Serbia`s metal processing sector

One of the most significant pillars of the local economy today, the metal processing and machinery sector in Serbia has a long history of growth and is one of the top industrial and production sectors in the country. It began when the nation’s first foundry opened for business in 1853. The industry currently contributes around 6% of the country’s GDP, and its workforce is regarded as highly qualified and adequately trained to match modern European standards.

The segment’s businesses range in size and structure, which contributes to the metal processing industry’s relative diversity, according to statistics released by the Serbian Development Agency. The first segment of the value chain is dominated by large corporations with substantial economies of scale (primary metal production and processing), whereas the subsectors that deal with the processing and manufacturing of metal products are more specialised and customer-focused SMEs. According to the official report, SMEs make up 90% of the secondary processing industry, which includes casting, pressing, processing, and coating metals.

About a fifth of the country’s export market, which has historically been very export-oriented and receptive to working with foreign businesses, is made up of metal processing. The most significant markets are Italy, Germany, and Bosnia and Herzegovina; nevertheless, Serbia has increased its exports to the Russian market as a result of the free trade agreement with Russia, according to the Serbian Development Agency.

Serbia’s educated and skilled workforce, incentives for investors, free trade agreements with the Russian Federation and Turkiye, developed infrastructure, and strategic position have all contributed to the country’s success in attracting numerous foreign investments. Over 4180 businesses are currently operating in the industry, employing over 73 000 people. The export business is valued at over EUR 2,7 billion, while the industry’s total revenues equal EUR 4,4 billion. Only the basic metal production industry has brought in about EUR 1,2 billion. It is run by a few major companies, such as Zijin Bor Cooper and HBIS GROUP Serbia Iron and Steel, and has thousands of workers and strong activities.

Associations and clusters

The Vojvodina Metal Cluster (VMC) is one of Serbia’s most significant metal associations. It was founded in 2011 by 71 businesses and organisations, and as of present day, it has 130 members, including 27 institutions and 103 companies. Over 84% of them are from AP Vojvodina, 14% are from other regions of the republic, and the remaining ones are from the EU – domestic companies with Union-derived majority ownership structures.

Established in 2014, the Metal Cluster of Western Serbia is another important branch organisation. The cluster currently consists of 11 small and medium-sized businesses from the cities of Uzice, Pozega, and Arilje. These businesses are primarily distinguished by their extensive history and expertise in the metal industry. The cluster also includes five institutions that engage in activities related to the development of knowledge about modern technologies.

The sector’s past

In 1853, the newly constructed “Topolivnica” foundry in Kragujevac successfully cast its first cannon, marking the start of Serbia’s metal and machine industry, according to a study done by the Institute of International Politics and Economics in Belgrade.

This signified the start of Serbia’s first wave, or primary, industrialisation. Numerous businesses in the metal and machinery sector were founded in Serbia and Vojvodina, which was then a part of the Austro-Hungarian Empire, in the second half of the 1800s.

The industry as a whole, including the metal and machinery sector, grew quickly and diversely until the start of World War I. The industry continued to grow between the two world wars, with significant production hubs located in Belgrade, Kragujevac, Nis, and several Vojvodina areas. Serbian industrial businesses expanded even more quickly and extensively after World War II. Numerous industrial zones were created as a result. Over the course of the industry’s lengthy growth, metal processing, machine building, the manufacture of transport tools, electric equipment and devices, and weapons and munitions have all been major subsectors.

Fresh perspectives were introduced to the industry in the first decade of the new millennium, and metal output more than doubled in physical volume (229,4%) in 2007 compared to 2001. Another significant drop occurred in the years leading up to 2012, nearly returning the output volume to its 2001 levels.
Throughout the decade, there was a consistent rise in the production of various metal products; the index for 2007 compared to 2001 was 127,5%, and for 2012, it was 150%.
The production of basic metals was just around half of what was recorded the year before in 2012. However, the sector experienced a gradual but steady upward development trend over the following four years.

With the exception of 2009 and 2014, when there were significant decreases, the production of fabricated metal products (apart from machinery and equipment) increased somewhat between 2009 and 2015. Due to fluctuations in the production of the iron and steel factory in Smederevo, the proportion of metallurgy and metal ore production in the physical amount of industrial output changed. This subsector exported USD 4,7 billion in 2015, which was 10,3% less than in 2014. At USD 6,6 billion, the import was 4,8% lower than the year before. In 2015, the metal mine and metallurgical segment exported USD 1,34 billion, which was 11,4% less than in 2014. According to data, the import totalled USD 1,59 billion, an 8,8% drop from 2014.

Present and future

Numerous cooperation clusters serve as representatives of Serbia’s highly concentrated metal and machinery sector. Large corporations presently control the first level of the value chain, with scopes of operation in the field of production of base metals, notably metal production, according to the 2019 report “Metal and machine industry in Serbia.” Small and medium-sized businesses make up the majority of the specialised organisations in the processing and production segment of metal products.
90% of secondary manufacturing, which includes foundries, metal pressing, processing, and coating, is done by small and medium-sized businesses. The metal sector, which accounts for almost 20% of Serbia’s overall export market, has long been focused on exports. According to official data, Italy, Germany, and Bosnia and Herzegovina are the top export partners.

Numerous OEMs have been created in the country since the middle of the 20th century. According to local market observers, several of the enterprises quickly turned into exporters of finished goods and products, despite their primary goal being to meet the rising domestic demand.

The current state of Serbia’s metal industry is entirely different. The majority of large enterprises and OEMs are either no longer in business or are only able to cater to the declining Serbian market. Rather, the leaders are subsidiaries of international corporations that have manufacturing operations in Serbia. Family-run SMEs make up the majority of the suppliers, who mostly cater to international markets. According to the report, the industrial heritage and availability of skilled people benefit both parties.

In order to remain competitive in the oversaturated global market, which is governed by the economy of scale, local economic specialists predict that Serbia’s metal and machinery sector will move towards high specialisation and niche orientation in the future.

The Institute of International Politics and Economics states that the following are some of the most significant capacities in the industry that are currently underutilised: the production of iron and steel (up to 2,5 million tonnes annually); hot-rolled flat products (up to 1,2 million tonnes annually); cold-rolled flat products (up to 600 000 tonnes annually); tinplate (up to 200 000 tonnes annually); welded pipes and cold-formed sections (up to 55 000 tonnes annually); drawn wire; reinforcing steel (around 250 000 tonnes annually, with marginal investments to 500 000 t/y), etc.