public disclosure authorized file copy annex to t.o....

RESTRICTED

ANNEX TOFILE COPY T.O. 4a

This report is restricted to use within the Bank.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

ANNEX TO TECHNICAL REPORT T.O. 4a

on the

PROJECTS INCLUDED

in the

SECOND YUGOSLAV LOAN APPLICATION

February 4, 1953

Technical Operations Department

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ANN:

TABLE OF CONiTENTS

Page Mo.I Electric Power Production and Distribution

i Kostolac Thermnal Power Plant 1 - 3

ii Vinodol Hydro Power Plant 4 - 7

iii Transformer Stations and Transmission Lines 8 - I1

II Coal Mining

Introduction 12 - 14

i Aleksinac Mine 15 - 16

ii Senjsko-Revavski Mine 17 - 18

iii Kolubara Nine 19 - 20

iv Kostolac Mine 21 - 22

v Banovici Uine 23 - 24

vi Kakanj Iviine 25 - 26

vii Zenica Mine 27 - 28

v±Ui. Kreka -ine 29 - 30

ix Coal Washery at Banovici 31 _ 33

III Non-Ferrous Metallurgy

i Strnisce Aluminum Project 34 _ 39

ii Lece Lead-Zinc-Gold Hinp LO - 3

IV Iron and Steel

i Zenica Steel Plant 4 a

ii Vares Iron Ore Project 52 r6

iii Sisak Seamless Tube Project 57 62

iv Ilijas Cast Iron Pipe Project 63 _ 66

V Utilization of Forest Resources

i Timber Production 67 .7o

ii Videm-Krsko Newsprint Plant 71 - 76

-2-

Page Ho.VI Indus

i Electrical Equipment Industry -Svetozarevo Cable Plant 77 82

ii Chemical Industry - Sabac Fertilizer Project 82 85

iii Non-Nifetals Industry - Pancevo Gilass Plant 86 - 89

iv Agricultural Processing Industry -Zrenjanin Starch Plant 9o 93

VII M4odernization of Transportation

i Rail Transport 94 96

ii Water Transport 96

iii Air Transport 97

Map Following Page 97

I. ELMiMIC PCMER PRODUCTION AND DIS'IIBUTION

i. Kostolac Thermal Power Station

Location

The Kostolac thermal power station is located about 70 kilometersby railroad east of Belgrade on the Danube River and l kilometer from the

Kostolac lignite mines.

Description of Existing Plant

Construction of the station was started by the Germans during the

occupation of Yugoslavia, principally to supply an electrolytic copper

refining plant at the Bor copper mines. Thuree boilers designed to burn

brown coal from the Breza mines near Sarajevo were moved by the Germans

from that locality to Kostolac along with three Brown Bovari 10,500 kw

turbo-generators and other equiprment. When the Germans retreated, they

took the generators and other equipment with them leaving only the boilers

and heavy equipment. After the war the Yugoslavs located the generators:

brought them back to Iostolac and put t-he first 10,500 Imy unit into opera-

tion in 1950. The other tlfo units were put into operation in 1952. All

of the mechanical and electrical work on the generating units appeared to

be well done. As the boilers were designed to burn brown coal from Breza

which has a calorific value of 3,500 to I,000 kg/cal. (6,100 to 7,200 BIU)

they do not operate very well on the lowr grade lignite from the Yostolac

which has a calorific value of only 1,500 to 2,000 kg/cal. (2,700 to

3,600 BTU). The three boilers are able to produce steam sufficient only

for two of the thlree generating units. Therefore, while the installed

capacity of the plant at present is 31,5C0 Iarp its actual capacity is only

21,000 kw. Th- e units are 3-phase, 50-cycle and generate at 6,300 volts.

MKpansion Program

The program for the further development of.the plant will be

accomplished in two phases, The first phase will consist of increasing

the boiler capacity sufficiently to provide steam for the tlhree generat-ing units so that they can be fully utilized to produce 31,500 kw, ar.d

the second phase will consist of expanding the capacity of the plant

ultimately to 74,000 kw. The first phase of the program will be accom-

plished by installing a fourth boiler and remodelling each of the three

existing boilers to burn low grade lignite efficiently and thus increase

their steam generating capacity. For the ultimate or final installation

in the plant, four more boilers and four more generating units of 10,500 lkr

are planned. These installat.ions would bring the total capacity of the

plant to 74,000 kw, irith 8 boilers and 7 generating units.

Schedule of Construction

The rebuilding of one boiler was scheduled to be completed by the

end of 1952. Tle remodelling of the other two boilers cannot be started

- 2 .

until the Spring of 1953 because of the winter demand on the plant. This

remodelling is scheduled to be completed by the end of 1953. The fourthboiler, obtained from reparations will be installed in 1953 and put into

operation in 1954. This will complete the first phase. The second phase

installations are planned for 1955-56.

Fuel Supply

Lignite from the i{ostolac mines is brought about 1 kilometer on anarrow gauge railway to the plant's primary crushers and is taken by a

belt conveyor from the crushers to the bunkers at the plant. It is thenpulverized and blown into the furnaces. The lignite contains about 45%moisture, 25% ash and has a heating value of 1,500 to 2,000 kg/cal. Themines now produce about 2,000 to 2,500 tons per day, 1,000 to 1,500 tonsof which is consumed daily in the powier plant. Production at the minesis to be increased to 4,000 - 5,000 tons per day by 1954. There will beat least a 20-year supply of lignite at the higher rate of production.Bunkers, crushing and handling equipment for the ultimate fuel consumptionof the plant (3,000 to 4,000 tons per day) have already been installed.

Water Supply

Cooling water for the plant is pumped from the Danube River. Tlecapacity of the pumps is sufficient to supply cooling water for the ulti-mate installation of 74,0coo lw.

Cost of First Phase

The rebuilding of the three boilers and the installation of thefourth boiler will cost the equivalent of $1,600,000. Of this, $R1,187,000will be for imported equipment and $413,000 for domestic equipment anderection costs. The amount of foreign exchange already finkanced at thethird quarter, 1952, was the equivalent of $1,062,000 and the amount re-quired to complete the first phase was $121,000. The latter amount isdesired from the Bank. About 60% of this amount wfould be required for thefourth boiler and the remainder for accessories for the three existingboilers.

List of Goods

The list of goods and the payments to be made thereon from theproceeds of a loan from the Bank consist of:

Goods Amount

Reconstruction of Icisting BoilersCentrifugal pumps $ 8,000Electric motors 39sooo

Fourth BoilerElectric motors 29,000Control and measuring instruments 45,000

Total 5121,C00

Labor and MIanagement

As the plant has been in operation for some time, the operatingpersonnel and management were at the plant. The number of workers employedwas reasonable and the management appeared to be competent.

Cost of Production

Fuel, although low grade, is mined cheaply from open cast mines.As the plant is practically at the mine, there are no transportationcharges on the lignite. The total cost of the fuel should, thereiore, below. With low fuel costs, reasonable labor costs, and more efficientsteam generation from the rebuilt boilers and the new boiler, the cost ofthe electric energy produced should be fairly reasonable as the full

capacity of the generating equipment could be utilized.

1Market

The energy now generated at the plant is distributed through the110,000 volt network to Belgrade, the Bor mines and to Svetozarevo andthrough the 35,000 volt network to Smederovo, Pancevo and Itaiden Pek inSerbia. The additional energy to be generated at the completion of thefirst phase will be distributed to the same area which can readily absorbit.

Justification

Industry in the vicinity of Belgrade and other parts of Serbiaserved by the transmission network is rapidly expanding and the need for

power is increasing. Industrial expansion will be severely hampered un-

less additional powTer is made available. The "ostolac plant, using acheap low grade fuel not suitable for industry, could supply a substantialpart of the demand for additional power.

January 27, 1953

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1. ELECTRIC PO'Ffl PRODUCTION AND DISTRIBUTION

ii. *Vinodol Hydroelectric Power Station

Location

The Vinodol power station is located about 28 kilometers airlinesoutheast of the port of Rijeka on the Dubracina Rivers a small streamwhich empties into the Adriatic Sea at the town of Crilkvenica. It isserved only by a road. No railroad is connected with the site.

Description

The power station has been constructed underground at the foot ofan escarpment which drops sharply from an elevation of abouit 800 metersto 50 meters above sea level within a few kilometers from the Adriatic Sea.Water for the operation of the plant is brought 13.7 kilometers throughtunnels and canals from two reservoirs on a plateau which borders thecoast. One reservoirs the Lokvep with a surface elevation of 770 meters,is located on the Lokvarka River and is connected by a tunnel 3.5 kilo-meters long to the Licanka River on which the Bajer Reservoir is located.

The surface elevation of the Bajer Reservoir is 717 meters. Wlater fromthe Bajer Reservoir is carried under pressure 4.8 kilometers in reinforced

concrete pipe and 4.2 kilometers in a tunnel to the top of the escarpmentat elevation 686 meters. From this points the water drops througlh asteel lined tunnel 1.2 kilometers long to the powqer station at elevation56 meters. The maximum head on the water wheels is about 661 meters(2,168 feet) and the minimum is 657 meters (2,156 feet). The tail water

discharges into the Dubracina River through a short canal.

The total capacity to be installed at Vinodol in the first phase

of the development will be 84,ooo kW, consisting of three 28,000 kw gener-ators powered by 6 Pelton water wdheels or turbines - or 2 wheels for each

generator. The whole station including transformers and switch gear forthe 10 kv and 35 kv circuits will be located underground. The switch yardfor the 110 kv circuits, however, will be located above ground.

In the second phase of the developments a second generating stationwill be constructed at the end of the tunnel between the Lokve and Bajer

Reservoirs and another will be constructed on the Kriz River with a tunnelconnecting it to the Lolve Reservoir. This will add 5.8 million cubicmeters of storage and 3,800 Iw of generating capacity to the project. Athird phase which will include another reservoir and another small gener-ating station is under study.

Drainage Area, Rainfall and Runoff

Ihe drainage area above the reservoirs is about 68 square kilo-meters (about 27 square miles), In this relatively small area, however,

the rainfall averages 3.?3 meters (117 finches) annually. XThe runoff amounts

to about 122 million cubic meters or about 55% of the total rainfall. About33.2 million meters or 2TVh of the runoff,can be stored in the two reservoirs.

- 5.-

Rainfall records extend over a peridd of 40 years and stream flowJ recordsover a period of 20 years.


One generating unit of 28,000 kw has already been installed atVinodol and is operating principally on water from the Bajer Reservoirwhich is completed. The second unit is scheduled to be completed by theend of 1952 and the third unit by mid-1953. The dam on the Lolcvarka isonly partially completed, but it is at a stage which will permit the par-tial filling of the Lokve Reservoir in 1953 to supply water for the secondand third units* The Lokvarlca Dam will not be finally completed until mid1954s, consequently the full energy production from the second and thirdunits will not be available until the latter part of 195. Constructionof the second phase of the project is planned to begin in 1955.

Over all the construction work on the first phase was about 88%completed and the installation of equipment was about 8O5O completed inOctober, 1952. The work remaining to be done to complete the first phaseconsists of the completion of the Lokvarka Dam, the completion of a smallamount of work on the second 28sOO0 kw generating unit and the installa-tion of the third generating unit with necessary transformers.

Estimated Eunergy Production

After completions Vinodol will be used as a base load plant in thewinter (the wet season) and a peak load plant in the summ¢r. The produc-tion from the first two jnits in 1953.is estimated at about 90 million kwh.In 19541 with 3 units in operations but with incompleted storage reservoirs,the production is expected to increase to 140 million kwh. After thecompletion of the Lokvarka Resewvoir in-1954l, which will permit fullscheduled production from all 3 generating units, the production is esti-mated.to be 263.2 million kwh in a wet year, 183.3 million kwh in anaverage year and 107.5 million kwh in a dry year.

Management and Labor

The Vinodol Powrer Station is uncer the general supervision of themanagement of the Slovenian-Croatian network. The station manager hasbeen operating the first unit since it was installed and apparently iscompetent to manage the station with the 3 units installed. The construc-tion work yet to be completed will be performed by the Yugoslav constructioncompanies which have been thus far building the project. The generatingunits will be installed under the supervision of the Swiss suppliers of theequipment*

Cost of Production

The installations included in the first phase are estimated tocost the equivalent of $238 per kw. For a project involving two reservoirsand a considerable amount of tunneling and canals, this is a very reason-able cost per kwv. On this basis power production cost would probably be

in the order of 1/2 cent per hilowatt hour in an average year. This isa. reasonable cost and probably lower than many plants now producing energyfor tile Slovenian-Croatian netiork.

Cost of the Project

The total cost of the project to thne third quarter of 1952 was theequivalent of $17.7 million. Completion of the project will require thefurther expenditure of the equivalent of appro:.z.mately $i2.3 million, ofwhich onlywr $80,000 will be for imports. The table below shows a breakdownof the costs:

Cost Expressed in Thousands of U.S. DollarsConstruction Equipment

Period WIork Imported Domestic Installation -Total

Third Quarter01952 14,l00 3,138 177 300 17,715To complete 1,900 80 256 70 2,306

Total 16,000 3,218 433 370 20,021

The $80,000 remaining to be paid on imports is desired from the Bank.

List of Goods

The equipment which the Bank has been requested to assist in finan-cing has been on order in Switzerland for some tinme and only a small amountremains to be paid. The items and the payments to be made thereon are:

type of Equipment Amount

Transformers $31,650Generator (3rd unit) 48,350

Total $580,000

iIarket

Ihe plant is already connected into the UO0,000 volt Slo-rnnian-

Croatian netwiork which serves tle highly industrialized northeas:,ern partof Yugoslavia in which the demand for electricity is rapidly ir.Crea.sir,g.The production from Vinodol can be readily absorbed in the networ':.

Justification

The justification of this project rests primarily on the fact thatit can be used, in effect, to Afirm up the power from other hydro stationsin the SlovenianvCroatian network. The drainage area of Vinodol lies inthe Mlediterranean Basin 2nd its high water season is in the winter time

whereas the drainage areas of the other hydro stations (principally on the

Drava River) in the network are in the Alps and have their low water sea-son in the wJinter. This inversion of seasons in the same network is mostunusual and is important because it increases the firm or assured amount

- 7 -

of hydro power available in the network, and obviates the necessity for alarge amount of standby thermal capacity. This station will contributesubstantially to the large power requirements of the Strnisce Alumninumproject in Slovenia which the Bank has been requested to assist in fi-nancing.

January 27, 1953

- 8 -

. I. ELECTRIC FOWER PRODUCTIONT ATT) DISTRIBUTION

iii. Transmission Iines and Transformer Stations

Description of Pro;ject

The transmission lines and transformer stations which the Bank hasbeen requested to assist in financing are all under construction. Equip-ment from abroad is required for the completion of 1,290 kilometers oftransmission lines, 27 primary and 58 small secondary transformer stationslocated in various parts of the country. The total foreign exchange cost

of the project is estimated at the equivalent of $9,482,000, of which$7,576,000 has already been financed. Of the remainder, $1,906,000, theequivalent of $576,000 wrill be financed from the German loan and $1,330,000is desired from the Bank. Of this amount, $193,000 would be for transmissionlines and $1,137,000 would be for transformer stations. Mlore detailed infor-mation concerning the transmission lines and transformer stations follows.

Transmission Lines

Yugoslavia can supply most of the copper and alumainum conductors and

most of the materials and equipment reouired for the construction of itshigh tension transmission lines including the towers from domestic produc-tion, but it must import high tension insulators and other accessories and

some special types of conductors. These constitute a relatively smallproportion of the total cost of the transmission lines. The loan requestfor transmission lines covers such equipment.

The high tension transmission lines under construction as at the endof October, 1952, for which equipment is being imported, consisted of 730

kilometers of 110,000 volt lines and 560 kilometers of 35,000 volt lines.These lines will supplement and extend the 9,023 kilometers of high tensionlines already in existence on that date. About 57% of the existing lines

(5,100 kilometers) have been constructed since 1945. All of the new mainlines have been 110,000 volt or 35,000 volt lines and all future main lineswill be of these voltages, although lines of 132,000, 80,000, 60,000, 5Q,000and 20,000 volts are in use. The kilometers of lines in use and under con-

struction in each of the six republics are given in the following table:

Kilometers of Transmission Lines

Republic In Operation _ Total Unaer Construction Total110kv 35kr Other 110kv Ma351v

Serbia 514 2,100 - 125 2,739 340 150 490

Croatia 400. 1,070 - 335 1,805 120 100 220

Slovenia 566 2,035 - 212 2,813 - 55 55

Bosnia & Herz. 226 670 - 896 243 105 348Macedonia 40 500 - 540 27 100 127

Miontenegro 230 _ 230 - 50 50

Totals 1,746* 6,605 672 9,023 730 560 1,290

I-ilometers of thep--n l-nes are temporarilyr o;nc orrw -r _L 'rA

_.9._

There are five separate, uncornected network's of transmission lines

in Yugoslavia serving five regions of the country. The lines were con-

structed without regard to the boundaries of the Republics and in two

instances the networks serve parts of tWo Republics. In Serbia, Macedonia

and Montenegro the networks do not extend beyond the borders of the

Republics, The two networks which serve parts of two Republics are the

Slovenian-Croatian and the Bosnian-Dalmatian (see map).

