Serbian metal and machinery industry
The metal processing and machinery sector in Serbia has a long history of development and it is among the leading national production and manufacturing industries and one of the most important pillars of the local economy today. It dates back to 1853 when the first foundry in the country started operating. Today the sector accounts for approximately 6% of the national GDP and the workforce is considered highly skilled and properly trained to meet current European standards.
According to officially published data by the Development agency of Serbia, the enterprises within the segment vary in size and structure, which makes the metal processing sector relatively diverse.
“Large companies dominate the first part of the value chain, with significant economies of scale (production of primary metals, primary processing of metals), while the companies operating in the processing and manufacture of metal products subsectors are more specialized and customer-oriented SMEs. In the secondary processing such as casting, pressing, processing and coating of metals, the share of SMEs is 90%”, the official report states.
Metal processing accounts for about one fifth of the country export market, which has always been very export-oriented and open to collaboration with foreign companies. “Italy, Germany and Bosnia and Herzegovina are the most important markets, while thanks to the FTA with Russia Serbia has a growth of export to Russian market”, the Serbian Development Agency informs.
Numerous international investments in Serbia were made possible by the country`s educated and professional workforce, incentives for investors, free trade agreements with the Russian Federation and Tьrkiye, established infrastructure, and advantageous geographic location.
Currently there are over 4180 active companies in the sector with more than 73 000 employees. The total revenues of the industry amount to EUR 4,4 billion and the export business is worth about EUR 2,7 billion.
The basic metal production sector only has generated more than EUR 1,2 billion in revenue. It has at its disposal thousands of employees and robust operations and is led by a small number of large enterprises, including HBIS GROUP Serbia Iron and Steel and Zijin Bor Cooper.
The manufacture of general-purpose machinery – pumps and compressors, cooling and ventilation equipment, lifting and handling equipment – is considered the largest in terms of wealth creation accounting for 57% of the value added generated in the machinery and equipment manufacturing sector”, the official report says.
One of the most important metal associations in the country is the Vojvodina Metal Cluster (VMC). It was established in 2011 by 71 companies and organizations and it currently has 130 members – 103 enterprises and 27 institutions. Most of them (over 84%) are from AP Vojvodina, almost 14% are from other parts of the republic and the rest come from the EU – domestic firms with majority ownership structures originating from the Union.
Another significant branch organization is the Metal Cluster of Western Serbia, founded in 2014. Today the cluster unites 11 small and medium enterprises from the municipalities of Arilje, Pozega and the city of Uzice, which are mainly characterized by long traditions and experience in the metal sector. Five institutions with activities in the field of developing contemporary technology knowledge are also part of the cluster.
According to a study, conducted by the Institute of International politics and economics in Belgrade, the beginning of metal and machine industry in Serbia is set to 1853 when the newly built “Topolivnica” foundry in Kragujevac casted successfully its first cannon.
This was the beginning of the first wave, or primary industrialization of Serbia. During the second half of the 19th century many enterprises within the metal and machinery industry were established in Serbia, and also in Vojvodina, which was then a part of the Austro-Hungarian Empire.
Until the beginning of the World War I, the industry as a whole, including the metal and machinery sector, developed rapidly and diversely. Between the two world wars, the industry kept developing, as important production centers were Belgrade, Kragujevac, Nis and many locations in Vojvodina. After the World War II industrial enterprises in Serbia saw even more rapid and vast expansion. As a result, many industrial zones were formed.
Among the main subsectors of the industry during its long development process have been metal processing, machine building, production of transport tools, electric machinery and devices, weaponry and munitions.
“The metal and electrical sectors in Serbia achieved their economic and technological peak in 1980. After that a great deceleration followed, and after 1985 a distinct stagnation and decrease of production took place as a result of many factors – sanctions, ineffective privatization and restructuring, technological obsolescence, premature liberalization, great share of the grey and black economy, instability of currency, exchange rate primarily directed to utilizing consumption interests, high indebtedness, foreign investments absence or their bad absorption”, the study also informs.
The first decade of the new Millenium brought new perspectives to the sector, and in terms of metal production in 2007 (in relation to 2001) more than doubling of physical volume (229,4%) was registered. In the period to 2012 again a huge decline took place which almost brought production volume back to the 2001 levels.
In the production of other metal products, a constant increase was registered during the decade, as index for 2007 in relation to 2001 was 127,5%, and for 2012, relative to 2001 – 150%.
In the production of electric machinery and equipment the index for 2007 in relation to 2001 was 132%, and in 2012 it reached 146,9%. “However, in the production of other machinery and equipment there was a huge decrease registered in 2007 in relation to 2001 – only 65,5%, and in 2012 – 57,8%. The decrease continued, although considerably decelerated, but total production was almost twice lesser at the end of this 11-year period. In motor production in 2007 there was a considerable increase registered in relation to 2001, with an index of 142,6%. At the same time basic metals production in 2012 was only 100,2% of the 2001 levels”, the report says.
