Processing industry in Montenegro

Automation & RoboticsIndustrySouth-East European INDUSTRIAL Мarket - issue 3/2019 • 26.08.2019

Industry in Montenegro has been the powertrain of the country`s economical development over the last sixty years. Metallurgy (aluminum and steel), power and transport are the key sectors today. The processing sector (metal, wood, food, paper, textile processing, etc.), although it sporadically suffers from recession, remains among the main pillars of Montenegro`s economy.

According to Economy watch, during the last decade the Montenegrin industry has the capacity to annually produce over 1 million tons of bauxite, 100 000 tons of aluminum and 3 billion KWh of power. About 90% of the country`s production is exported, helping Montenegro to earn higher foreign exchange. Besides the metal industry, other significant industrial sectors in the country are: wood-processing; textile and chemical; leather and footwear; household appliances; construction and building trade.
Additionally, fish-processing plants, flour mills, breweries and wine cellars in Montenegro contribute to the development of the processing industry.

 

“Montenegro, a part of the Federal Republic of Yugoslavia (FRY) till 2006, had a weak economy in the past due to constant wars in the region. However, due to rapid modernization of Montenegro`s industry sectors and adequate government investments, the Montenegrin economy is expected to become competitive in the global market. Montenegro`s industry sectors are currently attracting large scale private investment as a result of the nation`s business-friendly investment environment”, a current report by the Ministry of Agriculture and Rural Development of the country states.

 

General overview

According to a report by the Ministry of Foreign Affairs of Montenegro, the country`s industrial production is divided in two categories: heavy industry – which includes energy, mining, metal processing industry and chemical industry, and light industry – which includes food processing industry, textile industry, wood processing industry, graphic industry and construction materials industry.

In 2016 the Government of Montenegro adopted a strategic document called “Industrial Policy of Montenegro until 2020”. According to the document, priority sectors identified with strong growth and export potential include: Manufacturing industry – agro-food, wood processing, metal and pharmaceuticals; Energy and Tourism.

“Abundance of natural resources, cheap and good-quality domestic raw materials, relatively cheap and qualified work force, investment-friendly environment, favorable geographical position with good maritime transport connectivity (strategic location Port of Bar), with free trade access to a market of around 800 million consumers thanks to the Stabilization and Association Agreement with the EU, as well as the CEFTA agreement, and FTAs with EFTA, Turkey, Ukraine and Russia – all represent Montenegro`s competitive advantages in this area”, the Ministry`s report informs.

Mining and metal processing have significant potential for future technological improvement. “Attracting reputable foreign investments in further development of the mining and metal processing sector, namely those with high environmental protection standards and practices, remains one of key priorities of Montenegro”, the document continues.
At the beginning of the current decade the manufacturing industry recorded a growth rate of 6,8% in comparison to the previous, mostly due to the increase of production in the sub-sectors of machines and equipment production, production of basic metals and metal products and wood processing and wood products, the Ministry of Agriculture and Rural Development remarks.

It describes the change of the structure of the industrial production in the country as one of the most important characteristics of the industry development in the past years. “Generally speaking, the highest decrease of the share had the work-intensive spheres (food and textile industry as well as wood processing and wood products). Several sub-sectors have increased their share in the last decade, like for example the sub-sector of food, beverage and tobacco production, which in 2012 had a share of 16,7% in the manufacturing industry”, the “Development Strategy of the Manufacturing Industry in Montenegro 2014-2018”, published by the Ministry of Economy, says.

According to current statistics by Trade Economics, industrial production in Montenegro increased 5,6 percent year-on-year in June of 2019, recovering from a 4,8 percent fall in the previous month. “It was the first gain in industrial activity since December of 2018, as output rebounded for electricity, gas, steam & air conditioning supply (19,4 percent from - 0,6 percent in May).

In addition, production continued to rise for mining & quarrying (7,5 percent from 30,7 percent) while manufacturing output dropped at a softer pace (-2,6 percent from -11,4 percent). On a monthly basis, industrial production surged 25,8 percent, following a 9,1 percent advance in May. Industrial Production in Montenegro averaged 0,56 percent from 2009 until 2019, reaching an all time high of 91 percent in March of 2010 and a record low of -51,40 percent in August of 2009”, the Agency further adds.