All of the lines now under construction are scheduled to be completed

by the end of 1953. The 110,000 volt lines now being temporarily operated at

60 and 35,000 volts will be stepped up to full voltage as soon as the sub-

station equipment required is installed.

Cost of Transmission Lines

The total cost of the 1,290 kilometers of transmission lines under

construction will be about the equivalent of 36,000,000. Of this amount

$661,000 will be in foreign exchange and the remainder in domestic currency.

The Bank has been requested to finance 3196,000 of the foreign exchange

costs.

List of Goods for Transmission Lines

The goods to be financed with the proceeds of an IBRD loan would

consist of:

Insulators and Accessories i134,000Steel rope 32,000Covered conductors 30.000

Total $196,000

All of the equipment is under contract and will be imported from France, the

United Kingdom and Austria.

Justification

Expansion of power facilities, of which this is a part, is necessary

for the general programa of industrial development now in progress-in

Yugoslavia. The completion of the 1,290 kilometers of high tension lines

will assure a better supply of electricity for existing consumers and

provide power for,new tndustries now under construction throughout the

country,

transformer Stations

In the first loan to Yugoslavria the equivalent of $3,000,000 was

allocate-l for the purchase of equipment for 19 transformer stations. The

domestic currency costs wrere estimated at $3,247,000. To the end of

October, 1952, $954,833 of IBRD funds and the equivalent of '$1,589,000

in domestic curreney had been expended on the stations, Fourteen of the

stations are scheduled for completion in 1953 and the remaining 5 are to

be completed before the end of the second quarter in 1954. These dates

of completion are somewhat later than the dates originally given to the1-.. .

- 10 -

Under the current loan request the Bank has been requested toprovide funds for additional equipment for each of the 19 transformer

stations included in the first loan, for certain equipment for 8 newprimary transformer stations and for 58 small secondary stations notcovered by the first loan. The name, location, the amount of financingunder the first loan and the current loan request for each of the 19 trans-former stations are showxn in the table below, together with the amounts offinancing desired for the 8 new stations and the 58 secondary stations.

19 Primary Transformer Stations Previously FinancedAllocation under

Station Location 1st Loan 2nd Loan Request

Belgrade Serbia 321,400 52,400IKosovo " 107,200 67,700

Nis 156,800 5,200Novi Sad 76,700 12,700

Lozovac Croatia 134,500 :9 ,700Rijeka (1Iatulje) " 33,400 34,000

Zagreb " 234,000 82,600

Split " 165,200 167,300Tito n 190,000 134,400Varazain " 119,000 43,800LJubljana Slovenia 190,000 77,000Marifor !I 330,000 90,000Mostar Bosnia & Herzegovina 183,000 16,400Sarajevo " 163,700 40,000Jajee" 100,200 105,300

LuIsavac " 90,700 40,600

Zenica 217,600 32,600Gorazde 73,800 17,000Skoplje Macedonia 112.800 60.000

Totals 3,000,000 1,111,700

8 New Primary Transformer Stations

Vlaljevo Serbia 15,000Petrovac 14,700Svetozarevo 15,300Bor " 6,000Rankovicevo 4,700Dugarat Croatia 108,500Radojica Slovenia 77,000Celje (1aslco) " 73.700

Total 314,900

58 Secondary Transformer Stations

4 Stations - Serbia 28,30037 Stations - Croatia 214,400

3 Stations - Slovenia 16,0007 Stations - Bos & Herz 40,3007 Stations - Montenegro _24.600

58 323,600

- 11 -

The amounts currently requested for the transformer stationsfinanced under the first loan are required because: a) transformersoriginally planned to come from domestic production now cannot bedelivered in time for the scheduled completion of a number of stations;b) new demands for lines to serve new indus;ries or loads have developedsince the original estimates of equipment for the stations were made, andc) the original plans provided only the minimum equirment to be installedin the stations and in some instances only for the provisional operationof the stations. The additional funds requested will provide equipment forthe full operation of the 19 stations and permit them to supply all currentdemands, and will provide equipment for the 8 new primary and 58 secondarystations not financed under the first loan.

Cost of the Transformer Stations

The total cost of the transformer stations under consideration(including the 19 covered in the first loan) is estimated at the equivalentof $13,500,000. Of this, $8,821,000 is estimated to be in foreign exchangeand $4,679,000 in domestic currency. Foreign exchange costs of $7,108,000have already been financed. The Bank has been requested to finance$1,137,000 of the remaining foreign exchange costs and $576,000 will becovered by the German loan.

I,st of Goods

The goods to be financed with the proceeds of a Bank loan and thepayments to be made thereQn are:

Goods Amounts

Transformers $ 151,000Circuit Breakers 85,000Cables, armored 289,000Switchgear 522,000Control Instruments 90.000

Total $1,137,000

The equipment, which is all under contract, will be imported from France,Italy, Germany and Austria.

Justification

The transformer stations are a necessary link in the transmissionand distribution of electricity from generating plants to ultimate consumers.The stations under consideration are geared to the industrial expansion pro.gram and are necessary to keep the power program in pace with the industrialprogram.

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II. COAL MUIIHG - 140DERUNIZATIO1T A"LD M-AITSION

The project for the modernization of coal mines for which the Bankhas been requested to orovide, the equivalent ofl$3i,890,000 in foreignexchcvnge, will consist of the installation of; a) modern mining and trans-port equiPment in 8 mines, both underground' nd open cast; and- b) a wash-ery at one brown coal mine. This 'roject is part of a large scale coalmodernization program which has been under wey st-ce 1947. In 1951, aprevious Bank loan included a project for coal-mining modernization forwhich about $8 million was made available out of a total loan of $28

million.

As part of the Key Projects Program, a project has been drawn up andis in the course of execution, designed to raise total coal producing capa-city to 20.2 million tons per year by 1955. The effort is confined almostentirely to 12 large mines which are slated to have an annual capacity of14 million tons. Tonns.ges produced in recent years as compared with pro-jected 1955 capacity (thousands of tons) are:

Mines 1948 1949 15 1951 capacity

Bituminous 1 544 825 784 667 860Brown coal 7 3,273 3,403 3,711 3,786 6,040Lignite 4 2.31 2.?40 3.007 2.815 7,100

Key Mfines 12 6,130 6,968 7,502 7,268 14,000All others 4, 59 5139 5.2 6 4.774 6Ž2oo

Grand total 10,724 12,107 12,866 12,042 20,200

The total estimated foreign exchange cost for corrmoletion of the coal

mining modernization program under the Key Projects Program, is $20.7 mil-lion, An adaitional $2 milllon will be required for a new coal washeryproject described belowi. The first I3RD loan allocated $7,990,000,equiv-alent to 8 mines. The present proposal includes $1,890,000 for 8 mines(four of which were lnot covered earlier). If the proposal is executed, the

total foreign exchange requirements for the coal portion of the Key Pro-jects Program will be assured excent for$222,000 for 4 mines (Breza 126,

Rosa 82, Velenje 10, and Zagorje 6). The remainder of $10.6 million was

made available from other sources, inclt-.ding credits fromn the Exoort-ImoortBank and payments from Yugoslaviats otl:n exchange resonrces.

The amounts involved are so small as to indicate that the necessarypayments can be net from Yugoslaviats own resources. In the case of Breza,delays in delivery of transport equinment which may occur are not believedcritical, since mining capacity w?ould in any event greatly exceed washerycapaXcity. For this reason, it was felt that priority should be given toexpenditures for other mines where present washery cap.city appears adequate.

lfhile total capacity is to reach 20.? million tons, Yugoslav authori-ties do niot envisage a production need exceeding 18 million tons, by 1955.

- 13 -

Excess capacity is however renuired as a ressrve against seasonal laborshortages (in the summer), high seasonal demands (in the winter) equip-ment breakdowns and other contingencies. It was the lack of such reservecapacity in recent years which is said. to have been responsible for situ-ations where forced production at the expense of inadequate maintenanceand development caused later reductions in output in some mines in 1950and in most mines in 1951.

Yugoslav authorities furnished estime.tes of coal demand for 1950,1951 and 1955 as follows (in millions of tons):

19551951 Yugoslav Estimate

Industry and ?ower 7.20 6.68 10.92Defense Plants 0-35 0.32 0.40Transport 3.45 3.42 3.70Domestic use 1.15 1.12 2.20Erports 0.13 0.25 0.75Others (including stocks) 0.59 0., _.

12.£7 12.04 17.97

After detailed discussions, Yugoslav exoerts conceded that largelybecause of revisions in the Key Projects Program industrial demandscould be reduced by at least 500,000 tons per year. In view of only thelimited likelihood that exports would reach 750,000 tons and the probabilitythat household consumption would not likely double in four years, staff es-timates are that a oroduction of about 16.5 million tons would be adequatein 1955. Offsetting this reduction in demand is the fact that productionat mines other than the 12 key mines may fall further since little or noinvestment is likely to be made in these mines. On that Dremise, 1`55 pro-duction mey be estimated as follows:

000 Tons % of Capacity

1 Bituminous Coal 750 877 3rown Coal 5,100 854 Lignite 6.ooo _8S

11,850 85All others 4.650 75

16,500 82%>

In any particular year from 1955 on, production could be raisedcloser to capacity if required either for e mort or internal consumption.After thi.s expansion in capacity is carried out in the larger mines, itis anticipated that production at some of the smaller and oldr-r mines willbe curtailed or cease altogether, while others like the Kosovo open pitmine in Serbia near the Macedonian border may be expanded, if market condi-tions warrant.

A major -aurpose of the cepacity expansion program is to reduce man-

power requirements. As compared with employment of 53,400 in !-lay 1952,that toal manpower requirements for capec-ity operatioiis in 1955 would be

3,000 lower due to substantial increases in out:out ner marn shift, especial-ly at underground mines lacking modern mechanical equipment, has been es-recially difficult in years of good harvests, the mechanlzE.tion orogram an-Dears essential. In fact, there is good. reason to believe that in theabsence of such mechanization, a shorta:.e of coal mighlt prove a majorbottleneck in the Yugoslav economy, thereby endanngering -rospects for sec-uring bealance of payments equilibrium.

Moreover, the expansion of open-cast lignite output in Serbia (Kolu-

bara and Kostolac) will have the effect of reducing long railroad hauls oflow value lignite from Bosnia (Kreka. mine). This displaced lignite is ex-pected to be used incre-.sin.gly for coke oroduction at Lukavac and Zenica,affording significant import savings and important trans-port economies.Croatia or Slovenia, w1hich apDear to lack adequate coal reserves relativeto coal consumption, *oresent or anticioated may become incre-singly imcort-ant markets for Bosnian lignite and brown coal.

In addition, provision is made for $2 millions (equivalent) in foreign

exchange for construction of a washery at the Banovici brown coal mine. Thismine, visited by a staff member, is tne largest coal producer in Yugoslavia.Most of the coal mined is from open-pits by drag lines, slhovels and power

loaders; its oroductivity is the hiGhest and its unit costs the lowest inYugoslavia. 'then visited, large quantities of run-of-the mine coal were

lying unsold along the railway line, bec4use its quality in an unw,zashed

and unscreened state rendered it unsaleable except at sizeable price re-ductions. The existing screening plant has only a 4,000 ton per day capa-city (1.2 million tons oer year) as comnared with current and projectedoutput of 1.4 and 1.9 million tons per year.

The existing screening plant merely provides a means for sorting outlarge isolated oieces of wood, stone and other waste. A washery, 2s indic-ated in more detail in the washery project anz:.lysis, produces two market-v:ble products with 89% of the mined volume, elininc..ting 11% by weight andonly 1l-+, of the estimated heating value. The main bulk of the marketable

coal is ha;uled long distances (over 300 kilometers to Belgrade and EasternSerbia, and even farther to the Austrian bord.er for e:-.:port). Washing byraising the heating value peer ton sold and reducing the volume of waste mat-

ter (largely ash) hauled long distances, s'nould benefit the internal Yugo-slav economy and improve its cornmetitive oosition in exiort markets. Attach-ing the washery to the largest, lowest-cost mine with a diversity of coalseams, aD?eared more desirable than an altern.ative site (Breza) under con-sideration. At the latter, less assurance of adequate sup.olies existed be-cause the mining was from undoerground workings of more limited ca:...cityreouiring c. larger working force and inv-olving higher real costs. Thrther-more, the 3anovici mine appeared to offer greater promise for future ex.an-sion, if required. mhe other coa.l.mines being financed appear to haveF.ufficient coal treatment capacity installed or under construction (Kakanj,

Kolubara) relative to requirements.

A detailed description of the coal mines and the washery to be financ-

ed, follows.

- 15-

II. COAL MI"TYIG

i. Aleksinac

Location:- In eastern Serbia north of Nis. The mines are located on the

main railway line, Belgrade-Nis-Skop1je.

Type of Coal:- Brown coal.

Reserves:- ADoroximately 25 million tons.

Analysis:- Moisture 17 - 23%; Sulphur 4.2 - Lk-5%; Ash 14 - 19%; heating

value, 4,270 calories Der kilogram (7,686 BTTJ per pound).

Production A c t ua 1 s t i m a t e d1948 ' 1949 ' 1950 1951 1 1952 1953 195K

'ca-acity(l,000 M tons) 291' 251 ' 273 2 66 t 280' 20' 480

Marlkets:- Serbia is a deficit coal area and it needs in excess of the pro-

duction from Aleksinac and SenjskD Resavski are suiilied by long-haul railtrans;ort from Bosnian coal f4elds. Main present customers are rail2vaysand the Bor mines. Newi; refractory plants nearin" completion will provideadditional markets, but displacement of Bosnian coal is also likely.

Labor:- M!d-1952 mine employment 1las 2,400 and is exrected to decline to

2,050 by 1955.

Power:- Pow.er is obtained from Aleksinac thermal povwer plant, whose capacity

is adequate to meet probable increase 'n consurotion.

Improvements to be Undertaken:- New shafts now being sunk to concentratehoisting operations. Nei. mine conveyors and battery locomotives to speedup mine transport. Present washing capacity adequate to treat expectedincrease in output.

Investments to Date and Foreign Exchange Requirements:-

Expressed in 000 Dollars Equivalent.

Foreign ExchangePannents made Requested

To June 30, 1252 Required to Complete after June 30,152 from I3RD

Localcurrency 4,998 2,002 -

Foreignexchange 366 180 5 175

- 16 _

List of Goods to be Purchased with Proceeds of IBRD Loan:-

Amounts$tems 0oo0 U.S.)

- ripes and Accessories 30- Seamless pipes 24- Conveyors and parts 8- Two conveyors 6- Electric motors 13- I'SCH' sets 2- Electric motors 7- Pneumatic Hammers and Parts 7, Mine conveyors 49- Battery locomotive

Total 175

Tlese goods have alreaedy been contracted for in France, Germany,and the United Kingdom.

Justification: While output per man shift is relatively low, the Serbianmines enjoy a transport advantage, nearness to market. Exoansion ofSerbian mines frees Bosnian coal for use in Bosnian industrial exoansionand for shipment west to Slovenian and Croatian deficit areas. Expan-sion of production will enable fuller use of existing washery, facilitiesfor which are not adequate in Bosnia. Assists in raising foreign exchangeearni,ngs from copper and refractory exports.

- 17 -

Ii. SenJsko Resavski

Location:- In Eastern Serbia, near Cuprija north of ITis and Aleksinac.

The mines are connected by narrow gauge line to the main Gelgrade-

Nis-Skoplje railway.

Type of coal:- Brown coal.

Reserves:- Approximately 15 million tons.

AAnalysis:- Moisture 21 - 225%; Sulphur 1%; Ash 15 - 20C; heating value

.3,700 calories per kilogram (6,660 BTU' per pound).

Production A c t u a 1 E s t i m a t e d1248 1 1949 ' 1950 ' 1951 t 1952 ' 1953 ' 1955

(1,000 lI tons) 377 ' 347 ' 387 318 ' 330 ' 360 520I t , I I

Markets:- Similar to Aleksiiiac, but lower sulphur content as mined elim-

inates need for washing; dry screening is practised.

Labor;- Employment mid-1952, 2,618, but is expected to declilne to 1,820.

Power:- Power is suplied from a thermal plant at the mines and another

in Cuprija, both interconnected wiith other Serbian power plants.

Improvements to be undertaken:- A new pit is being oopened by means of

an adit, requiring drilling equipment, conveyors and other transport

equipment and rel&ted equipment, Efficiency will be greater at new pit

because of more modern equipment and elimination of hoisting requirements.

Investments to Date and Foreign Exchange Requirements:-

Zxoressed in 000 Dollars Equivalent

Foreign ExchangePayments made Requested

To June 30, 1952 Required to comilete after June 30,1952 from IBRD

Localcurrency 4,115 1,536 _ _

Foreignexchange 462 283 100 183

- 18 _

List of Goods to be Purchased w'ith Proceeds of IBRD Loan:-

Amc rn tsItems ($000 U.S.)

