for operations, availability of loans, as well as cost increases, Monitor said.

Kurum has already been monitored by the authorities due to its failure to comply with environmental standards, which forced the ministry of environment to block the activities of the company in May 2015.

Just one year earlier, Kurum claimed to be the largest producer of steel in the Balkans and the biggest exporter in Albania with revenues of €195mn, broadcaster Top Channel reported earlier.

However, hit by the global crisis in the sector, Albania’s Kurum started to cut its staff rapidly, shedding 700 employees. By the second half of 2015, it employed less than 200 people.

According to the company’s 2014 financial report, Kurum owed over €110mn in bank loans.

Turkey's Kurum acquired the Elbasan Steel Works in Albania in 1998. Kurum has one mill with capacity of 510,000 tpa. It was the first and only operator of an integrated single iron and steel production plant in the country.

In 2012, Kurum won a tender to purchase four operational state-owned hydropower plants in Albania - Uleza, Shkopeti, Bistrica I and Bistrica II - with total capacity of 76.5M. The total cost of the project was estimated at €120mn, which included €109.5mn for the acquisition and the remainder for investments to rehabilitate the plants. The International Finance Corporation (IFC) approved a $44.9mn loan to Kurum in 2013.

Through the acquisition, Kurum was planning to reduce electricity purchase costs, which is a significant production cost item for the company, as well as to secure a reliable source of electricity in order to continue operations without major disruptions.