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Do you know what a steel mill that you can buy for $1 is like?
In 2002, the United States bought a steel mill from Serbia for $23 million, which started well, but then went downhill and could not fill the hole in the losses and had to be sold for $1.
A factory selling for $1 is obviously no different from going out of business. Unexpectedly, after this steel mill was acquired by China, it reversed the loss-making situation in less than one year and became the first export enterprise in Serbia.
How did China do it?
America's loss-making business
If you have the opportunity to walk through the gates of the Smederevo steel mill, you will see several large prominent characters printed on the wall, which translates to "Pride of Serbia" in Chinese.
This slogan refers to the Smederevo steel mill itself, which was founded in 1913, and in its heyday, it generated 40% of the annual revenue of the city of Smederevo.
For ordinary people, the Smederevo steel mill brings them not great wealth and wealth, but a stable life.
The mill employed more than 5,000 people and worked with more than 1,600 local suppliers, creating a total of 21,000 direct and indirect jobs.
This also means that at least 21,000 people have a stable income here thanks to the steel mill.
With the intensification of world trade competition, the Smederevo steel mill gradually lost its core competitiveness due to old age and had to be sold to the outside world, and finally the confident United States took over the old steel mill from Serbia at a price of 23 million US dollars.
With the United States in charge, the workers thought that the days of stability were coming, and they could not wait to clean up the cold factories and welcome the arrival of American managers.
Eventually, the American managers came, but their faces were colder than those of the blast furnace that had not been lit for a few days.
At the sound of the order of the Americans, production began again, and with the addition of advanced foreign capital, the Smederevo steel mill once again ushered in vitality.
But the good times did not last long, in 2008 the international financial crisis broke out, the daily production of steel mills higher and higher, the cost of manufacturing is getting bigger and bigger, the profit is getting less and less, and then began to lose money.
As orders continued to dwindle, U.S. regulators issued an order to reduce the operation of one blast furnace. The next day, the order was reduced again, and the manager ordered the reduction of one blast furnace.
After a few days, there was only one burning blast furnace left.
Of course, the last blast furnace can't be extinguished anymore, and if even this fire is gone, what kind of steel mill is it called.
If you can't recover your losses by shutting down the blast furnace, then reduce the wages of the workers. After that, the workers were sweating the same, but their pockets were deflated than before, and life was more difficult.
Even if wages were reduced, it would be difficult to save the steel mills from losing money, and the US authorities, after discussions, finally put the steel mills back into Serbia's hands at a price of $1.
After the Americans left, the government had to look for new investors, but the steel mill equipment was seriously aging, the steel production capacity was declining, the product was single, and the annual loss was at least 120 million euros.
The wages of the workers have dropped and fallen, and although many people feel very uncomfortable, they can't help it, they can take as much as they can, their wallets are deflated, and their bellies are also deflated.
Although I had a hard time, I looked at the big chimneys of the steel mill every day, fantasizing that there would be smoke tomorrow, and there would be hope for life.
The hot potato that China has taken over
A steel mill that loses 120 million euros a year will not be picked up even if it is delivered for nothing. The fate of the Mederevo steel mill, it seems, has already been sentenced to death from the time the price of 1 dollar was offered.
It wasn't until 2015, when China signed a memorandum of understanding with Serbia on the Belt and Road Initiative, that the century-old factory finally had new hope.
Vučić, then the prime minister of Serbia, saw this opportunity and hoped to reach a cooperation with the Chinese side to take over the steel mill.
The Chinese side agreed to Vučić's request and bought the Mederevo steel mill for 46 million euros in April 2016, both out of aid to Serbia and out of consideration of the value of the steel mill.
The company that has reached a cooperation with the Cypriot side to take over the steel mill is the mainland's HBIS Group, which is the largest steel enterprise in China and the second largest in the world, and currently operates in 100 countries and regions in the world, and has been ranked among the world's top 500 companies for 7 consecutive years.
But no matter how strong HBIS is, it is very risky to take over such a loss-making steel mill.
Someone came to persuade Song Sihai, deputy general manager of HBIS Group's Tangsteel Company, saying that he was jumping into the fire pit, and the United States could not hold on, so why did HBIS have to wade into this troubled water.
Song Sihai said that the fact that the Americans do not do well does not mean that the Chinese do not do well!
This sentence was quickly confirmed, and after HBIS Group took over this "hot potato", after scientific planning, it successfully doubled the output of only 60,000 tons per month, and the monthly output reached 129,000 tons.
Production was restored, and sales increased rapidly with the opening of the sales network in Europe.
In just a few months, the Smederevo steel mill gradually lost money at the hands of the Chinese. In 2017, the steel mill entered a state of full profitability.