- Electric mine drills 29- Winches 2- Conveyors 38- Electrical equi3ment for conveyors 11- Spare parts for drills 13- Spare parts for drills 17- Stationary compressor 21- Seamless tubes 30- Battery locomotive 22

Total 183

Justification: See Aleksinac.

- 19 -

iii. Kolubara

Location:- The coal fields are located aoout 30 miles southwest of 3el-

grade. The-y are situated south of the Sava River and on both sides of the

Rolubara River. Underground pits now in oper.: tion are now connected by the

narrow gauge lines Arandjelovac-Lajkovac-Belgrade. An adc6itional connec-

tion is olanned from the new open-cut sites to the railroad line Sabac-

Obrenovac-Kolubara.

TXme -if operation:- Present mining is largely unCerground, but open cast

mining on a small scale started in the summer of 1952. When the excavating

equipment is delivered and assembled, overburden removal can be accelerated

in preparation for solely open cast mining. The older underground pits will

be abandoned gradually.

Reserves:- Reserves are estImated at 1,000,000,000 tons, of which about

250,000,000 are suitable for open-cut oneration. 0pen cast mining for the

next decade will be concentrated largely on Field A (4 million tons) and

Field B (21 million tons).

Analysis:- The coal is liniite, of the following average comoosition; total

moisture, 50 to 54%; total sulphur, .26 to .75'%; ash, 5 to 145; heating val-

ue, 2,146 to 2,606 calories per kg (3,863 to 4,691 3TU per pound). Proces-

sing in the drying olant financed by the first I3RD loand will reduce mois-

ture content to 18%' or less, raise ash to 9 - 12p with a kg. caloric content

of 3,350 - 4,000 depending on the degree of dry,ing.

Production:- A c t u a 1 s t I m a t e d

19L48 T94 9 1950 1951 1952' 1953 1955capacity

(1,000 M tons) 385 430 474 424 450 700 2,400

Market:- The undried fines wtould be used at ne. rby pow.er clants, while

the dried lignite would be used for transoort industrial and household

consumption. Among the likely industrial users are the new Sevojna brass

plant, the glass plant at Paracin (financed by thn first ITRD loan), and

several ceramics plants. Large shipments of lignite now mede from the

Kreka mine near Tuzla, 3osnia cotld be eliminated.

Labor;- Present employment including those engaged in preparatory work

for open cast mining exceeds 1,500. Capacity production in 1955 (over

five times Dresent output) would require no net addition to the labor

force, although different skllls will be required.has

Power:- HTearby power plant (Vreoce)/adequate capacity to meet needs, in view

of interconnections Aith other Serbian nower plants.

Improvements under way:- Preparation of open pits for large scale mining

with bucket wheel dredges and the use of drag lines for coal extraction

are contemolated. Some of the equi-oment had heen delivered in the summer

of 1952, when a staff member visited the mine, but all had not yet been

comoletely assembled. Most of the necessary equipment was arranged for

20

under the first IBRD loan. The supplemental amounts under the presentproposal are for additional transportation equipment.

Tnvestments to Date and Foreignr. 3xchange Requirements:-

Exoressed in 000 Dolle.rs Equivalent.


To June 30,1952 Required to Complete e.fter June 30,1°52 from I3RD

Localcurrency 6,094 5,265 - -

Foreignexchange 5,168 563 201 367

List of Goods to be PurchaseC; with Proceeds of IBRD Loan;-

AmountsItems ($000 U.S.)

- Tracls and Track Accessories 156

- Steam Locomotives and Cars 209

- Cutters 25

- Tractors and Parts q

- Gross 393

Less Payments Unallocated 26

i-et total 3,67

These goods have alre.ady been contracted for in France and Germany.

Justifications:- The dried lignite product will displace Bosnian lignite

and brown coal, now hauled 300 'kilometers or more to Belgrade and other

Serbian destinrtions. Its delivered cost in central Serbia will be perhaps

$6 psr ton or at least 25% less than the cost for equivalenrt heating value

in Bosnian brown'coal or lignite.

- 21 -

iv. Kostolac

Location:- In Serbia, 70 kilomaters east of Belgrade on the south bankof the Danube. Shioments to Belgrr.de and other areas are mabnl:: b water,but the mine is also situated on1 the Belgrade-?ozarevac railway line.

T;,e of oneration:- Lignite coal mined by open -pit and uncderground methocs.

Reserves:- 150 million tons in open cuts anc a few- million tons in under-ground mirnes.

Analysis:- Low grade uiwashed lignite used mainly for thermc.l power stat-ions, cont-ains about 50% moisture, 10/<) ash and about 4; sulphur. Heating

value anproximates 2,000 calories per kilo-ram (3,600 BTU per pound).

ProductionA e t u a I T s t i m a tu e d

1948 1949 1950 1951 1952 1953 195Scape.city

(1,000 M tons) 618 678 736 690 700 700 1,200

Markets;- Thesc- mines supply coal to fuel the 3elgrade and Kostolac thermal

stations, which are part of a netWork suoolying other imp,)ortant installa-tions including the Bor cop-per mines. Part oJ' the production is also for

household use. As in the case of Kolubara, part of the contemplated increasein outiout will Olisplace long haul Bosnian brown coal and lignite. Because

of its low calorific value, Kostolac lignite cannot be economically shipned

great distances; hoviever tliere -s a large nearby market which can be sup?pliedby cheap river transoort, including large -pover plants sipecially equippedto use low quality lignite.

Labor:- Mid-1952 employment was 1,558. By 1955, when the open pit opera-

tion is exn)ected to be in full oner-tion, a larger -oroduction is to be ach-

ieved with less than 700 men.

Power:- Obtained from adjacent Kostolac thermal station vhose exoansion

is also to be financed under proposed loan (see I above).

Imorovements Under iay:- A substantial amount of equinment was ordered

earlier, including drag lines and excavators,The equioment pronosed for IBRD

financing includes supolementary mining and transport equipment. The new

equinment is due to arrive in 1953 and should facilitate the strinp]ing of

overburden preparatory to increasing output.

Investments to Date and Foreign Exchange Requirements;-Exoressed in 000 Dollars Equivalent

Foreigh ExchnngePayments made Requested

To June 30, 1952 Required to Comolete after June 30,1952 from IBRD

Iiocalcurrency 2,716 1,302

Foreignexchange 1,071 87? 314 563

- 22 -

List of Goods to be Purchased with Proc--eds of IBRD Loan:-

Amounts

Items ($000 U.S.)

- Steam Locomotives and lJagons 521

- Track Accessories 30

- Shovels parts 27

_ Gross 578

- Unallocated Payments 15

--iet total 563

been.These goods have alr2ady/contracted for in France and Germany.

Justification:- These exranded open pit mines will increase production,

and reduce manipower requirements resulting in cheaper coal for major Dower

stations in Belgrade and the vicinity east of it, As in the case of

Kolubara, its outpUt will, in part, displace low grade Bosnian coal hauled

over 300 km at high cost to the national economy.

_. 23 -

v. Banovici

Location:- The Tito-Banovici brown coal field is about 30 km southwestof Tuzla, 3osnia. They are connected by narrol-gauge railway with acoal separation plant at Litva, and are also connected through the stEnd-ard gauge line Vinkovei-Broko-Zivinice-Litva to the main Belgrade-Zagrebline.

T:e of 0peration:- At present four ooen cast and two underground minesare ooere.ted. A new! underground mine is being opened and several newopen pit workings are bein- prepared for mining.

Reserves:- Total reserves at thi.s f4eld are estimeted at 300,000,000metric tons, of which about 80,z are suitable for ooen-cut mining.

Production: -A a t u a 1 E s t i m a t e d

1948 l1949 1950 191 1952 1953 1955capacity

(ooo M tons) 801 850 1,033 1,318 1,450 1,600 1,,900

Analysis;- See Banovici washery project.

power:- Electric power is obtained from the Bosnian grid, supolemented bya standby Diesel unit of 600 kw: capacity. A 2,500 lnk st tion at Banoviciwas completed in 1952.

Markets:- Coal is shipoed eastward to SerbiE L.nd. westward to Croatia andSlovenia, and for exnort to Austria and Wesstern Germany. Stocks of run-of-mine coal were accumulating, siince mining cepacity exceeded-screeningcapacity at existing facilities. For this reason a washing project to im-prove coal cwuantity is Droposed.

Labor:- Local labor force i;cluOing shops and tra.nsport is about 3,300, ofwhich about 2,200 are engpged in mining 1'roper. Total lebor force is notexpected to clhange greatly. Outout per worker is the highest in Yugoslavianmines, because of the excellence of the seams and the large proportion ofopen-cast production to tote;l out-ut.

Improvements Under Way:- This mine wa:s visited by a staff member in thesummer of 1952. Tne open cast equ5pment appeared efficiently ran and itwas evident that as additional equi.om3nt, financed both by Export-ImsortBank and. the I3RD loans arrived, production could be further expanded. Theshovels to be fine.rced are essential to increased output. As noted abovescreening cap city is inaclequate to trsat the full mine output, resultingin accumulations of unscreened coal, unsaleable excent at lower prices.

- 24 -

Investments to Date and Foreign Excha:nge Requirements:-Eypressed in 000 Dollars Equivalent.

Foreign ExchangePayments made requested

To June 30, 1952 Reauired to Complete after June 30,1952 from IBRD



Requirements for the washery are shown separately elsewhere.

List of Goods to be Purchased with Proceeds of IBRD Loan:-

Amounts

Items ($0O0 U.S.)

- Electric Shovels 324

- Drills 14- Rubber cables 12

- Seamless tubes 28378

Less Unallocated Payments 24

Total 354

The goods listed above have been contracted for in U.S.A., U.K., France,Belg,ium and Western Germany.

Justification:- This is the largest, lowest cost coal mine in Yugoslaviaand 4s very efficiently operated. It is counted uoon as a major supolierfor the exoort trade. The new equiptent should further reduce real costs.As indicated abo-ve, a washery oroject at the mine to imnrove quality andreduce trans6ort costs involved in shipments to domestic and foreign mark-ets would further Imorove its comoetitive ;,osition and greatly benefit the

Yugoslav economy'

- 25

vi. Kakanj

Location:- The Xakanj mine is ppart of the Central Bosniar- brown coalfield, located in the Bosna River Valley, extending in a southeast oir-ectio;i from Zenica to Sar&jevo. T'he coalfield, largest of its kind inYugoslavia, occupies an area of 900 sq.uare kilometers. The Sarajevo-Vrpolje line, which conrects with the Belgrade-Zagreb-Ljubljana raillwayline, passes throu;gh 3osna Valley, e.nd connects with the three mines nowbeing vorked - Breza, Kaisanj and Zenica.

Tyve of Operation:- Mining is carried on at four underground poits.

Reserves:- Over 200 million tons of brown coal.

Production A c-t u a 1 E s t i m-a t e d1948 194a9 1950 1951 1952 1953 1955

caac i ty

(1,000 N tons) 512 568 636 611 640 700 1,150

Analysis:- Raw co&l as mined contains 27% ash, lO, moisture, and 1.65%sulphur; heating value 4,450 calories oer kilogran (8,010 BTU per pound).Present washery reduced sulThur below l.5>, moisture to 8 - 9c and ashbelow 25% on the average, and rai'ses heating value about 81%6. iNew we.shery(2,400 tons per day) will make further improvement possible.

Pover:- Obtained from Bosnian grid, largely from the Zeneca thermal station.

Markets:- 56% of the coal sales are to destin-ti.ons 1ithin 200 kilometersof the mine. This rmine will supp,ly brown coal ,'or the colleries at Lukavacand Zenica.

Imnrovements under way:- lNew shafts hcve been sun': end work, is under wayconnectiing t'hese shafts with working galleries to reduce -resent longunderground haulage by concentrL tinv hoisting at fewer lhafts, betterlocated for future m4ning o,oerations. Washery und3r construction alsobetter located and will have ample capacity,

Investments to Date and Foreign Exchange Requirements:-Zx:ressed in 000 Dollars Equivalent

Subsequent RequiredTo June -0, 1952 Required. to Comn,lete ?ryments from IBRD



_ 26 -

List of Goods to be Purchased wjith Proceeds of IBRD Loa.i:-

AmountsItems ($OOC U.S.)

_ Sea.mless tubes 35_ Miscelle.neous items 28

63

Justification:-The expe.nsion of brov-n coal out'wut at Kakan;, producingthe best type of such coal for coking purposes, is necessary to assist inmaking possible substantiU.l im.nort savings on coke. Nevi wEishery will fur-ther imorove quiality and perm.t larger tonnage to be mined and sold.

^ 27 O

vii. Zenic,

Location:- Part of the Central Bosniar brovn co..l field (see XakanJ).

Ty-Oe of Oneration:- Underground. mining by 4 shafts.

Reserves:- 75 million tons

rroduction

A c t u a 1 :4 a t i m, a t e d194 8 - 1949 1950 1951 1952 1°53 1955

ca-oacity

(O0O .-I tons) 394 404 432 399 420 440 56a

Analysis:- Raw coal contains 14% moisture, 28% ash and 3,5% sulohur; heat-

ing value 3,770 calories per kilogram (or 6,680 3TU per pound). Screeningand washiing at the mine reduces ash below 20% and raises heE.ting value 10-

15%. Fines with higher ash content are used at adjacent thermal po.rer

plant.

Power:- ?o*:er is sup;:lied. by adjz;.cent therm-.l ooter plant interconnectedwith Bosnian grid.

Markets:- 85 - 90% of coal is sold to thermal mower pl- nt,Zenica steel wior;zs,and railroads with minimum haulage.

ImTprovements Under Wa-;:- New shafts have been sun!c severcl miles away toafford better access to remnining coal reserves, to re.,l..ce ex.mected declinein output from nresent shafts, with only sllall net ex,..nsion in outout ex-:pected. -resent mashery ca:oacity amole to treat anticim&ated capacity out-put.

Investme..nets to Date and Foreign Exchange Requ;.rements:-Exzressed in 0oo D ollar Equivalent


To June 30, 1952 Required to Comnlete after June 30, 1P52 from IBMDLocalCurrency 4,415 1,583ForeignExchange 530 122 34 88

List of Goods to be Purchased with Proceeds of I3P.) Loan;Amounts

Items l.•Doo U.S.)

- Conveyors 10E Electric Locomotive 17

- Seamless tubes _Gross 94Less payments unallocated 6

,T_, 4. ^+ 8 -

- 28 -

iJustification:- This m4.ne hac ample weshing caoacity to treat a largeroutput, which is to be ach..eved bay comoleting new, more accessibleshafts. Bulk ofI output sold to consumers :wiithin 10 kilometers of mines,minimizing transport requirements.

- 29 -

viii. Kreka

Location:- The Kreka coal field. is in northern 3ornia near Tuzla. It ex-tenids westvtard alon-g, the Spreca River from Zvorniik to Gracanica for adistance of 55 kilometers, and has a total area of 255 square km. Thefield is connected with the narrow-gau.ge Tuzlz-Doboj line, and v?ith thestandard-gauge line Breko-Banovici, which in turn connects vwith the Bel-grade-Zagreb line.

Type of Operat.2on:- Underground mining at numerous shafts, both inclined

and vertical. Ne-j pits are being opened to minimize underground haulagewhich is not mechanized.

Reserves:- Total reserves in the field are estimated at four thousandmillioni tons, of which two thousand million tons are in the area 1where thepresent pits are locatedi.

Analysis:- The comnosition of the Kreka lignite is: moisture 30-351:;sulphur 0.5 - 0.Z; ash 8 - 20%; heating value 2,200 - t,300 caloriesper kg (or 3,960 - 5,940 BTU per pound).

ProductionA c t u a 1 E s t i m a t e d

1948 1949 1950 1951 1952 1953 195

(000 I. tons) 870 1,157 1,291 1,184 1,400 1,550 2,150

Labof:- Mid-l952 emnloyment 5,507, of whom 700 were em)loyed in auxiliaryoccupations, e.g. washcry, shops, etc. Mine emoloyment is exoected todecline by about one-third when underground transport is fully mechanized.

Power:- ?oller is obtained from the Kre'ka and Banovici poower stations.

NWrkets;- 'hile considerable quantities are sold to chemical plants nearby(Lukavac soda ash and i(rek.ca salt), large quantities h;ve been shioped toSerbia anc'. the Voyvodina. This wasteful haul will be reduced when Kolubaraand Kostalac n-nes exoand outout. Increased demand for Kreka lignite isanticioated from L-ukavacs (soda, ash expansion) and the Lukavac and Zenicacokeries which ere much closer at hand.

