Hesteel rebuilt Serbia's Smederevo steel mill into the country's top exporter

Zelezara Smederevo, founded in 1913, was socialist Yugoslavia's flagship steelworks and fell on hard times with the 1990s sanctions. US Steel bought the bankrupt plant in 2003 for $23 million, but in January 2012 handed it back to the Serbian state for one dollar when steel prices collapsed, leaving 5,400 employees and heavy liabilities. Both blast furnaces shut by mid-2012 and 5,000 workers went on paid leave; repeated tenders found no serious bidder. Serbia was losing roughly $10 million a month keeping the mill alive.

In April 2016 the Hebei-based Hesteel Group bought the mill for €46 million and committed about $300 million of investment over two years, including a galvanizing line, with the aim of lifting output from 875,000 to around 2.1 million tons. Both production lines returned to full capacity. According to China Daily's reporting from Smederevo, the acquisition ended seven years of losses and the mill was profitable again by the end of 2016, with wages up about 8% on pre-takeover levels and a 2017 revenue target near $800 million — more than 2% of Serbia's GDP.

By the end of 2018 and early 2019, researchers at Belgrade's Review of International Affairs note, Hesteel Serbia had become the number one exporter in the country. The turnaround preserved a single-industry town and turned a subsidized liability into the crown jewel of China's investment presence in the Balkans.

The story is not risk-free: EU safeguard quotas capped steel imports from 2019, European producers accused Chinese-owned mills of dumping, and the pandemic forced a partial closure in 2020. But the core transformation held — a mill the state could not give away had become the country's leading exporter under disciplined industrial management.

The mill was profitable again by the end of 2016 with wages up 8%; by 2018-19 Hesteel Serbia had become Serbia's biggest exporter, with about 5,000 jobs preserved.

Hesteel operated comparable integrated steelworks at scale, so it could restart idled furnaces with its own engineers instead of learning on the job.

Serbia's position gave tariff-advantaged access to European and Middle Eastern steel markets just as China was cutting domestic overcapacity.

The Serbian state, drained by monthly losses and failed tenders, was finally motivated to close at a low price rather than hold out for more.

The $300 million modernization bet on quality — galvanized steel for the EU market — not just on restarting old volume.

A distressed asset revives when its buyer runs the same business at scale and funds modernization through the cycle. A low price is still a win if it ends the drain and saves the town.

Hesteel (renamed HBIS Group) kept expanding, and the mill's fortunes stayed tied to trade politics: Brussels' 2019 steel safeguard forced export negotiations, and in 2020 falling EU demand brought a partial shutdown. Still, the plant remained Serbia's largest single exporter, and the Smederevo sale became the template case cited in debates over whether Chinese industrial acquisitions rescue or capture Balkan economies.