By 2018, Smederevo Steel Mill was even more powerful, becoming Serbia's largest exporter, accounting for 2.08% of Serbia's GDP.
In 2020, due to the outbreak of the new crown epidemic, production everywhere was severely affected, and the Smederevo steel plant was not immune.
However, when the epidemic occurred, the steel mill did not sit still, but adopted a proactive response strategy, requiring the company's employees to work online, steelmaking workers must strictly wear masks, establish a shift disinfection system, and strictly disinfect public places......
If an employee becomes infected, they need to arrange an isolation break immediately. Enjoy daily "home delivery" service.
Due to strict control, there has not been a single cluster of infections in the three years of the epidemic, and there has not been a single day of work stoppage.
Relying on HBIS Group to turn the tide, the steel produced by today's Smederevo steel mill has a large market in neighboring countries and as far as Western European countries, and is widely used in home appliances, automobiles and machinery manufacturing.
Now this 100-year-old steel mill has successfully come back to life after injecting fresh blood.
China's way to save factories
One of the reasons why the Chinese side was able to save the old factory was that the managers were able to get along with the employees.
Duda, a Cypriot executive who attended the welcoming ceremonies twice, said that when the United States arrived, their attitude was always cold, they would only stand on a high place and talk to the workers, and they would never go into the crowd or understand the workers' demands.
The managers in China are very different, as soon as they arrive at the Mederevo steel mill, they are brothers and sisters to the workers here, sitting down to chat on an equal footing and understanding their demands.
After two months of operation of the steel mill, the company gave a bonus to every employee here, which was unprecedented.
After the outbreak of the Russia-Ukraine conflict, inflation became more and more serious, and the managers saw that the workers were having a hard time, so after discussion, they finally raised the wages of the workers appropriately.
For local workers, their wages have not continued to decrease, and thankfully, they can increase their wages, which they have never done for decades.
While trying to save the steel mills, the Chinese side also helped the surrounding villages to renovate schools, donated medical equipment to local hospitals, provided stationery for students, and donated to welfare institutions.
China has not only solved the employment problem in Serbia, but also greatly improved their living environment. When employees feel the warmth brought by Chinese management, they will naturally work harder.
In the process of mingling with the workers, the managers also learned about the actual situation of the steel mill from their mouths.
Although the equipment of this century-old factory looks very old, the quality of the equipment is good enough, and some can even produce 0.13 to 0.14 mm food-grade tinplate.
Such equipment is also one of the few in China, not to mention the product of the last century.
It's just that the previous steel mill's cost control was too "extensive", resulting in the uselessness of these exquisite machines.
In terms of reducing costs and increasing efficiency, the mainland has also achieved the extreme.
When the Smederevo steel plant was under the control of the United States, it would dispose of some waste with high zinc content in landfills, and spent tens of millions of dollars to build a waste pond for this purpose.
After the departure of the United States, this treatment method has been used, which not only causes environmental pollution, but also requires an additional annual management fee, which increases the burden on steel mills.
When China took over, the old waste pond was almost filled, and if the original treatment method was continued, a new one would have to be built, which would be a significant expense.
Faced with this dilemma, the Chinese management team did not follow the previous method, but analyzed the chemical composition of the waste and came up with an effective solution - recycling the waste back into steelmaking.
Most of the Serbian employees objected to this change from the norm, and the Chinese management knew that the implementation of this treatment would not be achieved overnight, so it was not enforced.
After that, the Chinese personnel entered the workers again and communicated with them, hoping to see if they could make good steel after adding the recycled scrap in the form of trial operation.
The workers finally nodded in agreement, and the steelmaking action of adding scrap began under the operation of the workers, and finally the quality of the steel reached the standard after the inspection of the relevant quality data by the technicians.
The recycling of waste does not affect the quality of steel and reduces costs, and workers have embraced this practice.
Later, this new waste treatment method was used, which not only saved a series of costs such as the construction cost of the waste pond and environmental protection costs, but also created tens of millions of benefits. In the process of economic development, the protection of the environment is taken into account.
Under the management of China, this factory is no longer comparable to the original $1, and the fire of the century-old factory is not extinguished, and it is with Chinese wisdom that it is lit.
Resources:
[1] "HBIS Officially Acquires Smederevo Steel Mill in Serbia", China Economic Times, 2016-04-25
[2] "The Rebirth of Serbian Steel Mills" by Hu Yifeng [Serbia] Poyana Štokč
[3] "Smederevo has a 'golden business card'", Guangming Daily (December 13, 2022, version 16)
[4] "Walk into Serbia's "Century-old Steel Mill" and Look at China's Plan to Revive the Old Balkan Industrial Base", Global Network, 2023-09-23
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