Imorovements Under "lay:- Hoisting operations conclucted at &ppiroximately20 points are to be coancentrated at a smaller number of points. Under-ground trmns?ort is being rechanized by use of conveyors to main haulageways, where electric locomotives will carry coal to hoists. Much of thisequipment has been ordered and committed previously. Very extensive localexpenditures for surface works to handle this concentrated tonnagse wereevident to a staff mern,bsr who visited the mine. Reductions in la-oor require-ments should be considerable.

l 30 -

Investments to Date and Foreign Exchange Requirements:-Expressed in 000 Dollars Equivalent

Foreign ExchangePayments made Reqcuestedo

To June 30. 1952Reaulred to Complete after June 90, 1,52 from IBBID

LocalCurrency 15,268 5,973 - -

ForeignExchahge 1,498 152 55 97

List of Goods to be Purchased with' Proceeds of I3RD loan;-

Amounts

Items ($000 U.S.)

- Locomotives 314

- Seamless tubes 63

Total 97

Justificatioa:- This mining area reoresents a major source of coal res-

erves, whose opprztion can be greatly expanded and costs (especially labor

r,quirements) conisidercbly reduced by mechanization of underground transnort.

Substantial exoenditures have alr-ady been made or committed both in foreign

exchange and local currency. Gro':;in? demands for lignite nearby will im-prove

competitive position and benefit Yugoslav economy,

- 31 -

ix. Washery - Banovici

General:- The Banovici mine, its reserves, production, labor and competitiveposition has been described in v. above.

Present Coal Treatment Facilities:- Dry screening capacity is only 1.2 r1il-lion tons, or.about 80% of 1952 output and only slightly above 60% of esti-mated 1955 capacity.

Alternative Policies:- In the past year unscreened coal has accumulated atthe Banovici mine,.because its price has been kept high relative to screenedor washed coal. It would of course be possible to sell the untreated coalby reducing the price sufficiently to make it more attractive than other sup.plies offered to ownsumers. In fact, such price reductions for export have beenmade by reducing tax obligations on the Banovici mine on export sales. As along term measure this policy however would be undesirable because it involveswaste of economic resources,

Since much of this coal is hauled. a considerable distance to Serbia,Croatia and Slovenia, the freight factor is of considerable iriportance..

More screening capacity would not appreciably imlaprove quality but merelymake grading more uniform and thereby improve consumer acceptance.

A washery installation, however, would, by reducing the volume to betransported and increasing the average he. ting value make possible importantfreight and consumption economies.,. It is largely for this reason, that thewashery project at Benovici, already under study but not included in the KeyProjects krogram vas reviewed by staff members.

An analysis indicated that a washery would eliminate 11% by weight butretain over 98% of the heating value in the total coal treated. Two productswould be.made, 1) a higher quality brown coal having 18% more heating valuewhich would be shipped to distant points within the country and for export,and 2) a miidling product with only 62% of the raw coal heating value to beused at adjacent and other nearby power plants best equipped to i4se thisfuel to advantage,

The sitp of Banovici gas chosen in preference to other sites because ofthe araple reserves, the large current production at relatively low costs adiversity of coal types, and scope for further output expansion when requiredq

Costof the Wahe The project for a washery is estimated to involve atotal costof 3,33,000 (equivalent) as followst

Subject Foreign Exchange Domestic Exchange Iotal

Rails, etc, 33,000 33,000Buildings and construction

works v1,300,000 1,30.0,000Separation plant 2,000,000 - 2,000,000Accessory equipment - 200,000 200,000

Total 2,000,000 1,533,000 3,533,000

- 32.

The domestic expenditures are for 1) railway spurs to the proposed plantsite, 2) the buildings and storage facilities required for the washery, and

3) for auxiliary equipment. The auxiliary equipment will be locally cons-tructed as well as the equipment for switching railway cars, coke weighingscales and the conveyor system for the separation plant.

The foreign exchange cost estimate is based on estimates received fromtwo contractors before December 1952, but other bids are also expected. Theestiiate of $2 million (equivalent) is for plant treating 2 rnillion tons peryear, on the basis of 3,300 tons per .8 hour shift. The plant would be ope-rated 2 shifts per day for an estimated 305 work days per year.

Flow Sheet:- line run coal delivered at the washery vwould be fed from bins toa crusher which would reduce all coal to 450 mm.(18 inches) or less in dia-meter. Conveyors would take crushed coal to screens where classificationabove and below 60 mm.would be effected. The larger sized screenings wouldbe sent directly to washing plant for separation by heavy media (probablymagnetite). Clean coal is then sent to bins for loading, while the semi-clean coal is further crushed to a rmaximum of 60 mm.diameter and then classi-fied as between above and below 10 mm.

The larger size is then again washed with heavy media, and then separatedinto clean, semi-clean and waste coal. 'he clean coal would be sized accord-ing to market needs while the semi-cleaned is crushed to 10 mm. size or lowerand added to the fines previously classified.

Power Water and Labor:- Power requirements estimated at 2.5 million kwh peryear are obtainable from the adjacent Barovici thermal plant to which coal

is now supplied.

The river Oskava nearby would furnish the necessary water.

Labor requirements are estimated at 52.

Production: Of the total input of 1,900,000 tons of raw coal, final productswould be 78% (1,482,000 tons) of clean coal, 11% middlings (209,000 tons) and

11% waste. The following table gives a comparative analysis of heating valuesand impurities in raw coal and marketable products:

Total% by W.eight Calories/kg Calories Ash Moisture

Raw Coal 100 3700 3700 26 19Marketable froducts

Clean Coal 78 L360 3401 13 20Middling (Fines 11 2306 253 40 20Viaste 11 _

3 6"5

- 33 -

Justification:- Yugoslavia's econom. would benefit by a reduction in tonnagehauled of about 200,000 tons an average distance of about 250 km. or 50 mil-lion ton kilometers per year. Since coalcQnsumption by railways per ton kilo-meter (including allowance for passenger travel) approximates 1 ton of coalfor 3,000 ton kilometers, fuel savings per year alone would approximate 17,000tons of coal. In addition, rolling stock and labor requirements are consi-derably reduced. From a monetary standpoint, at present freight rates, thesavings would exceed 210 million dinars (U700,000 equivalent)..

34 -

III. NON-FERROUS 1tETALLURGY

i. Strnisce Aluminum Project 2/

Location

Strnisce (which means stubble-field) is located in Slovenia nearthe Austrian border about 21 kilometers south of I-laribor. It is served by

a standard gauge railroad and good highways. The site, whlich was selectedby the Germans during the war, has ample room for future expansion. Thereported reason for the selection by the Germans wJas the coordination ofproduction in the Slovenian, Austrian and Hungarian areas using eitherHungarian, Austrian or Yugoslav bauxite.

Description of the Plant

Construction of the project was started by the Germans in 1943 anddiscontinued in 1945. The Yugoslavs resumed construction in 1947 and havecontinued to work on it since that date. The project when completed willproduce both aluminum oxide and aluminum. Aluminum oxide or alumina isproduced from bauxite. Aluminum is made by dissolving alumina in cryoliteand then separating the metal from the oxygen in the alumina by electroly-sis. Two tons of alumina are required to produce one ton of aluminum.

The project was originally designed to produce 100,000 to 120,000tons of alumina (depending on the type of bauxite used) and 30,000 tons of

aluminum annually. 2/. Because of the high foreign exchange cost ofequipping the plant to produce these auantities of alumina and aluminum,and to obtain the amount of powrer required, a decision was made to equipthe plant at present for only half of the original design, although mostof the buildings have been constructed to house equipment for the largerproduction. As the annual production of only 30,0CO tons of alumina, theamount requ4red for the output of 15,000 tons of aluminumt would be toosmall to be economical in this plants the alumina plant will be equippedto produce 60,000 tons of alumina and the surplus will be exported. Inthe second phase, the aluminum production will be increased to 30,000 tonsannually and the entire alumina production will be consumed.

Both the alumina and aluminum plants, which were designed byDr. IJilhelm Fulda, a recognizecl German authority, will have the latestmodern equipment includingt in the alumina plant, the Tower-Sinter processfor digesting bauxite, and in the aluminum plant, vertical stub Soderbergelectrodes wJith gas and fume collectors. Brown coal will be used to

1/ This summary is based on a rerort dated August zb, 1952, prepared byIlr. D.H. MIlson, consultant to the Bank on the Aluminum Industry inYugoslavia.

As only 60,000 tons of alumina are required for this production ofaluminum, the Germans planned to ship the surplus alumina to otherparts of Europe.

- 35 -

produce process steam and lignite will be used to make producer gas fordrying bauxite and calcining alumina, A small power plant of 7j,500 kwcapacity will be operated on the process steam and will be used to supplya part of the requirements of the plant. A townsite about 1 kilometerfrom the plant will provide housing for a large part of the permanentoperating staff. According to the Bankls consultant, the plant is welllaid out, the construction work was well done and the equipment in placewas satisfactorily erected.


In the two years in which the Germans worked on the project, theycompleted about 13 of the total construction and installation planned.This work included a substantial part of the required roads, railroads,storehouses, work shops, about 35% of the alumina plant, about 20% of theauxiliary buildings, power plant and gas producer plant, but they did nowork on the smelting plant or townsite. When the Germans retreated in 1945they reportedly took with them over 40 carloads of small equipment such aspumps, motors, instruments, etc. The Yugoslavs resumed work on the pro-ject in the fall of 1947, but progress was disrupted in 1948 by the breakwith the Cominform when equipment ordered from Hfungary and other Satellitecountries was not delivered. Lack of foreign exchange since 1949 has

delayed purchase of equipment to replace that ordered from Satellitecountries. In July, 1952, the project was about 52% completed over-all.Completion ranged from 25% for the smelting plant to 73% for the aluminaplant. The projected date for the completion of the entire plant is theend of 1953. This appears to be overly optimistic to the Bank t s consultant.A more realistic date would be 6 or 8 months later.

Raw 1:laterials and Fuel

Large proven deposits of bauxite, the principal raw material foralumina are located in Yugoslavia within 300 kilometers of Strnisce. Ata production rate of 60,000 tons of alumina annually, for which 120,000to 130s000 tons of bauxite will be required, the proven deposits wouldlast 35 years. There are other deposits and unproven reserves in Yugo-slavia which would provide several tirmies these required tonnages. Coal and

lignite mines located less than 100 kilometers from Strnisce are capableof supplying the fuel requirements of the plant (175,000 tons annually) foran indefinite period. Other materials required in relatively small quanti-ties such as soda ash, limestone, lime, are all available domestically.Cryolite, Soderberg electrode material and pot lining materials, whichcomprise 10 to 120 of the cost of aluminum, must be imported.

Electric Power

The power demands of Strnisce are estimated to range from 45,300to 49,600 fw of which 38,500 to 42,800 kw or 85% will be for the smeltingplant, 5,400 kl for the alumina plant and 1,400 kT fQr the towmsite. Thesmall power plant at Strnisce will normaLly carry 2,500 lak of the load.

The remainder of the power or an average of about 45,000 kw will beobtained from the Slovenian-Croatian network. This network in July, 1952,had a firm or assured capacity of 194,200 kw. Between August, 1952 and

- 36 -

early 1954 when Strnisce's demand will come on the network, the firm

capacity of the system is scheduled to be increased by 72,000 klw from

plants now under construction. Additional lhydro and thermal capacity is

also scheduled to be added in 1955, 1956, and 1957 to provide for the

growing demands of the region.

In spite of the growing demands on the network, an analysis of the

power development program indicates adequate power will be available for

Strnisce and all other demands in the region. HoweverS even if the capaci-

ty is not added as rapidly as scheduled, there is a large factor of safety

in the fact that the Drava River has its low water season in the winter as

it rises in the Alps, whereas the other rivers in the system (the Sava,the Soca, the lKupa and Licanka) have their low water seasons in the summer

as their head waters are all in the Nediterranean Basin. This inversion

of low water seasons could supply as much as 50,000 kw in firm power under

the most favorable conditions.

The energy generated by the plants in the system totalled 1,140million 'kilowatt hours in 1951. The generation is estimated to increase

to 1,800 million kwh by 1954 and to 2,130 million kwh by 1955. Strnisce's

requirements for 60,000 tons of alumina ard 15,000 tons of aluminum are

estimated at about 380 million kwh annually, or about 205's of the total in

1954 and about 1753 in 1955.

Water Supply

The water supply for the plant and toimsite will be obtained from

wells. Four wells have been drilled to 25 meter depth ard they will have

adequate capacity for the full requirements of the ultimate capacity of

the plant. For the initial phase, there will be a surplus capacity.

Transportation Facilities

There are ample switching spaces and marshalling yards both inside

and outside the plant site and the main railroad line is double tracked

for about 2 kilometers where it parallels the plant. Most of the roads in

the vicinity of the plant are wvell built gravel roads. The road from

iWaribor to Ptuj is paved. The transportation facilities are therefore

considered satisfactory in all respects.

Labor and IJanagement

The labor force estLmated to be required for the initial phase

of production at Strrisce is 1,271, including the toJvmsite. At present,

there are 1,440 engaged, on construction and installation work, Some of

these will remain as a part of the permanent operating staff. There is an

ample labor pool in the area to supply the remainder required.

Host of the technical operating and managerial staff is yet to be

recruited, but the nucleus of these staffs now at the plant appeared, to

the Bank's consultant, to be competent and confident of their ability to

operate the plant. The Chief Engineer worlced under Dr. Fulda who designed

the plant. As both alumina and aluminum are being produced in Yugoslavia

- 37 -

at present, it may be assumed that there i-s sufficient technical slill inthe country to solve most of the operating problems which might arise.Problems which might arise in starting up the plant will, in general, betaken care of by the equipment suppliers who are committed to send theirspecialists to Strnisce to start operations and to train Yugoslav operatorsC-erman consultants familiar with the Tcower-Sinter process (wh1ich is in useat Lunen, Gennany) are also available.

Production Costs

To obtain an approxinate production cost, the Bank's consultantmade estimates based on man-hourss export and import prices, shippingdistances and probable operating efficiencies. On this basis, he was ofthe opinion that production costs (exclusive of capital charges) would bereasonably well in line with published American costs and competitive withEuropean producers in plants of similar capacity.

Cost of the Project

The cost of the plant with a capacity to produce 60,000 tons ofalumina and 15,000 tons of aluminum is estimated to be the eouivalent of$58,315,OO0. Of this, about 30% or 518,122,000 will be for imported goodsand services. The total cost, however, includes buildings, foundation,etc., for a capacity of 100,000 tons in the alumina plant and rectifiersfor 30,000 tons of aluminum in the smelting plant. A breakdovm of thecost showing the expenditures to the tlhird quarter of 19-2 follows:

enditures Expressed in Thousands U.S. DollarsEquipmen

Period Construction Domestic Imported Installation Total

To Third fluarter,1952 20,023 4.,715 13,215 1,769 39,722Tb complete 6,227 2,316 4 907 4,878 18,328

-26,250 7,031 TFfi2 6p647 58--05

of the $4,907,000 in foreign exchange required to complete theprQject, $3,736,000 is desired from the Banlc and $1,171,000 would be fi-nanced through the German Loan.

List of Goods

The proceeds of the Bank loan would be expended for payments forequipment and materials for the various divisions of the plant. About60% of the equipment is under contract.

_ 38 -

Department Amount

Alumina Plant

Crushers $ 54,000Conveying equipment 42,000Hoists and traveling cranes 69,000Autoclaves and accessories 86,oooI'lachines and auxiliary equipment for alumina production 1998,000

Smelting Plant

Transformers 300,000Electrical control equipment 520,0coTransformer oil 31,000Aluminum bus bars 2344,0ooLow frequency melting furnaces 114,000Traveling cranes 4o.,o00Cathode blocks and accessories 386,000Soderberg anode materials 322,000Cryolite 194,000Aluminum fluoride 61,000Mleters and other instruments 49,000Equipment for anode plant h70, 000Cryolite recovery equipment 130,000

Laboratory equipment 20,000

Plant Auxiliaries

Railway track materials 146,000

Coal conveyors 75,000Dust removers 35,o00Ash removing plant 15,000Electric trucks for interior wrork 25,000Trucks, gasoline 4o,oooWorkshop equipment 440,000Miscellaneous small toolss pumps, motors, etc. 40,coo

$ 3,736,0co

Markets

As the capacity of the smelting plant will initially be only15,000 tons of aluminum requiring only 30,000 tons of alumina, there willbe a surplus production of about 25,000 to 30,000 tons of alumina peryear at Strnisce until the smelting plant capacity is increased. As thecurrent domestic requirements of alumina are met by domestic production,the entire surplus production at Strnisce will be available for exportinitially. At present, there is a market for alumina in Austria andpossibly in Norway and Germany, How long these markets will continue toexist is problematical. If they should disappear, the proposed increasein smelting capacity to 30,000 tons annually could consume the entireproduction.

- 39 -

Ihe current capacity for the production of aluminum in Yugoslaviais 2,800 tons annually. The domestic requirements are estimated at about5,800 tons annually. Assuming that Strnisce will supply the deficit indomestic requirements$ 12,000 tons of aluminum ingots would be availablefor export. This relatively small amount can be readily absorbed inEurope. If the export market should be reduced, there are many potentialuses for the metal which could increase the domestic consumption consider-ably. However, the long run prospect is that aluminum consumption 1illrise in Europe and Yugoslavia should have no difficulty in exporting12,000 tons of aluminum annually.

