The investment will enable greater output, productivity and competitiveness as well as the employment of 20-25 employers within one year, said Feroimpex director Zoran Legac.
The furnace will be completed by the end of 2014 and launched in the first quarter of 2015, he added.
Feroimpex manufactures bearings and parts for the auto industry, wind farms, and the rail industry, employing 250 workers. Annually, it puts out 10 million products, 15,000 tonnes of steel and 3,500 tonnes of heat-treated rings and rolls.
Hamag Invest CEO Darko Liovic said the guarantee was the biggest it had ever approved and that he was glad it was an investment in a company which exported all of its products.
Entrepreneurship and Crafts Minister Gordan Maras said the state would support every such investment project by enabling financing through commercial banks, Hamag, and the Croatian Bank for Reconstruction and Development.
Maras said he expected commercial banks to lend more after the central bank on Thursday released more than HRK 4 billion to encourage business lending.
For every quality project, there will be funding and sharing the risk with the state, he added.
Asked when he expected GDP to grow, Maras said, "Next year Croatia will certainly come out of the recession, after five long years, and this should restore some optimism to our economy."
He voiced confidence that 2013 would be the last year with an economic downturn in Croatia, which he said was not because of small and medium enterprises but because of the restructuring of the shipyards, the textile industry and the INA oil company.
(EUR 1 = HRK 7.64)