A report by the Ministry of Agriculture and Rural Development in Montenegro says that the sub-sectors of the manufacturing sector in the country do not take part and do not contribute in an equal way to the overall results of the processing industry. “The statistical data show that the sub-sector of food products, drinks and tobacco is the most casually linked to the global trends, due to its traditional orientation towards the domestic market and closest regional markets”, the report elaborates.

According to the RCA index, which measures the export specialisation of the country, Montenegro has a comparative advantage in the export of wood products, basic metals and food products, beverages and tobacco. “When speaking about employment, from total number of employees in the manufacturing industry in 2012 13,03% derive from the sub-sector production of basic metals; 9,27% employees are working in the sub-sector of wood processing and wood products, cork and straw; 9,16% in the sub-sector production of metal products except machines and equipment, and 4,55% in the sub-sector of production of other non-metal minerals”, the Ministry continues.

 

Metal Processing Industry

The metal processing industry is the most important sector of the Montenegrin manufacturing. It includes the production of primary metals and metal products (non-ferrous metals, steel and iron).

“The aluminium sector alone represents the largest export sector by value within Montenegro. Global trends within the aluminium industry suggest a need to re-orient focus towards re-processing and recycling of aluminium, and development of other metal working sub-sectors, based on existing workforce skills within the metal sector, and research capacity in materials science, as well as expansion of metal products for use in the construction industry”, the Ministry of Foreign Affairs states. In its “Montenegro investment and business opportunities” report it lists some of the most important companies and organizations in the sector.

Uniprom KAP or Aluminium Plant Podgorica is a Montenegrin aluminium smelter company, located on the southern outskirts of Podgorica, Montenegro. The construction of an aluminium smelter in the country was first proposed in the 1960s, when significant quantities of high quality bauxite ore were discovered near Niksic. With the support from Pechiney (a major aluminium conglomerate based in France), the construction of KAP began in 1969, while production of aluminium began in 1971.

KAP produces its own alumina, extracting it out of the bauxite shipped from the Niksic bauxite mine. The factory also has its own production of pre-baked anodes. The smelter has an installed capacity of 120 000 tons of liquid aluminum per year. KAP is connected by railway with bauxite mines near Niksic and the Port of Bar.

Toscelik Alloyed Engineering Steel Niksic (Steel Mill Niksic) is one of the leading steel manufacturers in Turkey. The Holding`s Headquarters are located in Hatay Iskenderun. The company operates many production facilities in domestic and international locations such as Osmaniye, Istanbul, Izmir, Algeria and Montenegro. Toscelik Niksic has 60 years of tradition in steel production, and a wide range of products and technologies used in the production lines.

The Former Zeljezara became a member of the Tosyali Holding in 2012. “Since then, Tosyali Holding has been conducting the investments under the new name Toscelik Niksic in order to improve and modernize production technologies and achieve high product quality.

Toscelik Niksic is one of the major steelmakers in Europe and one of the leading industries in Montenegro. The product range consists of high grade and special steels in wide quality and size assortments”, Tosyali`s corporate website claims.

Montenegro`s and Niksic`s perfect geographical and strategic location enables easy and smooth product deliveries to the clients anywhere in the world in the optimal time periods via various transportation methods, the company adds.

Institute of Ferrous Metallurgy Niksic is a joint stock company and a licensed scientific and research institution that deals with research and development activities in the field of technical and technological sciences, laboratory-field testing and thorough characterization of metallic and non-metallic materials, process equipment and market oriented production of steel castings, gray iron castings, steel products, semi-finished steel products and non-ferrous metals and their related alloys for aluminium and steel and mining industry, power plants, chemical industry, construction industry, etc.