Justification

At present Yugoslavia is exporting bauxite and has exported itfor many years. It is a relatively low priced mineral and the exportsbenefit the balance of payments only slightly. The export market foralumina and aluminum is good. The value bf alumina is 13 or 14 timesthat of bauxite and 'the'value of aluminum is 65 to 70 times that of baux-ite. The net value of the exports of 28 to 30,000 tons of alumina and12,000 tons of aluminum after deducting the import costs is estimated at*the equivalent of $7,166,000 annually. This would be a substantial bene-fit to Yugoslavia's balance of payments. Furthermore, the bauxiteconsumption of Strnisce would not reduce bauxite exports as the bauxitefor Strnisce would come from a proven deposit not being used as a sourcefor exports. There is also the possibility that more domestic use couldbe made of aluminum conductors for transmission lines and for otherelectrical requirements which would free that much more copper for export.As copper brings a higher price than aluminum, this would be advantageous.

January 28, 1953

III. NON-4RROUS IMETALLUTTY

ii. Lece Lead-Zinc-Gold Itine and IIill

Location

The Lece lead-zinc-gold mine is located about 90 kilometers south-west of Nis in Serbia. It is not on a railroad, but is served by goodhighways. The flotation and cyanization mill under erection is connectedwith the mine by an overhead cableway system, about 7 kilometers long.Final products of the mill - lead and zinc concentrates and gold bullion -will be trucked 45 kilometers to Leskovac station on the major railwayline, Belgrade-Nis-Skoplje.

Description

The Lece mine was worked before World War IIU but the operationswere on a small scale. Less than 20,000 tons of ore per year were treatedin a small flotation plant. Because of the nature of the ore, flotationtreatment alone resulted in inadequate recoveries of the gold and basemetal contents of the ore. After the war, Yugoslav representatives con-sulted various firms including the Dow Company, well-known metallurgicalplant specialists in Holland, with a view to installing a more efficienttreatment plant at Lece. Tests shared that a combination flotation-cyanization plant would afford a much higher recovery of both gold andbase metals and would prove profitable.

This project was among those examined by the Bank's mining con-sultant, II. Francois ivillet, in 1949 and was highly recommended by him.Because of delays in negotiation, the Yugoalav Government arranged tofinance the project in part by use of funds under an Export-Import Bankloan.

Ore Reserves

Ore reserves in the proven and probable category are estimated at8o0,000 tons assaying 3.2/) leadp 5% zinc and 8 grmis of gold per ton. Thereare also indications that about 300,000 tons of possible ore exist, butthis estimate cannot be considered as exhausting the possibilities at Lece,since the lack of adequate power supplies in the postwar period has pre-vented a full delineation of the ore bodies in the Lece area with powerdrills.

Rehabilitation and Expansion Program

The Lece mine is to be equipped to produce ore at the rate of250 tons per day, 75,000 tons per year. At this rate the reserves will beadequate for 10 years operation. Ore is to be mined from 4 existing shaftsand the "Suta" adit. lining will be done with compressed air drills andmechanical shovel loaders. The ore will be hauled by locomotives to orebins about 500 meters from the adit entrance. From these bins, the orewill be transported by overhead cableway (7 kilometers) to the flotation-cyanization plant.

At this treatment plants the flow sheet provides for flotation toproduce a lead concentrate containing 65% lead and 90 grams of gold perton. The rejects will then be sent to the cyanization plant for recoveryof the remaining gold and the residues would then be reflotated for pro-duction of a zinc concentrate analyzing about 60% zinc. It is estimatedon the basis of tests, thiat the combined treatment of flotation will resultin recovery of 90% of the golds 65% of the lead and 85% of the zinc con-tained in the ore as mined.

Full production on an annual basis is estimated as follows:

Tons Assay per ton

Lead Concentrates 2,t400 Pb 65% Gold 90 gramsSliver 200 grams

Zinc Concentrates 5,4o.o Zinc 60%

Gold Bullion 324 Net gold production

Construction Schedule

As of October 31, 1952, Yugoslav officials report tllat the statusof completion of different parts of the program were as folloi-Ts:

11ine shaft 90,Transport to cableway 100%Cableway 100%Power station lOO1Treat.ment plant 75%Roads and housing facilities 100%J

All the mechanical equipment for the treatment plant had alreadybeen received at the site and was in the process of erection.

Power

For each ton of ore extracted and processed 50 kilowatt hours ofelectric energy will be required. The annual requirements will thereforebe about 3,750,000 kcwh. The mine is now supplied with energy from athermal plant at Belo Poije and will soon be connected into the Serbiannetwork.

Labor and Management

Labor requirements for fuull production are estimated at 382. Itis anticipated that selected supervisory personnel will be available fromother mines to assure efficient operations. Arrangerents have also beenmade with the equipment suppliers for technical assistance in operatingthe flotation-cyanization plant in the early stages to minimize difficultieswith the cyanization aspects. Flotation plants have been operated atnumerous other mines in Yugoslavia for at least 20 years, so that no oper-ating difficulties are anticipated at Lece.

- 2 -

Cost of Production

On a conservative basis, using higher tlhan average wage rates,depreciation calculated on a ten year basis and ample allowances for othercosts, the over-all cost of production and processing is estimated atabout the equivalent of $13 per ton. The net value of the products ob-tained from a ton of ore should be about t15 per ton. The margin of profitshould tiierefore be about $2 per ton. If the life of the mine should beextended by the discoveryr of flurther reserves, the depreciation costs wouldbe lower and the over-all costs somewhat less than 513 per ton.

Cost of the Project

The total cost of equipping the mine and mill i3 estimated at$3,670,000 eouivalent, of which about 20, will be in foreign exchange. Abreakdown of the cost follows:

Expenditures Expressed in Thousands U.S.$Equipment

Period Construction Domestic Irmported Total

To Third Quarters 1952 2,347 285 618 3,250To complete 220 65 135 120

2,5o7 370 3,670

Ihe construction expenditures include exploration, development,shaft sinkdng and adit driving as well as construction of buildings.

Included in the $618,000 foreign exchange expendLtures alreadymade are 14140,000 from the Export-Import Bank and $178,OCO from Yugoslavia'sown resources. The amount required to complete the project, $135,000 isdesired from tne Bank.

List of Goods

All of the eauipment required for thne completion of the plant has

been on order for some time and the balances due would be paid from the

proceeds of a Bank loan. The equipment will come from Italy, Belgium andGermany. The goods and amounts due are:

Goods Amount

oil circuit breakers $ 3,000Electric motors and transformers 51,000Cables 40, 000Seamless tubes 36 000

Markets

Lead and zinc concentrates and gold bullion will be shipped by truckto Leskovac's railway station on the miain rai way line, Belgrade-Nis-Skoplj e.Lead concentrates will be smelted at Trepca lead smelter 190 kiLlometers

13.- -

distant. Zinc concentrates will be shipped to the Celje Slovenia zincsmelter. Gold bullion, if it requires further refining, will be shippedto the Bor refinery in Serbia. Lead, zinc and gold are already exportedon a large scale by Yugoslavia.

Justification

At full production the Lece mine should provide gross foreignexchange earnings of the equivalent of about $1, 200,000 with lead and zincpriced at 10 cents per pound and gold at $35 an ounce. Foreign exchangecosts for the chemicals and other supplies required to operate the flota-tion and cyanization plants and for maintenance parts should not exceed$100,000 annually.- The net foreign exchange earnings should therefore beaboutzLel million annuaUy. In addition, the mine should be a profitableventure.

January 27, 1953

*-; lJ$-_

IV. IRON LMD STEL

i. Zenica Iron and Steel Works

Location

Zenica is located on the Bosna River in the province of Bosnia andHerzegovina about 70 kilometers north of Sarajevo. Tt is on a standardgauge railway extending from Brod to Sarajevo. It is also served by main

highways.

Description of 3Eisting Plant

The original steel plant at Zenica was built in 1892. It consistedprimarily of a rolling mill, the billets for w.7hich were sent from Austria,The site was selected because of the availability of coal, water and cheaplabor. The installations at Zenica prior to World liar It consisted of the

following:

Average DateAnnual of

Equipment Capacity Production Installation

Steel Mill3 Open hearth furnaces 25 tons 25,000 tons 1898-19132 Open hearth furnaces 45 n 55,000 " 1937-19381 Electric furnace 3 " 2,800 " 1937

Rolling MillHeavy sections and rails 160,000 tons 75,000 tons* 1937-1938

Medium sections 25,000 " 23,000 " 1892-1898Light sections 25,000 " 15,000 n 1892-1913

* Including semi-rolls for medium and light mills.

The plant was damaged during the war. The wartime damage was repaired bythe end of 1947 and an expansion program started in 1948. Since that time

three new open hearth furnaces (largely from reparations) have been placed

into operation. The plant is the largest steel mill in Jugoslavia and its

existing facilities including railroad yards, shops, warehouses, employeehousing, etc. provide a good base for further exnansion.

j This summary is based on a report dated 22 September 1952 prepared byMr. J. E. Holgate, Consultant to the 3ank on the iron and steel industryof Tunnlavia.

40 45

Prewar and Postwar Production

The annual prewar and postwar production at Zenica were:

Product 1939 1946 1948 l950 1951

Open hearth steel, tons 76,569 4 49 137,304 183,754 185,155Electric furnace, if 2,800 82 1,586 2j870 1,992

Rolled products ' 54,919 28,872 117,166 99,722 130,520Wire and rods n - 6,875 9,114 9,582

The Exoansion Proaram

The expansion program now in progress is divided into two phases,

the first of which is scheduled to be completed in 1954 and the second in

about 1956. The new facilities to be installed in the first phase will

result in a fairly well integrated plant and a better balanced. production.

They will include:

Facilities Annual CapacityTons

CokeOne battery of coke ovens complete with by-productplant and auxiliaries 200,000

Pig IronOne blast furnace complete with ore handling,crushing and sintering equipment and auxiliaries 200,000

SteelFour 60-ton fixed open hearth steel furnaces withone 800-ton metal mixer 180,000

Rolling MillBlooming mill and soaking pits for producing semi-rolled products for other mills 450,000

Medium mill 150,000

Light mill 70,000Wire and rod mill 40,000

Special improvements to old mills to increase output 6o,ooo

F'orgesSeven hammer forges for light work 2,000

one 850-ton press forge for heavy work 3,000

one 5,300-ton press for railroad car wheels 7,000

AuxiliariesWater supply (3.5 cu.m. per sec.)Maintenance Shops (10,000 sq. m.)

Railway Tracks (60 kan.)O.as holder (40,000 cu.m.)Oxygen plantRiver diversion

In addition, the old rolling mill will be modernized to increaseits capacity.

The new installations will transform Zenica from a plant limited tothe production of steel iigots (from pig iron produced elsewhere) and a smallrange of rolled products to an integrated plant producing its own coke, pigiron, ingots, blooms, rolled nroducts and forgings. The gases from the cokeovens and blast furnaces will provide most of the heat requirements of theplant and by-products (tar, phenols, toluenes, ammonium sulphate, etc.) ob-tained from the manufacture of coke will provide new salable items. Theblast furnace slag will be useful on farms. At present the plant obtainstwo-thirds of its pig iron from Vares and one-third from Sisak, and uses ahigh percentage of scrap. With hot pig iron available from its own blastfurnaces, the production of steel from the open hearth furnaces can be in-creased and they will use a smaller percentage of scrap, most of which isnow imported. The new blooming mill will increase the efficiency of themedium and light rolling mills and reduce the cost of their production. Thenew open hearth furnace canacity will permit the scrapping of two old andinefficient open hearth furnaces. This will reduce steel production about70,000 tons per year but this loss will be offset by the increase in effec-tive capacities of the other furnaces through the use of hot pig iron. Theadded capacities 4n the medium, light and wire and rod mills will permitthe plant to supply more end products for domestic consumption and the forgeswill supply some new products (car wheels and tires) not now available inYugoslavia. The diversion of the course of the Bosna River will make access-ible without bridges a large tract of level land for a large nart of thenew works.

Although the main items of equipment for the expansion program arebeing imported, a considerable amount of equipment Is being produced domes-tically, especially the parts necessary for repair and Installation of repa-ration items and such items as tanks, small boilers, tubes, parts for openhearth furnaces and some electrical equipment. The imported equipment in-cludes: coke ovens from Belgium, ore handling plant from Great Britain,sintering plant and blooming mill from the United States, motors and blowersfrom Switzerland, rolling mills, wire mills, reheating furnaces, oxygenplant and other accessories from Germany and refractories and =umps fromAustria.

According to the Bank's Consultant-, the design and layout of thenew works are well conceived; the new equipment includes the latest develop-ments; that in place appears to be well installed and on the whole the plantshould, when completed, be an efficient operating unit.

In the second phase the capacity of the coke ovens and blast furnaceswould be doubled and ingot steel capacity wrould be increased by 270,000 tons.The rolling mill capacity would remain the same but production would beincreased by about 604,.

- 47 -

Estimated Production, First Phase

The estimated production at Zenica after the completion of the firstphase in 1954 is com7pared in the table below with the actual production ofthe plant in 1951..

First PhaseProduct Out-ut 1951 Output 1955Coke _ 200,000Pig Iron - 200,000Open Hearth Steel 185,155 370,000Electric Steel 1,992 13,000

Rolled ProductsHeavy Shapes and Rails 62,000 82,000Medium Shapes 30,520 70,000Light Shapes 38,080 70,000Wire and Rods 9,582 4o,ooo

Forged ProductsHammer Forgings 2,000Press Forgings 3,000Car Wheels and Tires 7,000


In September 1952, the first ?hase of the expansion program wasabout 65% pcmpleted. Some facilities will be put into operation in 1953,but the final completion of the first phase will not be accomplished be-fore the last quarter of 1954. The table below gives the percentage ofcompletion of the various sections of the plant as at September 1952 andthe anticipated completion date of each.

% Completion CompletionSection Sent. 1952 DateCoke ovens 65 4th Q, 1952By-product plant 52 4th Q 1953Blast furnace and auxiliaries 65 4th Q 1953Three fixed open hearth furnaces 100 In operationOne fixed open hearth furnace 90 4th Q 1952One tilting open hearth furnace 20 3rd Q 1953One electric furnace 15 2nd Q 1953Blooming mill 95 4th Q, 1952Soaking pits 35 2nd q 1953Existing heavy mill improvements 2nd Q 1953Medium mill 5 4th q 1954Light mill 65 4th Q 1953Wire and rod mill 5 3rd Q 1954Water supply 6o 4th Q 1953Maintenance shop 20 4th Q 1953Railways 45 4th Q 1954

The second phase of the expansion program was oni the whole about15 to 20% completed as some of the facilities in the first phase will contributeto second-phase production.

Raw Materials

All of the principal raw materials for the production of iron andsteel are available in adeouate quantities within a radius of 50 to 60 Ianof Zenica, writh the exception of coking coal. There is no coIrinr coal inYugoslavia, but there are large ouantities of brown coal and lignite anda relatively small deposit of semi-bituminous coal. The Yugoslavs haveexperinented with thie production of metallurgical coke from a combination ofthe three indigenous fuels and. have successfully produced a good metallurgi-cal coke in a small pilot plant and the Drocess will shortly be tested on acomnmercial scale in a large coke oven plant at Lucavac which has a capacityof 200;000 tons per year. If the tests are successful the process can beused at Zenica. If the coke from indigenous fuels is not suitable for blastfurnaces, coldng coal could be imported for Zenica's requirements. The i.m-portation of coal rather than coke will provide large savings in foreign exwchange. The quantities of raw mnaterials required for the existing and ex-panded facilities are shown below:

Requirements in Tons

Raw Material 1951 1955

Iron ore - 58o-oooCoke _ 200,000Pig iron 97,679 Limestone 28,600 200 000Coal (for producer gas) 119,466Scrap 102,668 170,000Refractories 8,4ao 20,000Alloys 2,382 5,000

The iron ore will come from Vares, 60 kilometers by rail from Zenica;brown coal and limestone are available within a few kilometers of the plant;about half of the scrap and refractories will be imported.


For the operation of the plant after the completion of the firstphase of the exnansion program a tatal of 6,800 wororkers will be reouired.Of these, 3,250 will be in the steel plant, rolling mills and forges,1,000 will be engaged in ,naintenance, $40 in the coke ovens and blast furnacessand the remainder 2,010 on auxiliaries, quarries, etc.

The necessary skilled personnel is being trained by the varioussuppliers of equipment, and these firms have sent engineers and key techni-cians to supervise the erection of the equipment. Some slilled workerswill be trained in Yugoslavia and others abroad. Blast furnace operators,for example, are studying in France, blooming mill operators in the UhitedStates, and coke plant operators in Belgium, wfhile engineers and techniciansfrom Great Britain, the United States, France, Germany and Belgium are inZenica supervising erection and training workerse

4 -

The chief erector of the Brassert Company of Pittsburgh, Pennsylvania,U.S.A., who is supervising the erection of the bloomine mill, stated thatthe Yugoslav workers took training ver- well ane he anticipated no difficultyin training operators.

