Experts welcome Hesteel's Serbian steel buy

A Chinese steelmaker's purchase of a Serbian counterpart will help raise employment and boost profits as global steel assets drop in value, said experts.

China's Hesteel Group (formerly known as Hebei Iron & Steel Group) signed a 46-million-euro ($52 million) agreement on Monday to buy the loss-making Serbian steel plant Zelezara Smederevo, according to Reuters.

Serbian Prime Minister Aleksandar Vucic said that the deal will noticeably boost the country's economic growth. The Serbian mill registered an output of 875,000 tons last year, with losses of $113 million.

"As steel-asset prices are quite low at the moment, they may yield high returns in the future. Therefore, now is a good time to purchase assets overseas," said Zheng Yuchun, deputy director of the China Steel Development & Research Institute. "The deal will help raise the employment rate and give an impetus to the local economy.

Hebei province has made a plan to transfer 20 million tons of steel production capacity abroad by 2023.

Hesteel holds a 51 percent stake in Swiss-based firm Duferco DPH, the largest steel trade service provider in the world, and has invested in a steel project in South Africa with an annual production capacity of 5 million tons.

Hesteel Chairman Yu Yong said that the company plans to increase its annual overseas revenue by 30 percent by 2018 to $20 billion per year, 57.5 percent higher than in 2014.

The group owns holdings in around 70 foreign companies in more than 30 countries.

Wang Dayong, secretary-general of the Hebei Metallurgical Industry Association, said Hesteel's overseas expansion would cut logistics and sales costs in overseas markets, and would also serve to promote economic development in those areas.