AP reported that business was once so bad at Smederevo's steel plant that it has idled production and grew mushrooms in its halls instead. Then the Americans came in 2003 and turned things around. Now fears are rampant that hard times are back.
The town is in a panic over a financial report released by Pittsburgh based steel giant US Steel that its plant in Smederevo, almost the sole source of income for its 100,000 people, is losing tens of millions of dollars.
Smederevo resident Mr Biljana Andrejevic said that "If US Steel stops, the whole town will stop."
There are increasing signs that major foreign investors, previously attracted by central and Eastern Europe's cheap labor and lower production costs, are thinking of quitting the region or scaling down production, as markets shrink in the global economic crisis and competition from Asia rises.
According to the British based consultancy PricewaterhouseCoopers, the region experienced a fivefold increase in direct foreign investments between 2003 and 2008, rising from USD 30 billion to USD 155 billion. FDI plunged 50% in 2009, as the credit crunch set in, with only a modest recovery from 2010 onward.
Prominent Serbian economic analyst Mr Misa Brkic said that "The region is no longer so attractive for foreign investors because it's no longer competitive. If the Serbian steel plant was closer to China, they would not be think of closing."
US Steel Serbia, which has steadily reduced production over the last eight years, employs over 5,400 people and accounts for nearly 10% of Serbian exports.
Mr John Surma chairman & CEO of US Steel said that "We are not satisfied with our poor financial results in Serbia, and we are evaluating all options to improve our situation."
He cited the anemic regional economy, high raw materials costs, pressure from imports and Serbian customers who can't pay as the causes of the problem. The plant exports to 60 countries across the world.
The company said in a statement to The Associated Press that "US Steel Serbia results continue to reflect the difficult economic situation in Europe, particularly in southern Europe."
Serbian officials are stunned by the possibility that the plant could shut down production due to operating losses that amounted to USD 73 million for the first nine months of this year, compared to a USD 6 million operating profit for the same period last year.
(Sourced from Associated Press)