Both the Technical Director and the Managing Director of the plantare regarded by the Bank's Consultant as competent for the directors of theexnanded worl-s.

Power

The demand for power for the first phase will be in the order of25 to 30,000 kw and the energy requirements will be about 120 million kilo-wratt hours. The power requirements of the plant have bsen anticipated andwill be available from the new capacity now under construction in the Bosnian-Croatian network.

Cost of Production

The future cost of production of the end products at Zentca shouldbe very reasonable and considerably lower than the present costs or thedelivered costs of imports. All of the basic raw materials are availablewithin relatively short distances from Zenica; most of the facilities willbe modern and efficient; labor costs will be relatively low and the inte-grated production takes advantage of all the economies inherent in the useof hot metal and the gases from coke ovens and blast furnaces when rawmaterials are all processed in one plant through various stages to endproducts.

Cost of the First Phase of the Project

The cost of the first phase of the expansion program is estimated atthe equivalent of $99.4 million. According to the Bankts Consultant, thisreflects a reasorable cost for the facilities to be installed. The costper ingot ton of ,he increasedl capacity cannot be reasonably compared withunit costs elsewhare because much of the expenditure will also serve thesecond phase of the program. The table below shows a breakdown of theexpenditures to be made on the first phase:

Expenditures Expressed in Thousands UT.S. DollarsDomestic Imported

Period Construction Eq_ai-ment 3quipment Total

To September 1, 1952 29,624 19,725 22,482 71,831To Complete 8,124 13,505 i5924 553

Total 37,748 33,230 28,406 99,384

- 0o -

Of the total value of goods yet to be paid for in foreign exchangeamounting to the eauivalent of $5,924,ooo, the Bank has been requested tofinance $4,430,000, and $1,494,0oo will be financed from the German loan.

List of Goods

The goods to be financed from the proceeds of a Bank loan include:

Division of Plant Amount

Blast FurnaceBlast Furnace Parts $ 108,000Ore Preparation Plant 1,240,000Sintering plant 1,109,000Erection Supervision 63,000 $2,520,000

Steel PlantTilting Furnacas 181,000Refractories 414,0003igineering and Design 41,000 636,ooo

Rolling MillsIlgner Drive Eauipment 129,000Blooming Mill Erection 97,000Vire and Rod Mill Equipment 229,000 455,000

For,gesForge auxiliaries 150,000 150,000

Coke OvensEquipment for Reversing Gas Flow 50,000Gas Folder and Accessories 416,oooScales and Accessories 174,000 640,ooo

Auxiliary Equiprment 29,000 29,000Grand Total $4,430,000

Markets

All of the end products produced at Zenica will be absorbed domes-tically and will provide a large part of the steel reouired for the expan-sion now in progress in transDortation, engineering, chemical, mining,electrical and building industries.

Justification

The additional production of 200,000 tons of pig iron and of 134,000tons of heavy, medium and.light sections, rails, wire, rods and forgingsat Zenica should eliminate the necessity for the importation of approximately

- 51 -

28,000 tons of pig iron and 75,000 tons-of steel products annually and pro-vide urgently needed steel for Yugoslavia's industrial expansioni program.The elimination of 103,000 tons of iron and steel imports per year will saveat least the equivalent of $17,800,000 per year in foreign e7change and therroduction of ammonium sulphate and other by-products from the manufactureof coke should save another $300,000 in fertilizer and chemical imports, ora total of about $18,100,000 annually. From this, however, the value ofannual exports of 236,oo0 tons of iron ore or the equivalent of $1,514,000should be deducted as such exports will stop when Zenicals expansion is com-pleted. The net savings from Zenicals expansion will, therefore,.be about$16,600,000 annually.

As the cost of production for the entire outuit of 274,000 tons offinished steel at Zenica will be lowered, the availability of this amount ofsteel at lowrer cost should have a favorable effect on the cost of productionin many steel usino industries and thus a favorable effect in many sectorsof the entire economy.

January 27, 1953

IV. IRON JUD STEEL

ii. Vares Iron Ore project

Location

The Vares Iron Ore Project is located in Bosnia, about 40 kilometersnorth of the city of Sarajevo and about 60 kilometers by railroad from thesteel mills at Zenica. The small Stavnja river flows through the town ofVares near the mines. The mines which comprise the Vares group are locatedhigh above the town on the steep slopes of the river valley.

Description

The ore bodies of Vares have been known for centuries and may havebeen originally worked by the Romans. Mining operations on a fairly largescale were started in 1891 by an Austrian firm. Between 1891 and 1895, twoblast furnaces were built to produce pig iron. They were renovated in 1946-47,but they still lack mechanization and in spite of the recent improvements theyare still outmoded, inefficient units. The pig iron production averagingabout 68,000 tons annually is all shipped to the steel mills at Zenica. Assoon as the pig iron production from new! and modern facilities now under con-struction and projected will permit, the Vares furnaces will be scrapped.

The ore which is mined *n several places near Vares occurs in threedistinct forms: Siderite (35% iron), Linonite (42% iron) and Hematite(39-52% iron). About 80% of the ore is Siderite.

The average analysis of the ore used in the Vares blast furnaces is:

Iron 39 Manganese 3%Silica l11-Sulphur 11

Present Production

In 1952 the production from the Vares mines was at a rate of about200,000 tons -;er year. This production came mainly from 2 open-cast mines,with lesser amounts coming from 2 adit shafts. The ore, after blasting, wasmanually loaded on narrow gauge mine cars and transported to the blastfurnaces.

1/ This summary is based on a report Sated 22 September 1952 by Mr. J. E.Holgate, Consultant to the Bank on the iron and steel industry ofYugoslavia.

Reserves

The total known reserves are estimat-I at 120 million metric tons.Further explorations are in progress and the indications are that largeadditional quantities of ore will be proven.

Dcpansion Program

The production of ore from Vares is to be expanded to supply the newpig iron furnaces at Zenica in addition to the requirements of the existing

pig iron furnaces at Vares. In the first stage of the develo-mrent, nroduc-

tion will be increased from the present 200,000 tons to a rate of 900,000 tonsper year by the end of 1954. rurther expansion (in the second stage) to

1,400,000 tons is envisaged to supijly the ultimate requirements of Zenicafurnaces which are also being expanded in two stages.

To accomplish the increase in production planned for the first phaseand to provide for 'the efficient handling of the ore, a large expansion pro-gram has been undertaken which includes:

(a) the expansion of mining operations at 3 se-,arate locations, princi-pally by open cast methods;

(b) the construction of about 125 kilometers of narrow gauge minerailways;

(cl the construction of 5.1 kilometers of cableways to handle the orefrom one of the open cast mines and to transport the overburden to

a spoil area in an adjoining valley;

(d) the construction of new bunker type loading facilities on the mainrailway line;

(e) the conversion of 18 kilometers of narrow gauge railway line tostandard gauge to provide standard gauge line between Vares andZeni ca;

(f) the widening of the river channel through certain critical areasto prevent floods and the diversion of the river through a short(220 meters) tunnel to provide level space for shops and buildings.

The planned production in metric tons from the various mines by yearsis given below. ;,n the opinion of the Bank's consultant, tne goals esta-blished can be i¢hieved with the facilities available and to be acquired.

- S

Mine 12 1295 12). i26Smreka (o) 180,000 350,000 500,000 740,000Brezik (o) 250,000 450,000 450°000 450,00oDroskovac (u) 6o,ooo 90,000 150,000 200,000Prozici (u) 12,000 12,000 10,000 10,ofl

502,000 902,000 1,110,000 1,400,000

(o) - open east mine(u) - Underground mine

The open cast mines will be worked with diesel driven power-shovelsduring the first phase of the development and thereafter by electric shovels.

Initially, the electr£c -power reouired for the electric shovels will not be

available.

The new blast furnace at Zenica which will have a capacity of 200,000

tons of pig iron per year will require 580,000 tons of iron ore by the begin,-

ning of 1954 and possibly earlier. To provide for the opening of the Zerica

furnaces, the extra 302,000 tons of ore above that reauired for Vares blastfurnaces in 1953 wrill be stock-piled throughout the year. Thereafter allore above Varest recuirements will be shinped to Zenica where the ultimaterequirements will reach about 1,200,0O tons annually.


The percentage of completion of the various items in the program of

expansion as at September 1952 and the exnected date of completion are rivenbelow:

Scheduled% Complete Date ofSent. 1952 Completion

(a) Mine Expansion 15? 1956(b) Mine Railways 12% 1954(c) Cableway for ore 1.5 km 50a. 1952

for spoil 3.6 km 0 1953

(d) Loading Pacilities 70< 1953(e) Conversion of narrow gauge line 95e 1952(f) Other Works 45d, 1953

To carry the ore from Vares to Zenica 100 railway cars of 45-toncapacity are under construction in domestic shops. The first 5 cars havebeen delivered.

The overall percentage of completion of the first phase of the pro-

ject to September 1952 was about 35f%. The completion of the various workswithin the schedules given appears reasonable. According to the Bank's con-

sultant, the expansion work already accomplished was well laid out. Much ofit was accomplished with a minimum of suitable equipment.

"O 55 -

Cost of the ProJect

The total cost of the work to be undertaken in the first phase of

the project is estimated at the equivalent of $31,238,000. As at the 3L8.

quarter of 1952, the total expendltures had been $16,860,000. The comple-

tion of the first phase will require the further expenditure of t14,378,000,

of which the equivalent of only $1,388,000 will be for imported equipment.

The table below shows a breakdown of the cost:

Cost Expressed inConstruction Thousands U.S. Dollars

Period W'ork Domestic Imported Total

To 3rd Quarter 1952 10,055 4,3o9 2,751 17,115To complete 399°7 ,134 14,124

Total 19,lb8 8,216 3,885 31,239

Payments for the equivalent of $570,000 on the eouipment purchased

abroad will be made through the G.erman loan and financing of the remaining

$564,ooo of the $1,134,000 for imported items is desired from the Bapk,

List of G'oods

The goods to be paid for from the proceeds of a Bank loan would

include:

Goods AmountUsed steam locos, narrno gauge $ 10,000Diesel locos n 151,000Dump cars 228,000Skip hoists 65,oooBulldozers 6o,ooo

Dump trucks 31,000Miscellaneous equipment 19,000

Total $5 6L4,OOO

The equipment will be imported from France, Austria and U.S.A. About 6o0is already un4er contract.


A6 the increased production will come from mechanized operations, theincrease in labor requlrements will not be in proportion to increased out-

put. Since the present operations are largely manual, the increase in labor

supply will be relatively small. It is available in the vicinity. Themanagement and technical staff ,411 be 'strengthened as the expansion pro-ceeds. The work already aceomplished required.a versatile management.

Market

All of the ore mined will be consumed either at the Vares pig ironfurnaces or at Zenica. None will be exported.

Justification

The expansion of the Vares mine will provide most economically forthe expanding ore recuirements of the iron and steel works at Zenica, whichis the key plant in the program for the expansion of the iron and steel in-dustry in Yugoslavia. The alternative would be the importation of more scrapor the expansion of other ore mines more distant from Zenica.

January 27, 1953

IV. IRON AND STEEL

iii. Sisak Seamless Tube Plant /

Location

The Sisak Seamless Tube Plant is located in Croatia on the SavaRiver about 50 kilometers southeast of Zagreb. 't is also on the mainstandard gauge railway line between Zagreb and Belgrade. The Sava flivoris navigable between Sisak and Belgrade.


The original plant at Sisak was constructed between 1935 and 1939.It consisted of a small blast furnace with a capacity of about 25,000 tonsof pig iron per year, a small foundry, a therma'l power plant, and a ware-house Sisak was selected as the site for the blast furnace because ofits nearness to raw materials and its good transportation facilities. Twoadditional blast furnaces have been placed in operation since the war (onein 1949 and one in 1950). Each has a capacity of 45,000 tons of pig ironannually.


The pig iron production at Sisak prewar and postwar is shown below:

1939 1946 1948 1950 1951

3,736 18,956 - 26,759 61,806 - 98,469

The Expansion Progaram

Because of its favorable location for the economical production ofpig iron and good transport facilities, a decision was made in 1947 toexpand the plant by: increasing its pig iron capacity, adding open hearthsteel furnaces and a casting plant and by installing equipment for themanufacture of seamless steel tubes or pipe. The capacity of the facili-ties included in the expansion program are:

j/ This summary is based on a report dated 22 September, 1952 prepared byM4r. J. E. Holgate the Ban1ls consultant on the iron and steel industryin Yugoslavia.

_ 58 -

Tons Average AnnualFacility Capacity Production Tons

Blast furnace II 150 45-55,000Blast furnace III 150 45-55,000Sintering plant 600 200,000Open hearth furnace I 60 45,000Open hearth furnace II 60 45,000

Seamless Tubes

Light mill 3.3 per hr. 22,000Medium mill 5.8 per hr. 17,000Heavy mill 8.3 per hr. 23,000

Castings

Gray castings 5,000

Power Plant

Thermal station 7,000 kcw 32 million kwh

On completion of the expansion program, the plant will. have thecapacity for the pro'uction of about 130,000 tons of pig iron, 90,000 tonsof ingot steel, 5,00C tons of castings and 60,000 tons of seamless steeltubes. The size of the tubes to be proAuced will be:

Diameters Lengths

Light mill 3/8" to 4" up to 50 ft.Medium mill 4" to 10" up to 65 ft.Heavy mill 10" to 16" up to 35 ft.

As a part of the heavy mill, there will be special equipment forproducing up to 17,000 tons of oil well. pipe to the standards of the

American Petroleum Institute. There will also be equipment for galvaiizing,bitumen coating and cold drawing of tubes.

The tube plant was originally designed to cover the demands ofHungary and other Balkan Satelites, but after the break with the Cominformin 1948 the size of the plant was not reduced because it was anticipatedthat initially there would be a good market for exports and that eventuallyYugoslavia would absorb the entire production. The whole tube plant, whichis being supplied from Italy (largely through reparations), is of verymodern design based on the liannesnann Pilger system. The equipment isbeing erected under italian supervision.

The sintering plant will come from the United States. By betterpreparation of the ore, it will increase the efficiency and yield of theblast furnaces. The amount of pig iron produced will be in excess of therequirements of the steel furnaces and casting plant, consequently about50% of the output of pig iron will be shipped to other domestic plants.

59

The new open hearth furnaces are of ]Ierz design but are being builtin Yugoslavia. They should be very satisfactory according to the Banktsconsultant. They will be fired by producer gas from brown coal. Therefractories will come from Austria. The steam turbine for the power plantis being built in Switzerland.


In September, 1952 the expansion program was about 45% complete.The table below gives the percentage of completion of the various sectionsof the plant at that time.

% Completion Estimated DateSection Plant September. 1952 of Completion

3 - Blast furnaces 100% In operationSintering plant 20% 4th Q 19532 - Open hearth furnaces 15% 3rd Q 1953

Seamless Tube Plant

Light mill 90%7 1st Q 1953Medium mill 601% 4th Q 1953Heavy mill 60% 2nd Q 1954Galvanizing plant 5% 3rd Q 1954

Power Plant 45% 3rd Q 1953

Estimated ProFuction

Although the maior items of equirment will be installed during 1953,the plant is not expected to attain full production until 1955. Partialproduction, however, will be obtained in 1953 and 1954. The estimated out-put for 1952, 1953, 1954 and 1955 in tons follows:

Product 1952 1953 1954 1955

Pig Iron 120,0000 125,000 - 130,000 130GOOSteel ingots - 10,000 90,000 90,000

Seamless Tubes

3/8" to 4" - 7,600 15v,000 22,0004" to 10" - - 10,000 17,000

10" to 16" - - 10,000 21,000Gray castings - 5,000 5,000

Raw Materials

The amounts of raw materials required for the full (1955) productionof the plant and the sources of these materials are shown in the followingtable:

_ 60 -

Raw Material Quantity Source

Iron ore 260,000 tons Ljubija

Iron ore 20,000 tons VaresCoke 135,000 tons ImportedCoal 130,000 tons DomesticLimestone 80,000 tons Tounj

Scrap 43,000 tons Domestic sources

Refractories 5,000 tons Partial imports

Ferro alloys l,OOO tons Domestic

The iron ore from Ljubija, 90 kilometers southeast of Sisak, will

have 48 to 52% iron content and that from Vares, 225 kilometers southeast

of Sisak, will have 38 to 42% iron content. Coke will be imported from

Belgium or the Ruhr. Limestone is found within a few kilometers of Sisak.

Brown coal for gas producers and plant locomotives will come from large

mines within a short distance of Sisak. About 30% of the required scrap

will be derived from the plant's own operations; the remainder will come

from other domestic sources. Niost of the refractories will be imported

initially; after domestic production increases, most will come from

domestic sources. The ferro alloys will come from Sibenik, Jajce, Dugirat

in Yugoslavia.

Power

The electric energy required at the plant will be obtained partially

from the 7,000 kw power station under construction at the plant and partially

from the Bosnian-Croatian network. The total energy requirements of the

plant are estimated at 42 million kwh annually. Of this, 32 million kwh will

come from the Sisak station and 10 million kwh will come from the network.


