Serbia mining: Commodities market disturbances impacts local industry

7. January 2016. / Mining

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Due to cheap copper, aluminum, steel …and due to drop in demand in the world market, Serbia notes losses in export for five years now.

Price fluctuation in the world market has not been favorable for Serbian metallurgists for five years now. The prices of raw materials are dropping dramatically since March 2012, and prices of copper and aluminum are dropping since the beginning of 2011. The price of copper has dropped from 10.000 dollars per ton in the beginning of 2011 to 4.525 dollars in the beginning of December this year. These days a ton of aluminum in the world stock markets cost 1.462 dollars and at the same time in 2014 it was worth 2000 dollars.

Serbia decreased its share in the world export of metals from 0,18 in 2008 to 0,1 percent. This drop is due to decreased export of iron and steel after 2011, while our share in the export of non-ferrous metals did not change.

The share of aluminum and copper in the total value of our export since the beginning of 2015 till the end of October was 4,3 and the share of steel was 3,6 percent.

In metal mines and metallurgy industry of Serbia there are 516 companies with 17.300 employees while in 2001 there were 42.568 people employed – says Ljubiša Obradović, secretary of the Association for metal and electric power industry, metal mines and metallurgy of the Serbian Chamber of Commerce. There was a large decrease in production, export and number of employees in this part of Serbian industry in the past 15 years due to decreased inflow of capital, high interest rates for bank loans and decrease in the export demand. In the past five years the production of base metals has been cut to half, due to a standstill in the operation of “Železara Smederevo”, but the ore extraction was increased for 50 percent.

Opposed to expectations, even though they count as large exporters, the balance in foreign trade of metal mines and Serbian metallurgy industry is not positive. In 2014 the export was 1.5 and the import was 1.7 billion dollars.

Due to increase of iron import for “Železara Smederevo” the balance in foreign trade of our mines since the beginning of the year till the end of October was in deficit for 122 million euro, but at the same time metal producers gained 4ccording to Stojan Stamenković, editor of monthly magazine “Macro Economy Analysis and Trends” of the Institute of Economy, this year it was expected from the steel factory to contribute significantly to the grow of export and total value of gross domestic product.

Železara started working at the beginning of this year and the production was enlarged but the main effects are linked to the operation of both high furnaces and finding a strategic partner. There are no buyers so far. Only announcements – Stamenković said at the presentation of the magazine’s latest issue. The scale of the base metals production is now below the half of production scores prom the first part of 2008. The fact that in September there was an increase of 13,8 percent, and an increase of 23,5 percent in the period from January-September didn’t help to improve the scores.

Regarding the announced dynamics of Železara production and its contribution to the growth of GDP several questions were raised according to Stamenković. First, whether and when will both high furnaces be operational? Second will there be a buyer for Železara, or demand for its product if it doesn’t sell? Third, will it ever be profitable and when?

The last is key for the announced enlargement of gross domestic product, Stamenković says. The increase in production does not necessarily mean the same increase in the gross added value. Because with the increase of physical scale of production won’t necessarily bring the increase in gross domestic product.

However Professor Ljubodrag Savić is optimistic regarding the steelworks.

-Serbia is not capable of organizing a profitable production on its own. Still I think we are close to finding a solution with the Chinese. Given, off course that we make it clear to the Chinese company, backed up by the Chinese state, that our state too will take part. But Serbia has an agreement with the European Union which prevents it to invest a sole dinnar in the steelworks.

It is left to see whether EU would allow Serbia to use state guarantees to back up chinese operation of the steelworks rescue.

The fluctuation in prices in the world steel market is not in our favor, unfortunately. According to reports from the world stock market the situation is not good for anyone. Not even for the Chinese with their cheap and mass production. That is why all eyes are on the recovery of European and Japanese economy which are large consumers not only of steel  but of other base metals as well.

Nine Monts Balance

Since the beggining of 2015 till the end of September RTB „Bor“ Group exported 53,6 million dollars worth of goods, which is 2,3 times more than in the same period last year. The export of RTB „Bor“ in that period was worth 45,5 million dollars.

According to data from Serbian Chamber of Commerce, Aluminum company „Impol Seval“ – Sevojno  in nine months exported 127,9 million dollars worth of goods, which is 3,6 percent less than in the same period last year.  At the same time Copper company – Sevojno exported 74,8 million dollars worth of products, which is 17,3 percent less compared to the period January – September 2014. These two companies are among 15 largest exporters in Serbia.

 

This year’s nine monts export of steelworks „Sirmium Steel“ – Sremska Mitrovica was worth 71,3 million dollars, which is 28,3 percent less than in the same period last year, transmits Serbia-energy.eu

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