Serbia is establishing itself as a crucial supplier of raw materials, particularly copper and steel, to the European Union, shifting the focus of its industrial relationship with the bloc from finished goods to essential inputs. According to the JRC analysis, the country hosts approximately 70% of foreign-owned enterprises in the Western Balkans, positioning it as a primary site for industrial capital investment in the region. This role is underscored by Serbia’s capacity to provide copper and steel to EU supply chains, which are currently facing challenges due to geopolitical tensions and the push for decarbonization.
The copper industry in Bor, managed by Zijin Mining Group, plays a pivotal role in this context. With investments totaling between €2.6 billion and €3.0 billion, the facility has evolved into one of Europe’s largest integrated mining and smelting operations. Its annual production ranges from 80,000 to 90,000 tonnes of copper, placing Serbia among the secondary tier of European suppliers. The demand for copper is projected to rise significantly as electrification efforts increase; each megawatt of renewable energy generation requires substantial copper inputs, and electric vehicles necessitate far more copper than traditional vehicles.
Current market prices for copper are between €8,000 and €9,500 per tonne, generating annual revenues exceeding €700 million for Bor. The facility typically enjoys EBITDA margins of 30% to 40%, influenced by energy costs and ore quality. While these figures indicate solid industrial profitability with internal rates of return (IRR) estimated at 14% to 18%, the focus remains on where value can be captured throughout the supply chain.
At present, Serbia predominantly exports refined copper or semi-processed cathodes. However, there is a significant opportunity for expanding downstream processing into higher-value products such as rods, cables, and electrical components. Establishing a copper cable manufacturing facility would require an investment of €150 million to €300 million but could yield margins of 45% to 55%, compared to lower upstream margins. Additionally, securing contracts with EU buyers could elevate IRRs to between 16% and 22%.
In the steel sector, similar dynamics are at play but with increased regulatory challenges. The Smederevo plant, operated by HBIS, produces around 2 million tonnes annually and serves as a key player in Serbia’s steel exports within regional markets. EBITDA margins in this sector are more volatile, ranging from 8% to 15%, largely due to the cyclical nature of steel pricing and high energy consumption. The introduction of the Carbon Border Adjustment Mechanism (CBAM) poses further challenges; with carbon prices estimated between €80 and €100 per tonne, Serbian steel exports could see significant cost increases that may erode profit margins unless production processes are decarbonized.
This situation presents both risks and opportunities for Serbia’s steel industry. The estimated capital expenditure for transitioning Smederevo to electric arc furnace systems and integrating low-carbon materials ranges from €700 million to €1.2 billion. Successfully making this transition could position Serbia as a compliant steel supplier under CBAM regulations, potentially replacing imports from less stable regions.
Ultimately, Serbia offers a strategic advantage as a geographically close, politically stable supplier of critical materials for the EU. The next steps involve not just increasing production levels but also enhancing processing capabilities while reducing carbon emissions. This transformation would enable Serbia to capture higher profit margins and align closely with EU industrial policies amidst evolving security and sustainability demands in European supply chains.