About 1,900 workers will be required for the plant. Those required

for the operation of the seamless tube plant will be trained by the Italian

firm which is supplying the equipment as a part of the contract. Workers

for the blast furnaces and steel mill will be trained in the plant or at

other steel mills. Some technicians will be sent abroad to study the latest

developments in steel production. About 70% of the necessary supervisory

personnel is already available at the plant. The managing director and

technical director appeared to be competent and qualified to direct the

expanded operations, according to the Bankts consultant.

Cost of Production

The plant will use high grade ore (which will be sintered in a

modern sintering plant), a good grade of imported coke, good limestoiie and

these raw materials will be processed in modern blast furnaces. A good

grade of pig iron should, therefore, be economically produced. The new

open hearth furnaces using hot metal and scrap should produce steel effi-

ciently. While there undoubtedly will be teething troubles in the first

year of operation of the tube plant, the equipment should, after the

Yugoslav operators have been trained, be able to produce 60,000 tons of

_ 61 -

tubes without difficulty. The tube plant will consume all of the ingotproduction (90,000 tons) and yield about 30,000 tons of scrap. The sizeof the pig iron production (130,000 tons) should provide cheaper pig ironthan would have been possible mith the output limited to the exact amountof the plantts requirements. On the whole the cost of production shouldbe quite reasonable.

Cost of the Project

The total cost of the expansion program at Sisak is estimated atthe equivalent of 864,537,OOO. A breakdoim of the cost showing the expendi-tures to the third quarter of 1952 and the amounts required to completefollows:

Cost Expressed in Thousands U.S. DollarsEquipment

Period Construction Domestic Imported Total

To Third Quarter, 1952 27,737 8,888 12,845 49,470To complete 7,103 6 528 1,436 15,067

Total 34,5840 14,281 64,5337

Al) of the foreign exchange required to complete the project,$1,436,000, is desired from the Bank. This amount is only 10% of tlhe totalforeign exchange expenditure on the project.

List of Goods

The type of goods to be financed wholly or in part from the pro-ceeds of a Bank loan include:

¶jpe of Goods Amount

Sintering plant equipment $ 327,000Oil well pipe equipment 300,000Galvanizing equipment 50,000Bitumen coating equipment 240,000Cranes 519,ooo

Total {,;l,436, 000

Iarlcets

The pig iron produced in ex:cess of the requirements of the plantwill be absorbed in domestic steel mills and foundries. Although theimports of seamless steel tubes and pipe averaged only approximately 7,000tons in 1950 and 1951, this does not represent the needs of the domesticeconomy. Imports were held to this low figure because of lack of foreignexchange and also the lack of availability of pipe in some sizes. Atpresent there are 60 oil wells in Yugoslavia which have been drilled butcannot be operated for the lack of pipe and there also is a particularneed of seamless tubes and pipes in the cheriical, engineering (for boilers)and building industries (for water). The total domestic needs are esti-mated to be at least 30,000 tons annually in the next few years withamounts increasing in proportion to investments in petroleum development,

- 62 -

industrial expansion and housing. The remainder, 30,000 tons, will beavailable for export. A good export market exists for seamless tubes ofany description.

Justification

The export of 30,000 tons of pipe annually, would net the equiva-lent of about $L4.1 million in-foreign exchange each year after deductionsfor importation of coke and refractories. In addition, the importation ofabout 7,000 tons of pipe valued at $"2.1 million will be saved. The totalforeign exchange benefits from the plant will therefore be the equivalentof about $6.2 million annually. The domestic econony will be benefited oythe availability of an additional supply of pig iron and a supply of pipefor a wide variety of industrial uses and particularly in oil well develop-ment and the utilization of natural gas now going to waste for laclc of pipeto take it to consumning centers.

January 23, 1953

- 63 -

IV. IRON AND STEEL

iv. Ilijas Cast Iron Pipe Plant

Location

Ilijas is located in Bosnia about 20 Idlometers from Sarajevo and

about 53 kilometers south of Zenica. It is served by a standard gauge

railway and good highwiays. The site was selected for the pipe plant

because of its proximity to raw materials.

Description of the Plant

The only sizable industry located at Ilijas at present is a machine

shop used primarily for reconditioning reparations equipment. The cast

iron pipe plant will be adjacent to the machine shop which already has rail

connections. The pipe plant will be constructed in two phases. In the

first phase the plant will be designed to produce 15000 tons of cast iron

pipe annually in centrifugal casting machines wxith grey pig iron manu-

factured elsetihere. In the second phase, plans call for pig iron to be

produced in electric furnaces at the plant in sufficient quantity to pro-

duce 15,000 tons of cast iron pipe, 18,000 tons of moulds for steel ingots,

4,000 tons of rolls for steel rolling mills and hi,000 tons of other cast-

ings and to supply 28 to 40,000 tons of grey iron to other foundries.

In the first phase of this project the installations, wThich were

designed and laid out by the Seibert Company of Saerbrucken, France, will

include the following:

a) 2 Coupla type furnaces and the necessary accessories formelting pig iron and scrap.

b) A pipe casting department with centrifugal casting machines.

c) Annealing furnaces.

d) Finishing and threading department.

e) Hydraulic testing department.

f) Tar coating or painting department.

The necessary flanges will not be produced in the plant, but will

be purchased from other enterprises.

Of the 15,000 tons of pipe to be produced, 13,000 tons will be

high pressure pipe 80 to 600 mm in diameter (3 to 24 inches) and 4 to 5

meters in length (13 to 16 feet) and 2,000 tons of low pressure pipe

50 to 200 mm (2 to 8 inches) in diameter and I to 3 meters in length

(3.3 to 10 feet).

- 64 *


The construction of the main buildings for housing the foundry andpipe casting departments and some housing for workers was started in thesimmer of 1952. Tlhese buildings are expected to be completed in the thirdquarter of 1953. Some equipment is on order. If the remaining equipmentrequired can be ordered early in 1953, erection can be completed early in1924 and full production should be reached before the end of that year.Completion of the second phase will depend on financing for the necessaryequipment.

Rawr Material

Raw materials required for the first phase of the project wouldconsist of:

Quantity Naterial Source

11,00 tons Grey pig iron Vares or Zenica, Bosnia41,500 tons Scrap Domestic Sources3,500 tons Coke Zenica, Bosnia3,000 tons Foundry sand Domestic Sources

Water

Hater for the plant will come from wells at the site.

Power

Powver requirements for the first phase will be relatively smalland will come from the Bosnian network.


For the first phase only one shift operation is planned. Thiswill require about 160 workers. A small number of key technicians andskilled workers will be sent abroad for training and the suppliers ofequipment will train other vorlkers at the plant. Ianagers have alreadybeen appointed. They have had experience in the cast iron pipe plant atVares and in the steel mill at Zenica.

Cost of Production

Centrifugal casting of iron pipe is the modern method. Wlith ma-chines of the latest design, with low cost pig iron from nearby plants and

skilled labor, production costs should be low, probably considerably lowerthan the cost of imported pipe of similar quality and sizes.

Cost of the Project

The total cost of the plant upon completion of the second phase of

the project is estimated at the equivalent of $13,221,000. It is diffi-cult to separate accurately the cost of the first phase from the second

- 65

except insofar as the foreign exchange is concerned, but the following is

a rough estimate of the cost of the first phase.

Thxpenditures Expressed in Thousands U.S.6Equipment

Period Construction Domestic Imported Total

To Third Quarter, 1952 223 - 134.3 357.3To complete 1,777 2 726.7 5 003.7

2,000 2,I00 d6l.0

The Bank has been requested to finance the total cost of the equip-ment to be imported for the first phase. It will all come from eitherFrance or Switzerland.

List of Goods

W:Jith the proceeds of a loan from the Bank, payments will be madeon the goods listed below, 63% of which are under contract.

Item Estimated Cost

Main Foundry

Foundry equipment, including ventilators, heatrecuperators, burners, parts for metal mixerand testing instruments $ 67,000

Centrifugal Casting Department

Auitomatic core making machines 37,000Centrifugal pipe casting machines and accessories 458,oooMetal flasks 30.,000Hoists and accessories 20,000

Pipe Finishing Department

Equipment for finishing and threading pipe and forhydraulic testing 80,000

Engineering Fees 119,000

Contingencies 50 000

Ilarkets

The present production of cast iron pipe in Yugoslavia is 6,000tons annually. The needs are estimated at 21,000 tons annually. Thisrepresents only the most urgent requirements for the larger cities and newindustrial areas under construction or recently developed. If the needsof the smaller tow;ns and larger villages which are nowJ served wtith wellsin the central market place were included, the quantities required would

- 66 _

be very much larger. The entire production of the plant will therefore beconsumed domestically.

Justification

The need for cast iron pipe for water systems in Yugoslavia isurgent. The capitals of the republics of iMacedonia (Skoplje) and Monte-negro (Titograd) for example, do not as yet have modern water distributionsystems. From a standpoint of sanitation, the growing industrializationof Yugoslavia will present serious problems if water distribution systemscannot keep pace with the expansion of industrial communities. The 50year old pipe plant at Vares is a high cost producer and should be closeddown. The importation of Yugoslaviats minimum requirements of cast ironpipe would cost about bet7een $400,000 and 500000 in foreign exchargeannually. The plant is entirely justified, therefore, to supply domesticneeds and it is a technically sound undertaking.

January 28, 1953

_ 67 _

V. UTILIZATION OF FOREST RESOURCES

i. Timber Production

Description of the Project

A recent survey has revealed that there are in Yugoslavia forests,not heretofore exploited, containing upwards of 113.3 million cubic metersof timber. About half is coniferous and the remainder is made up ofvarious species. The forests which in recent years have been exploitedfor exports and domestic consumption are being overcut because they areaccessible by railways and roads. The unexploited forests are not atpresent adequately served by railways or roads.

To halt the overcutting of the accessible forests and to tap theforest resources of the unexploited areas, a project for the constructionof roads, railways and cable-ays has been undertaken. It wll be a tenyear program of developmert. The Bank has been requested to participatein the program by financing the equipment required to be imported toinitiate the program. It will consist primarily of transport equipmentfor railways and roads. During this period it is anticipated that ;457 km of truck roads, 380 lam of main forest railways, 417 kam of second-ary forest railways and 9.5 kam of cableways will be constructed inCroatia, Bosnia-Herzegovina and M4ontenegro. The construction work willbe carried on by specialized forest enterprises wyhich have been organizedfor this purpose. Iost of the necessary construction equipment is avail-able.


Construction of the roads and railways, which will be a continuingprogram, was started in 1952. The table below shows the kilometers ofroads, railways and cableways to be constructed in the period 1953-1955.

Type 1953 1954 1955 Total

Thuck roads 204 131 122 457I-ain forest railways 183 107 90 380Secondary forest railways 148 125 144 417Cableways 3.5 6.o - 9.5

For location of roadst railroads and cableways see 1Nap No. 3.

Specifications

a) .Roads

All roads will be permanent. They will be surfaced with 20 cm.of gravel or crushed stone and rolled, The width will be 5 to 6 metersincluding shoulders (usable portion 4 to 5 meters); bridge capacities willrange from 12 to 18 tons and the maximum grades will be about 6%.

- 68 -

b) Railroads

The forest railroads will be of two types, main and secondary.The main railroads are narrow gauge (760 mm) lines, laid out and designedto serve selected areas until the cutting is completed. This usuallytakes about 10 years. Compared with the lines on the main railway system,the forest railways are of lighter construction and have grades about 1%greater than on the main system. Traffic on forest railways is regulatedby telephone and telegraph as they do not have signaling equipment.

The secondary railroads are small feeder lines laid out to bringtimber to the main forest lines. They are designed to operate from 2 to5 years. They are frequently of smaller gauge than the main lines anduse lighter equipment.-

c) Cableiways

Cableways will have a capacity of about 32 tons per hour and willbe operated with diesel motors.

types of Equipment Required

Apart from some diesel driven trucks and road rollers, for con-struction work, the primary need is for narrow gauge diesel locomotivesfor the main forest railways.. As a considerable amount of narrow gaugetrack on the main railway system has been converted to normal gauge inrecent years and more is to be converted, there is an ample supply ofnarrow gauge rolling stock available, except locomotives. All of thenarrow gauge locomotives discarded on the main lines are obsolete andnearing the end of their useful, life. Quite naturally the better loco-motives are retained for use on the narrow gauge main lines sti'll inoperation. MThile steam locomotives can be used on the forest railways,where they can be serviced from existing coal and water stations, thediesel locomotives are more efficient, less expensive to operate and donot require the construction of water tanks in the forests.

The necessary railroad cars suitable for work in the forests arealready available for the initial requirements and new cars as requiredcan be constructed in Yugoslavia.

Crawler type diesel tractors will be extensively used to bringthe timber to roads and railways and the diesel driven cableways willbring logs from high altitudes where the construction costs of roads orrailways would be prohibitive.

Two mobile repair shops will be Drovided to make field repairs tothe automotive and rail equipment.

Timber Production Anticipated

As a result of the construction program it is anticipated thatabout 11.9 million cubic meters will be cut during the 3 year period. The

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volume of the wood cut (in millions of cubic meters) and the type of woodto be cut is shown in the table below:

Type of Wlood 1953 1954 15955 Total

Hardwood 1.0 2.5 3.1 6.6Softwood Total 0.8 1.8 24 7

Cost of the Project

The cost of the project for the years 1953-l955 is estinated atthe equivalent of $32,465,OCO. A breakdown is given below:

Cost Expressed in Thousands U.S. DollarsEquipment

Project Construction Domestic Imported Total

Roads 9,000 20 776 9,796Railways main 10,110 3,[40 393 13,943Railways - secondary 6,o60 2,030 176 8,266Cablewtays 86 93 281 460

25,253 5,583 1,626 32,465

The Bank has been requested to finance the entire foreign exchangerequirements, $01,626,000 equivalent.

List of Goods

The goods which would be procured wfith the proceeds of a loan fromthe Bank are listed below. About 30% of the items are already undercontract.

Goods Amount

Diesel locomotives, narrow gauge $ 250,000Steam locomotives, narrow gauge 136,000Skidder's, railway mounted 103,000Crawler tractors, diesel driven 340,000C bleway systems diesel driven 281,000Diesel trucks 176,000Dump trucks 4,ooooIlobile repair shops 67,000Compressors 167,COORock crushers 26,000Road rollers b0 000

.1,626,000

The estimated costs include spare parts, Prices of equipment notunder contract are based on quotations in July, 1952. The equipment willbe imported from Great Britain, France, Holland, Germany and the UnitedStates.

Markets

The timber produced will be consumed both in the domestic andforeign markets. Transportation factors will generally govern the marketto which timber is sent. With the development of the new forest areassome increase in exports of hardwoods over the present volume is antici-pated and the exports of softwoods can be reduced by about the sameamount.

Justification

Ihe principal justification of the project will be its contribu-tion to the diminishing or halting. of the overcutting of the accessibleforest areas and making an increase in the exports of hardwioods possible.

Yugoslavia is in a very favoraible competitive position to supply theEuropean hardwood market because, unlike its softwoods, the hardwJoods donot have the competition of the large Scandinavian production.

January 29, 1953

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V. UITLIZATION OF FOREST RESOURCES

ii. Videm-Krsko Newisprint Plant

Location

The newsprint plant will be erected adjacent to an existing pulp

mill (Celuloza, Videm) at the village of Videm near Krsko, a small town in

Slovenia about 45 kilometers by railway northwest of Zagreb. Videm and

K(rsko are on the main standard gauge railway line between Ljubljana, Zagreb

and Belgrade and also on a main east-west highway. The Sava River flows

within a few hundred meters of the plant,


The existing pulp mill started production in 1939. Its capacity

was 9,000 tons of sulphate pulp 1/ annuallyo but the buildings were con-

structed to house equipment for The annual production of 14,250 tons of

pulp. The plant was damaged when the Germans retreated in 1945, but it

resumed production in 1946. In that year equipment for the production of

mechanical or groundwood pulp 2/ was installed. The plant produces a part

of its own power recuirements Tn a 1,000 kw unit which uses process steam.

It also prcduces calcium bisulphite (which is used in the manufacture of

pulp) from zinc concentrates shipped from Trepca in Serbia. The residue,

zinc oxide 3/, is shipped to a smelting plant at Celje in Slovenia for

further refining into zinc. The plant aiso has equipment for bleaching a

Part of its pulp production and for the manufacture of high-alpha cellulose.

which is used in rayon plants and explosives. A coarse, heavy wrapping

paper is made from sub-standard pulp. The rated annual capacity of the

plant at present is: 9,000 tons of air dried sulphite pulp, 3,000 tons of

mechanical pulp and 1,500 tons of coarse irrapping paper.


