Hesteel Serbia

Hesteel Serbia is the Serbian steelmaking operation of Hesteel Group, the Chinese steel producer formerly known as Hebei Iron and Steel Group. The business is based in Serbia and is historically associated with the Železara Smederevo steelworks, whose industrial origins date to the establishment of SARTID in 1913. Under the Hesteel name, the company became one of Serbia’s most significant industrial enterprises and a major exporter. The company operates an integrated industrial complex centered on Radinac near Smederevo. Its facilities include steelmaking and hot- and cold-rolling operations at Radinac, a harbor at Smederevo, tinplate-related production facilities in Šabac, and limestone mining operations in Kučevo. This combination gives the business access to primary steel production, flat-steel processing, logistics and certain raw-material activities. The modern Hesteel chapter began in April 2016, when Hesteel Group acquired the Serbian steel business from the Government of Serbia after a prolonged period of financial and operational difficulty. The transaction followed the collapse of an earlier ownership period under U.S. Steel and several unsuccessful attempts to find a strategic investor. Hesteel’s acquisition was presented as a route to restoring production, improving the plant’s competitiveness and expanding its product capabilities. Initial investment plans included modernization and additional downstream equipment, including galvanization capacity, as well as a substantial increase in potential production. The operation’s predecessor had played a major role in the Serbian economy during the 2000s, but it faced severe challenges after the global steel downturn and the withdrawal of U.S. Steel in 2012. The Serbian state subsequently operated the plant while seeking a long-term buyer. Hesteel’s arrival moved the company back into private industrial ownership and connected the Serbian works to a larger international steel group. Hesteel Serbia is primarily positioned as a producer of flat steel and related metallurgical products. Its known production scope includes hot-rolled and cold-rolled steel products, while the wider operating footprint also includes tinplate production and supporting mineral and port infrastructure. The company’s market role is tied to Serbian manufacturing, construction, industrial supply chains and exports to European customers. In 2018, the company was reported as Serbia’s largest gross exporter, with steel-product output of approximately two million tonnes during that calendar year. These figures are historical and should not be treated as a current operating forecast. Although commonly called Hesteel Serbia or HBIS Serbia, the company also remains widely linked to its historic name, Železara Smederevo. The name reflects the continuity of the Smederevo steelworks across several ownership and corporate eras: SARTID, U.S. Steel Serbia, the Serbian state-owned Železara Smederevo entity and, from 2016, Hesteel Serbia. Its present identity therefore combines a long-established Serbian industrial site with ownership and management under a global Chinese steel group.

The industrial history of Hesteel Serbia reaches back to 20 February 1913, when SARTID a.d. was founded as the Srpsko akcionarsko rudarsko topioničarsko industrijsko društvo. The enterprise began with significant foreign investment and developed into a major metallurgical operation in the Smederevo area. From 1945 until 1992, the steelworks operated under the authority of the Government of the Socialist Federal Republic of Yugoslavia. During this period, the site expanded through the construction of additional factories and became an important pillar of Yugoslav metallurgy. The company’s fortunes deteriorated during the 1990s. Sanctions associated with the Yugoslav wars disrupted access to markets, suppliers and finance. The resulting loss of commercial and operational stability contributed to a major decline in the value of the business and ultimately to bankruptcy. The Serbian state later sought a private strategic owner for the troubled steelworks. In April 2003, shortly after the assassination of Serbian Prime Minister Zoran Đinđić, the bankrupt company was sold to U.S. Steel for $23 million. U.S. Steel committed to a modernization program reported at $150 million, and the business was renamed U.S. Steel Serbia, or USS Serbia. During the U.S. Steel period, the plant regained considerable importance in the Serbian economy. It became a major exporter and was described as an important contributor to national gross domestic product. U.S. Steel withdrew from the business on 31 January 2012, selling it to the Government of Serbia for $1. The transaction left the state with a steelworks employing approximately 5,400 people and carrying substantial liabilities, at a time when global steel prices had weakened. The plant’s problems deepened after the change of ownership. By the end of June 2012, both large blast furnaces had been shut down and roughly 5,000 workers were placed on paid leave. Operations resumed on a reduced basis from 22 April 2013, while the Serbian authorities searched for a strategic partner. Several efforts to privatize the company failed because public tenders did not attract an acceptable offer. A tender launched by the Serbian Privatization Agency on 5 December 2014 sought a buyer for 80.01 percent of the company. Esmark Steel Group was confirmed on 12 January 2015 as the only valid bidder, but negotiations did not result in a sale. On 17 February 2015, Prime Minister Aleksandar Vučić announced that the Serbian government had rejected Esmark’s proposal, principally because it had not received sufficient assurance that the plant would remain operating over the long term. The Serbian government then adopted an interim management approach. On 21 March 2015, Železara Smederevo signed a management-services agreement with the Dutch company HPK Engineering. HPK was appointed to manage the plant for three years and was expected to help restore profitability while preserving the existing workforce. The ownership question was resolved in April 2016 when Hesteel Group acquired the business for €46 million. The new owner announced ambitious modernization and expansion plans, including investment in galvanization equipment and an increase in potential annual production from approximately 875,000 tonnes to 2.2 million tonnes. During this transition, the company’s headquarters moved from Smederevo to Belgrade. The business became known as Hesteel Serbia, while Železara Smederevo continued to function as its best-known historic Serbian name. The Hesteel period connected the Smederevo operation to a large international steel group and restored a private-sector development strategy after several years of state ownership. The company’s physical footprint includes the Radinac steel plant and rolling mills, the Smederevo harbor, tinplate facilities in Šabac and limestone mining in Kučevo. In 2018, Hesteel Serbia was reported to be Serbia’s largest gross exporter, with approximately €749.5 million in exports and steel-product output of about two million tonnes for the year.

