High price for China’s investments in Serbian steel plant

In the years since the Smederevo Iron and Steel Factory was acquired by Chinese owner, the smog has grown heavier. In the morning, residents wake to everything covered in red dust and doctors say cancer rates are on the rise. Despite these alarming issues, there has still been no action from the Serbian government to monitor health conditions or limit the factory emissions.

For the last few years, Zoran Stojanovic, a local resident in Radinac village, has received regular visits from an inspector sent by the Serbian Environmental Protection Agency (SEPA). The inspector’s message is always the same: Things are taken care of. There is nothing to worry about.

But Zoran Stojanovic’s worries are growing. After years of listening to the inspector’s promises, nothing has improved, he says. The pollution from the nearby iron and steel factory, operated by China’s HBIS Group, continues to bring harm and misery to his family.

From his backyard Stojanovic can see the tall brick chimney of a vast industrial complex that is more than a century old. Originally founded in 1913, the factory was enlarged during the socialist period and then again after the war in 1999. The production facilities, which today comprise the largest employer in Serbia, are just a stone’s throw away from Stojanovic´s home.

In a modest plot behind his house, the family has built two tunnel greenhouses. In the fall, when Just Finance International visited, the greenhouses were full of large tomatoes, chillies, and cucumbers. For a long time, this area was an ideal location for growing vegetables, due to its first-class soil and the underground irrigation from two nearby rivers. 

As recently as ten years ago, Stojanovic´s village supported several professional greenhouses. But due to the rising pollution from the factory, the vegetables became contaminated. The emissions from the factory contain micro particles such as lead, nickel, and cadmium, which can cause both chronic and acute diseases. For example, last year, Stojanovic said, a boy from the village ate some cherries from a tree. He believed they were fresh but he was poisoned and taken to the hospital. 

Zoran Stojanovic walks us around the greenhouses and stops at the backside of his house. He slips his finger to a downpipe to demonstrate how the red dust cover everything.

“If you watch the dust closely it contains small glass-like particles, and it’s sticky. You can’t just brush it off” Stojanovic said. 

Stojanovic is one of the few residents in Radinac who openly complains about the pollution from the factory. Almost everybody here is dependent on the steel production for their livelihood, he explains, and they don’t dare to say anything. Stojanovic said that if he could, he would take his family and leave the village immediately, yet nobody is willing to buy his house because of the pollution.

“All the children have respiratory problems. Our lives are in danger here,” he said. His neighbor recently died of cancer.

Cancer rates rise within a black box

In a town near the Smederevo plant, JFI met with a doctor who specializes in oncology. The doctor and his colleagues have repeatedly raised concerns over the significant increase of cancer cases in their area, yet there has been no formal assessment on the steel factory’s adverse health impacts. 

“Serbia has a cancer registry, we have some statistics, but it has not been refreshed regularly and it doesn’t include the whole country,” the doctor said. “Therefore, no real conclusions can be drawn from that registry.”

From their own observations and analysis, the doctor and his colleagues have concluded that cancer rates in this region are without equal anywhere else in Serbia. Not only is the number of cases higher, the communities proximate to the factory also fall victim to more varied and aggressive forms of cancer than patients in other regions. An unusually high number of young people here are also afflicted by these forms of cancer.  

The dire situation in Smederevo can be clearly connected to the nearby steel industry facilities, the doctor said. But they are also linked to “problems in the healthcare system and a mentality where people do not put their health first to begin with,” he went on.

The doctor believes it is hazardous to live in the villages next to the steel plant, and has called for a buffer area surrounding the plant where nobody would live or cultivate their land. In the absence of such a relocation, villagers must all make regular visits to their health center, he said. The only hope would be to diagnose their conditions  at an early stage when treatment might still be possible. 

Yet this is far from the reality here today. Most community members typically only visit the healthcare system when their symptoms have reached an advanced stage. The treatment they receive is less likely to be effective. As a result, the mortality rates are higher.

Blind eye to health and labor hazards

In 2016 the Chinese firm HBIS Group (at this time called Hesteel) bought the steel and iron factory in Smederevo for 43 million USD. By then the steel mill, owned by the Serbian state, was deeply indebted. Much of the machinery was in poor working condition and the whole plant required large investments in order to continue production. 

Given the plant’s sorry state, the acquisition by HBIS Group, the world’s second biggest steel producer, was a blessing for the Serbian government, which previously had to cover losses around 100 million USD every year from the plant.

The deal was also welcomed by many laborers in Smederevo. Generations of the community had come to be dependent on the steel mill for their family’s livelihoods, and its new Chinese owner had the potential to kick life into it again. 

It was not the first time foreign owners had attempted a revival of the deteriorating plant. From 2003 to 2012, the factory was owned by the American company, US Steel, which committed large investments into both the factory and the local community. But saddled with outdated technology from the Soviet Union they never managed to bring it into profitability. Management struggled to turn the steel mill around for nearly a decade, before US Steel finally gave up and donated the facilities back to the Serbian state.

After China’s Hesteel took over the steel mill, things rapidly began to change. According to employees interviewed by JFI, the new Chinese managers increased production levels without making the necessary investments in new technology. They allegedly did not even bother to regularly change the air pollution filter systems, which is crucial to controlling the factory’s emissions.

Since the change in management, workers have been complaining about hazardous conditions and an unsafe working environment, without receiving any constructive response. In one recent incident, a worker was killed in an accident in the factory. Some workers say that it could have been avoided if the Chinese management had been more attentive to the workers’ warnings.

Factory management say they have invested around 120 million USD to modernize the facilities. Yet  their  communication with the workforce and surrounding communities has been poor to nonexistent. According to some workers close to the production, it is not at all evident what the investments have gone into. “Hesteel says that they are investing but we don’t have a clue about what they do. It is just their words,” a former employee told JFI.

Nikola Krstić, director of the Smederevo-based NGO Pokret Tvrđava (meaning “fortress”) has fought for a long time to get the state agencies to disclose pollution data for the areas surrounding the steel factory–without success. Both Hesteel management and the Serbian government’s ecological inspector have repeatedly denied his requests for access.

For Krstić, the lack of transparency is unacceptable. His worst fears were recently confirmed after an explosion occurred in the factory in March 2023, leading to a massive release of untreated gas and dust into the air. But he was unable to access any information of what impact the gas had on health of the population.

According to a recent court decision Krstić’s organization does not represent an institution that is responsible for measuring environmental life threats for citizens. Therefore they could not have access to information about the health impacts caused by the incident.

Despite these alarming transgressions, Krstić says that both the government and Hesteel have continued to avoid any responsibility. “They don’t want to give us information that concerns the health of our families,” he said. “We are worried because many people get sick in Smederevo. Information about the environment must be available to citizens, regardless of whether the polluter is a private company or the state.”

In the end of August 2023 Nikolla Kristc’s organisation formally submitted a petition to the European Court of Human Rights in Strasbourg, calling for the court to protect the health of the country’s citizens. The petition was recently dismissed. The court thought that there were still avenues left to explore in the Serbian legal system.

Nikola Krstić regret the the decision from the European court. The problem, he thinks, is that there is no deadline for the Constitutional Court of Serbia to issue its opinion, which means that it may take very long before there is a decision.

“We have no faith and hope in domestic institutions, because they have shown that they work in the interests of the Chinese company, not their own citizens,” he said.

Just Finance International have reached out to both HBIS Group and to China’s economic attache in Belgrade with questions about the pollution but without getting any reply.