* Serbia expects to seal sale contract by end-January
* Loss-making steel mill a huge drain on state coffers
* Is Esmark Inc's first foray outside North America (Adds European Commission)
By Ivana Sekularac
BELGRADE, Jan 9 (Reuters) - U.S. processor and distributor Esmark is set to take over Serbia's loss-making Zelezara Smederevo steel mill after submitting the only valid bid, the country's privatisation commission said on Friday.
The bid by Esmark Europe, which is subject to European Union approval of a restructuring plan for the mill, was the only one of three submitted to meet all conditions of the tender, said commission head Bojan Bojkovic.
He did not name the other bidders or give further details, but told a news conference he expected the contract to be signed by the end of January.
Serbia is trying to offload the loss-making plant as it seeks to rein in its budget deficit and public debt under a new loan deal with the International Monetary Fund.
Esmark Europe is part of U.S. flat-rolled steel processor and distributor Esmark Inc, whose foray into Serbia will be its first outside North America since its founding five years ago.
Serbian Finance Minister Dusan Vujovic, addressing the same news conference, said: "Based on negotiations we had with Esmark, I expect their bid will aim to maintain employment, to create added value and after that Zelezara should be able to cover all its expenses -- gas, electricity, salaries."
Last month, Serbia invited bids for an 80 percent stake in the mill, with the government offering to take on its $400 million debt to sweeten the deal. Zelezara, which has about 5,000 employees, swallows some $120 million in government subsidies per year.
Bojkovic said Serbia, which has formally begun talks on joining the EU, would seek approval for the deal from the European Commission. Under a pre-membership pact, the former Yugoslav republic committed to reducing state aid to Zelezara.
"In particular, Serbia must submit a restructuring plan," Oscar Benedikt, deputy head of the European Commission delegation in Serbia, told Reuters in an emailed response to questions. He said Serbia faced a Feb. 1 deadline to "ensure that the aid is limited to the minimum necessary".
The mill was run by U.S. Steel from 2003 until 2012, when the government bought it back for $1 to avert its closure and the loss of thousands of jobs as operations suffered from weak steel prices and subdued demand.
The mill, located in the town of Smederevo, some 50 km (30 miles) south of the capital Belgrade, is currently operating only one of its two furnaces and losing $10 million a month. (Reporting by Ivana Sekularac; Writing by Matt Robinson; editing by John Stonestreet)