1. 2018Strong export and production performance is reported

   Hesteel Serbia is reported as Serbia’s largest gross exporter, with approximately €749.5 million in exports and around two million tonnes of steel-product output.

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2. 2016Hesteel Group acquires the Serbian steelworks

   Hesteel Group buys the business for €46 million, creating the current Hesteel Serbia ownership and operating structure.

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3. 2015HPK Engineering receives a management mandate

   The Serbian government appoints HPK Engineering to manage Železara Smederevo after negotiations with Esmark Steel Group fail.

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4. 2012The Serbian government regains ownership

   U.S. Steel sells the company to the Government of Serbia, leaving the state responsible for a strategically important but financially troubled steelworks.

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5. 2003U.S. Steel acquires the bankrupt company

   U.S. Steel purchases the business and renames it U.S. Steel Serbia, initiating a modernization and recovery period.

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6. 1945The Yugoslav state takes operational control

   The steelworks enters a period of operation under the Government of the Socialist Federal Republic of Yugoslavia, lasting until 1992.

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7. 1913SARTID is founded

   The industrial predecessor of Hesteel Serbia is established on 20 February as SARTID a.d., beginning the history of the Smederevo steelworks.

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A major Serbian integrated steel producer serving domestic industry and European export markets, with capabilities spanning steelmaking, flat-steel rolling, tinplate, logistics and supporting raw materials.

• Hot-rolled steel productsFlat steel

  Produced through the hot-rolling operations associated with the Radinac complex. Hot-rolled products are a core part of the company’s flat-steel portfolio and serve industrial, manufacturing and downstream processing customers.

• Cold-rolled steel productsFlat steel

  Cold-rolled products are made through further processing of rolled steel to achieve more controlled dimensions and surface characteristics. The company’s Radinac site includes cold-rolling capacity as part of its integrated steel operation.

• TinplateCoated flat steel

  Tinplate production is associated with the company’s facilities in Šabac. Tinplate is a coated flat-steel material used in packaging and other applications requiring a protective and workable steel substrate.

• Limestone and metallurgical raw materialsMining and industrial inputs

  The company’s operating footprint includes limestone mining in Kučevo. This supporting activity forms part of the wider industrial system surrounding its steelmaking and processing operations.

• 2016Acquisition by Hesteel GroupM&A

  The Serbian government had been seeking a strategic investor after U.S. Steel exited in 2012, multiple privatization efforts failed and HPK Engineering was brought in to manage the plant.

  What changed. Hesteel Group acquired the Serbian steel business for €46 million in April 2016. The company subsequently operated under the Hesteel Serbia identity and moved its headquarters to Belgrade.

  Aftermath. The acquisition returned the steelworks to private strategic ownership and connected it to Hesteel’s international steel group. Hesteel also announced plans for modernization, galvanization capacity and increased production potential.

  Acquisition price. €46 million (April 2016)

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• 2016Modernization and capacity-expansion planStrategy

  The newly acquired steelworks required investment after years of financial stress, reduced operations and uncertainty over its long-term ownership.

  What changed. Hesteel initially stated plans to invest approximately $300 million over two years, including galvanization equipment, and to raise production potential from about 875,000 tonnes to 2.2 million tonnes.

  Aftermath. The plan established modernization and higher utilization as central objectives of the Hesteel ownership period. The cited targets describe announced plans rather than independently confirmed present capacity.

  Announced investment plan. $300 million (Two years from 2016)

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• 2018Hesteel Serbia reported as Serbia’s largest gross exporter

  The company was reported to have generated approximately €749.5 million in exports and produced around two million tonnes of steel products during the 2018 calendar year.

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• 2016Hesteel Group acquires the Smederevo steelworks

  Hesteel Group acquired the Serbian steel business from the Government of Serbia, beginning the company’s current ownership period and leading to its rebranding as Hesteel Serbia.

  M&ALeadership change
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1. Hesteel Serbia