Investment from China helps give steel mill new life

With higher wages and increased job security, workers at Serbian plant that at one time neared bankruptcy are now more confident and productive

For 20 years, Svetlana Radosavljevic has monitored the manufacture of steel and iron from a glass-walled control room in an old production center at Zelezara Smederevo, Serbia's biggest mill.

For many years, the mill, less than a 60-minute drive from Belgrade, could only run one of its two production lines, and it lost about $10 million a month. Moreover, many of the 5,000 workers were unproductive. These factors resulted in a prolonged period of low productivity that almost forced the company into bankruptcy.

Last year, the 105-year-old mill was given a new lease on life when Hesteel Group, from Hebei province, purchased it for 46 million euros ($49.6 million; ￡38.75).

Now, both production lines are running at full capacity at Hesteel Serbia, the mill's new name, which will see production of 2 million metric tons this year, the maximum quota agreed to between the European Union and Serbia. The acquisition ended seven years of losses, and by the end of last year the mill was profitable again.

The workers are now more confident because their jobs are secure and wages have risen by an average of 8 percent, compared with the pre-takeover level.

"Now it is safer, production is higher, and I am more focused on my job because I don't need to worry about becoming unemployed," Radosavljevic says.

Her control room is about 50 meters from the end of a line that produces steel plate. During a visit in June, President Xi Jinping spoke with the workers and management in the control room, which helped to inject the confidence needed to make the most of the lifeline offered by the acquisition.

In addition to the front line workers, even Serbia's Prime Minister Aleksandar Vucic, who is also president-elect, is excited about the performance.

Song Sihai, an executive board member of Hesteel Serbia who oversees management of the mill, describes his meeting with Vucic. "The prime minister and I discussed the revenue target for this year, which will be about $800 million, and he asked his assistant to calculate the amount it would contribute to the country's economic output," he says.

Sitting in his office, Song, an executive with the parent company, quotes Vucic's conclusion, that the company's revenues will account for more than 2 percent of GDP this year.

"Surely, this will provide great help to Serbia's economic development," he says.