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Fears run high in Serbia at floundering U.S. Steel plant

The U.S. steel giant purchased the Smedevero plant in 2003, but now claims it 's losing millions each year


November 25, 2011
by The Canadian Press

SMEDEREVO, Serbia—Business was once so bad at the steel plant in Smederevo, Serbia, that it idled production and grew mushrooms in its halls.

Then, in 2003, U.S. Steel came in and turned things around.

But the hard times are coming back.

The town is in a panic over a financial report released by Pittsburgh-based steel giant U.S. Steel that its plant in Smederevo—almost the sole source of income for its 100,000 people—is losing tens of millions of dollars.

Major foreign investors are showing signs of quitting the region or scaling down production as markets shrink among iffy economic conditions and increased competition from Asia, despite eastern Europe’s cheap labour and production costs.

Between 2003 and 2008, the region experienced a fivefold increase in direct foreign investments, rising from $30 billion to $155 billion, according to the British-based consultancy PricewaterhouseCoopers.

Foreign direct investments plunged 50 per cent in 2009 as the credit crunch set in, with only a modest recovery in 2010.

“The region is no longer so attractive for foreign investors because it’s no longer competitive,” said Serbian economic analyst Misa Brkic. “If the Serbian steel plant was closer to China, they would not be thinking of closing.”

U.S. Steel Serbia, which has steadily reduced production over the last eight years, employs more than 5,400 people and accounts for nearly 10 per cent of Serbian exports.

Serbian officials are stunned by the possibility that the plant could shut down production due to operating losses that amounted to $73 million for the three quarters of this year, compared to a $6-million operating profit for the same period last year.