Bank of China provides $600 million loan for Zelezara Steel Mill Modernization Project (Linked to Project ID#67788, #52821, #95935, and #95965)

On April 18, 2016, the Zelezara steel mill was bought by Hesteel Group Company Limited (also known as Hebei Iron and Steel Group Co., Ltd., HBIS, or 河北钢铁集团有限公司) — a Chinese state-owned steel company — for EUR 46 million. It purchased 98% of the plant's assets, saving the over 100-year-old plant from bankruptcy. In order to support the acquisition from Železara Smederevo, the Hebei Branch of the Industrial and Commercial Bank of China (ICBC) provided an EUR 27.6 million acquisition loan (captured via Project ID#95965) and an EUR 50 million working capital loan (captured via Project ID#95935) to Hesteel Group Company Limited. These loans were backed by a credit insurance policy from Sinosure. Then, in June 2016, Bank of China extended a $600 million loan (captured via Project ID#67013) to Hesteel Group Company Limited to support the Zelezara Steel Mill Modernization Project. The purpose of the project was to modernize the Zelezara Steel Mill in the city of Smederevo. Renamed Hesteel Serbia, the plant now employs over 5,000 workers, bringing local unemployment rates down to 6 percent from 18 percent. In 2017, the plant was expected to generate revenue of $800 million and a profit of $20 million. In 2018, the plant produced 1.77 million metric tons of steel, becoming Serbia’s largest exporter with sales of 750 million euros. However, the Zelezara Steel Mill Modernization Project has also provoked local controversy. According to a November 2021 report from Reuters: “a few hundred meters from the huge furnaces of the Chinese-owned Smedrevo steel mill in central Serbia, the village of Radinac is covered in thick red dust. Cancer rates have quadrupled in under a decade, and residents want the plant to clean up or shut down. Zoran, 70, a throat cancer patient who speaks with a voice prosthesis after his larynx was removed, said residents must dry their laundry indoors and use vinegar to clean the dust from their cars. ‘Water cannot wash it off,’ he said. ‘We do not go out. We do not dare.’ According to data from the Smederevo public health body, which a watchdog called Tvrdjava obtained through a freedom of information request and shared with Reuters, the municipality of around 100,000 people reported 6,866 cancer cases in 2019, up from 1,738 in 2011. The plant says it has invested 300 million euros in technology and pollution reduction since China's biggest steelmaker, Hesteel […], bought it from the Serbian state for 46 million euros ($53 million) five years ago. ‘We are all citizens of Smederevo.... Would we be working despite pollution, against ourselves and our children?’ the plant's manager for environmental protection, Ljubica Drake, said in a statement to Reuters. Three new production facilities will significantly reduce pollution after their completion in 2022, she said. It was ‘not correct’ to conclude that higher cancer rates were caused by the plant's activities, she said, adding that the disease could be a result of NATO's bombing of Serbia in 1999 during a war in Kosovo. But activists say the plant is an example of Chinese-owned industrial firms ignoring pollution standards. Nikola Krstic, the head of Tvrdjava, an environmental group whose name means The Fort, said an analysis of the red dust in September [2021] showed high concentration of heavy metals. ‘The air in the town is far below European standards for 120 days per year,’ he told Reuters. ‘Red dust is greasy, it sticks to lungs, makes breathing difficult.’ […] The authorities in Belgrade say they are prepared to challenge Chinese-owned companies over pollution’.

Additional details

1. The Chinese project title is 河钢斯梅戴雷沃钢厂 or 很高兴钢厂项目. The Serbian project title is HBIS Srbija Železara Smederevo or Железара Смедерево or Смедеревска железара. 2. On April 18, 2016, the Zelezara steel mill plant was bought by Hesteel Group Company Limited for 46 million euros. It purchased 98% of the plant's assets, saving the over 100-year-old plant from bankruptcy. This equity acquisition is captured in Project ID#52821.

Number of official sources

13

Number of total sources

29