“In the area of casting production, the liquid steel is produced in the induction furnaces with capacity of 2 tons per year, and then streamed for making castings and ingots intended for further processing by rolling and forging practices. An electric slag re-melting unit - the ingot weight range 0,65-3 t - is used for the steel ingot production”, the Ministry report clarifies.

Electrodes Factory Piva, Pluzine was a manufacturer of electrodes and welding wires. It had a projected capacity of about 5000 tons. “The factory used to produce over 60 types of electrodes in several dimensions. The quality of all products was certified by the world`s most important attestation societies. This factory was an export-oriented company, and 80% of the production was mainly marketed in the countries of the former Yugoslavia”, the investment report says. Production in the factory was terminated in May 2014 and bankruptcy was declared in February 2015.

Montenegro Metal Producers Cluster - the Metal Producers Montenegro is a group of 6 small and medium-sized enterprises specialized in high quality metal production and metal processing. It is located in Niksic, an important industrial center in north-central Montenegro that is renowned for its steel and iron works.

“We manufacture various types of cast ingots and steel as well as metal construction structures and spare parts for machinery. Based in the industrial zone of Niksic, Metal Producers Montenegro draws competitive advantage from our close proximity to one another, a skilled workforce of over 50 employees and a shared base of sophisticated knowledge about our industry. Total production value in 2014 was around 6 million EUR.

We are a leading supplier of high quality metal products and services. Through continued investments, we aim to expand our product offering and to reach new customers, both in Montenegro and export markets”, the Cluster`s website informs.

Faculty of Metallurgy and Technology - it was set up in March 1973 as a department at the Technical Faculty in Podgorica. Within the massive reorganization of the Technical faculty in 1978 the Department of Metallurgy became an independent institution called Faculty of Metallurgy. In 1992, the Faculty of Metallurgy became an independent university unit within the public Institution University of Montenegro. It consequently changed its name to Faculty of Metallurgy and Technology in 1995. Today it has three study programs: Metallurgy and Materials, Chemical Technology and Environmental Protection.

 

Wood Processing and Paper Industry

Forests and forest land in Montenegro occupy an area of 942 thousand ha, accounting for 67% of the total area, the 2017 edition of the Montenegro Country Report says. “By the value of forest land, conservation, organization, diversity, management and the impact on the environment, the forests of Montenegro are among the finest in Europe. The timber mass stock is estimated at 114,7 million m3, of which 41% are conifers and 59% are deciduous trees. The total annual increment in forests is estimated at 2,8 million m3.

Annual possible allowable cut, based on planning documents, is 700 thousand m3 of the gross timber, of which 532 thousand m3 in the state and 177 thousand m3 in private forests”, the report also estimates.

The wood processing industry in Montenegro is one of the oldest sectors in the country. In the last over 130 years it went through interchanging development and stagnation periods which merely depended on the different social circumstances in the observed time.

“The wood industry of Montenegro was until 1989 characterised with significant product capacities for the sawmill industry, manufacture of veneer, wood-based panels and final processing of wood. The major number of companies was registered in the north and north-east part of Montenegro in the areas with the most wood resources”, the country`s Development Strategy further informs.

The economical development of the sector is based on the use of local natural resources and it is traditionally export-oriented. Raw material resources and capacities represent a good basis for a much higher level of production, as well as a significant share in total GDP, export and employment. The structure of today`s wood industry production consists of: primary production (production of lumber and elements); secondary production (pallets and elements for pallets with the production of briquettes); final production (production of furniture, parquet flooring, prefabricated wooden houses, latex strips, joinery (doors and windows).

“The present day wood industry sector in Montenegro is made up of 90% of primary and secondary production and 10% of the final production. Cut timber, plywood boards, slabs, latoflex slats, laminated three-sided billets, ship`s floor and lamperia are the main products of primary wood processing. This represents opportunity for investment in this industry”, the document continues.

The total number of companies in the wood industry in Montenegro in 2012, according to data from MONSTAT, amounts to 400. In the sector wood processing and wood products, cork and straw there were 313 entities registered, and in the furniture production there were 87 active companies. In relation to the manufacturing industry 20,4% of the total number of companies was in the wood industry in 2012.