In 2012 the manufacture of basic metals was only about one half of the production registered in the previous year. In the next four years though, the sector saw a slow but steady positive development trend.
Production of fabricated metal products (except machinery and equipment) realized some increase in the period to 2015, except in 2009 and 2014, when the declines were huge.
According to the Chamber of commerce and industry of Serbia, the number of companies in the sector in 2015 was 5263, with over 120 900 employees. The metal and electrical industry with over 4700 active enterprises and over 103 600 employees (approx. 10,5% of the total workforce engaged in the economy of Serbia) built 5,47% of all enterprises.
The total number of enterprises in the mining and metallurgy sector in 2015 was 516, and the employees – over 17 300, the Chamber report also informs.
The share of the metal and electrical sector entities in the physical volume of the industrial output decreased from more than 20% and today it is only a half of that.
The share of the production of metal ores and metallurgy in the physical volume of industrial output varied, because of the oscillations in the production of the iron and steel plant in Smederevo. The export of this subsector in 2015 amounted to USD 4,7 billion, or 10,3% less than 2014. The import amounted to USD 6,6 billion, or 4,8% less than the previous year. The export of the metal mines and the metallurgical segment in 2015 amounted to USD 1,34 billion – 11,4% less than 2014. The import amounted to USD 1,59 billion, a decrease of 8,8% in relation to 2014, statistics show.
Enterprises, current state and future of the sector
The metal and machinery sector in Serbia is highly concentrated and represented by various cooperation clusters. According to the report “Metal and machine industry in Serbia”, published in 2019, large-scale companies currently dominate the first level of the value chain, with scopes of activity in the field of production of basis metals, primarily metal manufacturing. The specialized entities in the segment of metal products processing and production are mainly small and medium enterprises.
“In secondary manufacturing, including foundries, pressing, processing and coating of metals, the share of small and medium enterprises is 90%. The metal industry has always been export-oriented, and its share in the total Serbian export market is about 20%. Most important export partners are Italy, Germany and Bosnia and Herzegovina”, the official data shows.
Since the mid-20th century, a number of OEM`s have been established in the country. Although their basic purpose was to serve the growing domestic demand, much of the companies soon became exporters of finished goods and products, local market analysts conclude.
Among them were Zastava (a manufacturer of cars and trucks), FAP (trucks and buses), IMT and IMR (tractors), Zmaj (combine harvesters and trailers), Sever (electrical motors), Pobeda (forklifts), Gosa (rolling stock), Apatin, Sava, Begej and Kladovo (shipyards), Potisje and Lola system (machine tools), (machine tools), Utva (airplanes), Majevica (soil cultivation machinery), Ikarbus and Neobus (buses). The metal machining industry has been mainly concentrated around the OEM`s and served them as suppliers and service providers.
“Today, the metal industry landscape of Serbia looks completely different. Most of the big companies/OEMs do not exist anymore or are limited to serve a diminishing Serbian market. Instead, the leaders are subsidiaries of foreign companies with manufacturing operations in the country like Siemens, Grundfos, Wacker Neuson, FIAT, ATB Motors and many others. The suppliers are mostly family-owned SMEs, serving almost exclusively foreign markets. Both parties benefit from the industrial heritage and availability of skilled people”, the report informs.
The adoption of technical regulations in the country in the field of safety of machinery is under the authority of the Ministry of Economy. For the purpose of alignment to Directive 2006/42/EC (the Machinery Directive), i.e. amendments thereto set out in Directive 2009/127/EC, the Minister of Economy adopted the new Rulebook on Machinery Safety, which entered into force on June 1st, 2016.
The Rulebook on Amendments and Modifications of the Rulebook on safety of Machinery, which repeals the obligation of obtaining Confirmation of Conformity for all categories of machinery, starting from January 1st, 2022, was published in March 2020.
Local economic analysts expect that the future of the metal and machinery industry in Serbia is going towards high specialization and niche orientation in order to stay competitive in the oversaturated global industry, which is dictated by the economy of scale.
According to the Institute of international politics and economics, among the most important capacities in the sector, that are not enough utilized, today are: iron and steel production (to 2,5 million tons per year); production of hot-rolled flat products (to 1,2 million tons per year); production of cold-rolled flat products (to 600 000 tons per year); production of tinplate (to 200 000 tons per year), welded pipes and cold formed sections (to 55 000 tons per year); production of drawn wire, production of reinforcing steel (about 250 000 tons per year, with marginal investments to 500 000 t/y), etc.
“There are also good possibilities for investments in the mining and smelting complex Bor, and in other metal mines for better capacity utilization in the production of yield of ores and the production of concentrates. The capacities in the foundries in the country are also not well utilized, only 30 to 40 percent. The main challenges facing the Serbian industry as a whole can be solved through the right strategic partners”, economic analysts conclude.
LATEST issue 3/2023