According to the “Development Strategy of the Manufacturing Industry in Montenegro”, the wood industry, which in most of the strategic and planning documents is marked as one of the strategic areas, which together with tourism and agriculture should present the main development driver of Montenegro. “It is expected that during the process of structure changes in the wood industry of Montenegro (numerous) small companies will vanish whose business philosophy is based on the principle “selling wood raw materials (any of them) without processing”.

The development needs to be directed towards the bigger companies, who managed to service and who potentially represent a solid base for a new strategic development and generating new work places. In this process, as less important, the small and medium companies will give their full contribution to the development of the competitiveness in this sector, as the dependency of one on the other is higher and higher”, the Ministry of Economy forecasts.

DEKOR ROZAJE - the main activity of Dekor Rozaje is the production of decorative paper and cardboard products. In the last few years, after production took place with minimal use of capacity, it was completely abandoned due to lack of working capital and poor overall financial situation in the company caused by many years of business problems. The company owns the total area of a plot in the real estate cadastre: 43,918 m2. The total area of the facilities is 4488 m2, the investment opportunities report clarifies.

 

Textile Processing

According to a report by the Ministry of Foreign Affairs of Montenegro, the textile sector is one of the traditional industries in the country. Besides the opening of the new factories, the potential for new investment can be found in the factories which ceased the production, especially having in mind the existing facilities, qualified existing staff and available incentives for stimulating this industry sector, the document points out.

“Regardless of for example the tradition of the textile industry, it is necessary to be noted that in the past two decades it was reduced to less than one tenth from what it was back in the year 2000. Very similar trends were noted in some other sectors like the leather and shoe sector or graphic and paper sector, which lost its importance compared to the beginning of the year 2000. However, also these industries which have a decreasing trend, will not be forgotten, but there will be efforts to find a solution for their existence and the preservation of employment, taking into account the regional potential and specific requirements for the development of the single industry sectors”, the Ministry of Agriculture and Rural Development notes in an official document.

Castello Montenegro Pljevlja - the company`s activity is the production of socks and light clothing/work clothes. During the past years, the company ceased production in the plants for socks manufacturing, while the light clothing factory has not been operational since the mid-1990s.

The company owns a significant space (an administrative building and a facility with two production halls, a larger hall for production of light clothing and a smaller one for the production of men`s and children`s socks) that are on the lease, which enables them to settle their obligations on the basis of salaries and other expenses. “The company`s business relies on the services concluded with the Agreement with the Customs Administration of Montenegro on the use of a truck customs terminal on the basis of which the company charges services, also services concluded by the Contract with the Ministry of Interior, on the basis of which the company charges services for the issuance of business premises”, the Montenegrin Ministry of Foreign Affairs further informs.

KONI Konfekcija Niksic was once one of the most important business entities in the town of Niksic in the field of textile industry producing quality health and safety work wear. Bankruptcy was declared in December 2012.

The basic activity of the company La Vista is manufacturing of men`s, women`s and children`s shirts. Its products are sold to: domestic market 30%; EU market 30%; CEFTA 40%.

Dress press is another popular company in the sector with basic activity manufacturing of textile products. It was founded in 2003, and the current number of employees is 15.
Simtex Basic is a traditional Montenegrin manufacturer of textile products. It established the first factories for manufacturing of work, commercial and sports clothing in Montenegro.

The company`s staff today consists of people with 25 years of experience working in the textile industry.
Spark Basic is also active in the manufacturing of work clothing and textile products. It is the only specialized manufacturer of HTZ equipment and distributor of protective agents at work in Montenegro.

Other popular companies in the sector are MB Bitex Basic - a manufacturer of textile products, the Rudex company (producer of bedding, household linen and hotel equipment) and DOO Papic – Konfekcija Papic, which manufactures sports clothing, sweat suits, t-shirts, shirts, jerseys, shorts, caps, etc.

Source: Ministry of Foreign Affairs of Montenegro, Ministry of Agriculture and Rural Development of Montenegro, company and organization websites

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