The prewar and postwar production of the plant is shown below in

tons:

Product 1940 1946 1948 1950 1951

Sulphite pulp 5,171 4,130 8,703 9,982 9,933

Mechanical pulp - - 2,829 3,374 3,950

Wrapping paper 300 202 907 1,453 1,210

Bleached pulp - 531 1,142 701 2,126

High alpha pulp - - - - 511

1/ Used principally for writing and book paper

$1 Used for lowTer grade papers and newsprint

3/ 6,925 tons from 8,186 tons of zinc concentrates in 1951

- 72 -

Since 1949 the production of the plant has been forced above itsrated capacity.

Expansion Program

The expansion program will consist of:

a) The increase in the capacity of the existing sulphite pulpmill from 9,000 tons to 14,250 tons annually by installing athird digester, modernizing the two existing digesters, addinga new chipper which will enable the plant to utilize saw-millwastes in addition to logs and completing the new boiler orderedfrom Czechoslovakia in 19t7, but delivered incomplete in 1948.

b) The erect-Lon of a newsprint plant with a capacity of 20,000tons per year. The plant will include a boiler designed forburning concentrated salphite liquor as well as wood bark andpulverized coal, mechanized wood handling facilities, equipmentfor the production of 70 tons of mechanical pulp per day, papermachines, finishing machines and accessories for the procluctionof high quality nevwsprint from a mixture of mechanical pulp andchemical pulp.

c)- The expansion of the power plant from 1,000 kw to 6,400 kw.

d) The erection of additional warehouses, laboratories, shopsand housing for workers.


Contracts for 9051 of the imported equipment required for theexpansion program were placed in July and August, 1952, for deliveriesin 1953, )954 and 1955. The only actual construction in progress in thelast quarter of 1952 was on housing, on a warehouse for materials, and onthe boiler from Czechoslovakia. The estimated date for starting opera-tions of the newJsprint plant is May, 1955.

Estimated Expanded Production

The production expected at Videm-Krsko after the completion of theexpansion program is shown below in tons.

Product 1955 1956 1957

Sulphite pulp 14,250 14,v250 114,250liechanical pulp 10,000 19,500 20,000Newsprint 9,COO 20,000 20,000Coarse wrapping paper 1,800 1,800 1,800

The entire production of mechanical pulp and 3,000 tons of thechemical pulp will be consumed in the production of newsprint and thecoarse wrrapping paper. There will remain for sale, in addition to thenewsprint and wrapping paper, 11,250 tons of chemical pulp either in the

- 73 -

form of air dried pulp, bleached pulp or high alpha plp., depending on thedemands of the market. There will also be a residue of about 10,000 tonsof zinc oxide annually which can be shipped to the srmelting pl2nt at Celje.

Raw i4laterials

The amounts of basic raw materials reauired for the existing (1951)and ex-panded production of the plant are:

Raw iilaterial 1951 1956

Pulp wood* 56,160 cu.m. 114600 cu.m.For chemical pulp (47,686 cu.m) (68,600 cu.m)For mechanical pulp t 8,474 cu.m) (46,000 cu.m)

Coal 16,873 tons 55,000 tonsLimestone 1,174 tons 1,500 tonsZinc concentrates 8,186 tons 12,000 tons

* For one ton of chemical pulp L.8 cu.m. of ulpapood are required;for one ton of mechanical pulp 2.3 cu.n. are required.

In 1951, 27,300 cubic meters of pulpwood used in the mi'l. was ob-tained from Slovenia, 2h,392 cubic meters from Bosnia and 4b,I68 cubicmeters from Croatia. In the future about 4100 cubic meters of sawmillwaste will be used in the sulphite mill andc the raiainder of the pulp.roodrequirements, 110,600 cubic meters, will be obtained from Slovenia. Thelong hauls of 200 to 300 kilometers from Bosnia will then be eliminated.Thle increased cutting of fir and spruce in Slovenia, howJever, will eliminatethe annual export of about 26,00o to. 27,000 cubic meters of these woodsalthough the export of some 30,000 cubic meters of beech wood annually canbe continued as the supply of this -wood is plentiful. The annual growthof beech, fir and spruce in Slovenia is estimated at about 350,OCO cubicmeters.

Coal comes from mines within 5 kilometers of the plant and allother materials needed in snall amounts in tle manufacture of paper (suchas soda ash, alum, clay, etc.), except rosin (50 tons) and dye stuffs(2 tons), are available from domestic sources.

A number of locations for the newsprint plant were considered,including sites in Bosnia and Croatia, but Videm-IKrsko was finally selectedbecause' of the availability of the type of trees particullarly suitecd formechanical pulp, the availability of experienced worlcers and t7he advan-tages of locating the plant at the site of an existing sulphite mill.

Water and Waste Liquors

Cooling water and process water will be obtained from wells locatedin the vicinity of the Sava River. Waste liquors, after treatnent, andwaste water will go into the Sava River.

4 -

Porer

The electric energy requirements of the plant are estimated at32.6 million kwh annually. About 2/3 or 21.0 million kwh will be producedin the generating unit at the plant using process steam and about 1/3 orII.6 million kwh will be obtained from the Slovenian network.


At present there are 272 workerss including maintenance personnel,foremen and assistants, employed in the existing plant. The expanded plant

will require only 42 additional workers, because some of the existingoperations, particularly the handling of pulpwood, will be mechanized. Thetop management of the existing plant is entirely competent to undertakce t'lemanagement of the expanded operations and only a fel additional admirnistra-tive employees will be required. As Slovenia has long been the area fromwhich most of the pulp and paper in Yugoslavia has been produced, no di+ffi-

culty is anticipated in obtaining the additional experienced wJorlkersrequired. The training of workers necessary for the operation of the newnewsprint equipment will be given by the suppliers of the macllinery.

Cost of Production

Because of the advantageous location of the plant with respect tothe supply of pulpwood, coal and other raw materials, wlhich constitute

about 50% of the production costs exclusive of amortization charges, theavailability of low cost power from its own generating plant (about 10%of production costs), the over-all efficiency of the new equipment in thenewsprint plant, the experience of the management and labor force, theproduction costs should be low and the over-all cost of the newsprintshould be much lower t1han imported paper.

Cost of the Project

The estimated cost of tlhe expansion of the existing plant and theerection of the new newsprint plant is shown below:

Expenditures Expressed in Thousands U.S.$OConstruction Equipment

Period Work Domestic Imported Total

Existing Plant

To Third Quarter, 1952 5.1 8.1 196.5 209i7To complete 10.0 15.0 - 25.0

Sub-Total 15.1 23.1 19Z75 234.7New Plant

To Third Quarter, 1952 500.0 122.0 303.3 765.3To complete 1,870.0 357.0 4 196 7 6,583.7

Sub-Total 2,370.0 479.0 7s349.0

Grand Total 2,385.1 502.1 1,696.5 7,583.7

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To the end of October, 1952, $499,800 of the total imported costshad already been financed. Of the remainder, $1,848 would be financedfrom the German loan and $2,349,000 is desired from the Bank.

List of Goods

The payments with the proceeds of a loan from the Bank would bemade on the following equipment:

Equipment Amount

Conveyors $ 438,oooBarldng machines and sawrs 40t,000Paper machine and accessories 1,129,000Paper winding and cutting machines 25,000Steam boiler and accessories 386,000Steam turbine and accessories 228,000Electrical equipment 96,000Pipe, valves and fittings 7,000

Total U2,3499,0CO

Contracts for about 9015 of the equipment to be imported hazealready been placed in Germany; a faw items will be imported from Belgiumand Austria.

Equipment to be produced domestically will include: cranes, weighbridges, airconditioning and ven-tilating equipment, piping, small electricmotors, cables, control eouipment and tiles.

Markets

There is no newsprint produced in Yugoslavia at present and therewas no production prewar. The total needs of the country for newsprintare estimated to be in excess of the 20,000 ton projected production ofthe Videm IKrsko plant although consumption has never exceeded 1,000 inany year because of the lack of foreign exchange for larger imports. Inthe period 1947-1952 the imports of newsprint ranged from 9 to 149000 tonsper year. After full production is reached at Videm-Krsko, domestic con-sumption may be permitted to rise somewhat from the present low level.Assuming a domestic consumption of 1 kilogram per person per year, whichis below the average European consumption, domestic consumption wouldreach about 17,000 tons per year. This wotld permit the export of about3,000 tons of newsprint annually. Some of the increased production ofsulphite pulp might also be exported, but the surplus over domestic needswill be relatively small.

Justification

In the period 1947-1952 the annual outlay of foreign exchange fornewsprint imports ranged from $1.7 to $2.4 million equivalent. When theVidem-Krsko plant reaches full production it can supply domestic needs inexcess of past consumption and still have a small surplus for export.These exports together with perhaps some exports of sulphite pulp would

76

more than offset the loss of foreign exchage resuIting from the elimina-tion of exports of pulpwood from Slovenia and the cost of the small amountof imports required for paper production. The net saving in foreignexchange would therefore be about $2 million annually. The project wouldsave in about 2-1/2 years its entire foreign exchange cost. The plant,which is technically sound should produce paper at a reasonable cost andsupply a commodity based on ample Yugoslav resources.

January 27, 1953

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VI. INDUSTRY

i. Electrical Equipment Industry - Svetozarevo Cable Plant

Location

The plant is located about 3 kilometers from Svetozarevo, a townof about 10,000 population, in the Republic of Serbia about 135 kilometers

by railway southeast of Belgrade on the main standard gauge railway be-tween Belgrade and the Greek port of Salonika. It is also on the main

Belgrade-Nis highway.

Description of Plant

The plant, wihich is entirely new, wiill produce heavy lead covered

and rubber covered copper cables, bare copper transmission cables, steel

wtire cables and miscellaneous small diameter copper wires, enameled ardcovered. In addition, steel reinforcing bars will be produced in the

copper rolling mill 1/ (obtained through reparations) which has a capacityin excess of the requirements of the plant for copper rods and bars. The

plant will have a foundry which will produce a high conductivity, oxygenfree copper bar which is not produced in quantity at present in Europe.

The copper wire and cables produced in the plant will therefore be of highquality. As a large quantity of process steara will be required in theplant for the treatment of rubber and otiher insulating materials, a gener-

ating unit will be installed to provide a part of the electric powerrequirements of the plant. Svetozarevo was chosen as the site of the

plant because of its proximity to the plant's chief raw materials, copper

from the smelters at Bor to the east and lead from the smelters at frepeato the southwlest, and also because of its nearness to the port of Salonika

for the export of cables.


Constructiion on the buildings for the plant was started in 1951.At the end of 1952 about L,0O00 workers were engaged in construction anderection. Buildings for the rolling mill, wire drawing mill and wire

stranding were completed at the end of 1952 and all other buildings arescheduled to be completed before the end of 1953. Erection of wire drar-

ing equipment started in September 1952. Erection of other equipmentwill continue throughout 1953, 195X and a part of 1955, although produc-tion will start in 1954. The table below shows the status of constructionas at September 15, 1952, the expected dates of completion of installationand initial production,

The annual capacity of the rolling mill wrill be 51,000 tons;

16,000 tons of copper and 35,000 tons of steel.

- 78 -


Construction Installation Production% Complete Date of Date of Date of

Department Sept. 15, 1952 Completion Completion First_ _ _ _ _ _ _ _ _ ____ _Procluction

Wirebar foundry 50 July 1953 July 1954 Aug. 1954Rolling mill 95 Dec. 1952 Oct. 1953 Jan. 1954

Wire drawing dept. 95 Dec. 1952 May 1953 Jan. 1954Stranding department 95 Dec. 1952 Oct. 1953 Jan. 1954Heavy current, leadcovered cable dept. 55 Oct. 1953 lvMay .1955 Sept. 1954

Weak current, leadcovered cable dept. 45 Oct. 1953 May 1954 July 1954

Rubber insulated, leadcovered cable dept. 45 Oct. 1953 May 1955 Feb. 1954

Enameled wire dept. 45 Oct. 1953 N1arch 1954 Jan. 1954Winding wire dept. 45 Oct. 1953 I1'arch 1954 Jan. 1954Insulated wire dept. 45 Oct. 1953 Feb. 1954 Jan. 1954Power station 15 Dec. 1953 Nov. 1955 June 1954

Estimated Production

The estimated production of the plant for the .years 1954, 1955,1956, and 1957 is shatm in the table below:

Production in Tons

type of Product 1954 1955 1956 1957

a) Underground armored pow-rer cable 1,500 7,000 11,000 14,150b) Underground armored telephone cable 1,000 2,500 3,200 3,950c) Rubber insulated lead covered cable 3,000 5,000 7,300 7,300d) Enameled wire 500 800 1,000 1,200e) Covered winding wire 500 830 830 830f) Insulated wire for all electrical

uses 1,200 1,800 2,500 2,560

g) Copper transmission cable 500 4,500 4,500 4,500h) Steel wire rope 300 400 400 400i) Steel reinforcing bars 12,000 25,000 35,000 35,000

Raw lvMaterials

The amounts of raw materials and other materials required for thefull production of the plant in 1957 and the sources thereof are expectedto be:

79 17

Materials Tons Source

Copper 15,600 SerbiaLead 10,200 SerbiaKraft paper 1,700 BosniaStrip steel 2,800 SerbiaSteel wire 1,700 SloveniaSteel billets 36,000 BosniaCoal 71,500 SerbiaChalk, China clay 1i6o0 SloveniaHineral oil 320 BosniaBitumen 680 BosniaPolyvinyl chloride 280 CroatiaVarnish 360 CroatiaJute yarn 920 ImportsCotton yarn 270 ImportsRubber 7hO Imports

Water

Water will be obtained from w.ells located near the plant. Testshave shown that sufficient water is available for all processing require-ments.

Power

Energy requirements of the plant, estimated at 33,300,000 kwfh,wrill be met partially from the generating station at the plant and par-tially from the Serbian network. Ihe total power demand is estimated at7,500 kw.


Tle labor and supervisory staff will total 2,284X when the plant isin full operation. Of these, 77 will be en,ineers, 371 administrativepersonnel, 860 skilled worklers., 485 semi-skilled workers and 1491 unskilledworkers. Tne top management for the plant has already been selected andthe key skilled workers and technicians are being trained in Yugoslaviaand abroad. In the last half of 1952 about 75 slilled workers wrere beingtrained in cable plants in Yugoslavia; 120 more wJill go to domestic plantsin 1953 and 80 more in 1954. in 1953, 21 engineers, technicians andskilled workers will go abroad for training (2 engineers to Sritzerland,3 technicians and 6 sldlled workers to England and 10 technicians to theUnited States i/). In addition, the equipment suppliers will train oper-ating personnel in the plant. No difficulty Is anticipated in obtainingthe necessary staff for the plant as it wyill be built up gradually. Themanager ard technical director of the plant have already been appointedand appear competent.

1 Under United Nations Technical Assistance Program

- 80 -

Cost of Production

The cost of production at the plant should be reasonaoly low, asit is advantageously located with respect to its principal raw materialsand fuel supply. It will have modern machinery and-equipment and the plantis well laid out for the efficient flowz and storage of materials. As onlyminor quantities of its required materials will be diported, its cost ofproduction will not be materially affected by changes in world prices.

Cost of the Project

The total cost of the plant is estimated at $27,404,000, 19.5% ofwhich w'.7ill be in foreign exchange. The table below shows the cost and

expenditures to the third quarter of 1952.

Expenditures Expressed in Thousands U.S. DollarsEquipFent -

Period Construction Domestic Imported Installation TotalandReparations

To third quarter, 1952 11,515 4,379 1,518 210 17,652lb complete 3,181 2 278 3,827 466 9,752

Total 14,726 5,65,77 5 2?,404

Of the total foreign exchange cost, including reparations, theequivalent of $1.,518,000 has already been financed, 1p,175,000 will befinanced from the German loan and $2,652,000 is desired from the Bank.

List of Goods

The items on wJhich payments will be made from the proceeds of a loanfrom the Bank will include:

Item Amount

Wirebar foundry, complete including spare parts,melting furnaces, casting equipment, moulds,gas producers, induction heating equipment andother accessories $ 858,000

Wire stranding equipment 18,000EJquipment for insulating and armoring cable 848,oooEquipment for rubber insulating cable 478,oooWire enameling equipment 944,ooOWire wxinding equipment 8)4,oooNiscellaneous items, including instruments, hoists,

electric and petrol trucks, tools 27200C0- ~ ~~~52,52,-ooo

About 60% of the equipment to be imported is under contract andrecent quotations have been obtained on the remainder. It will be importedfrom the United Kingdom, Austria, Switzerland, the United States andGermany.

Markets

Yugoslavia, at present, produces bare copper and aluminum cablesfor high and low tension transmission lines almost sufficient for domesticconsumption but none of the other sheathed or insulated copper wire or

cable to be produced at Svetozarevo is manufactured in the country. Sheathed,insulated, and other special kinds of copper wire are at present imported.In recent years these imports have amounted to about $2.5 million per year.When operating at full capacitys howevers the plant is expected to produce

copper wire and cables in excess of domestic needs in varying quantities of

each of these items. On a total tonnage basis about half of the 34'500 tonsof copper items produced will be available for export. All of the reinforc-

ing bars and steel wire rope produceds however, will be consumed domestical-ly. There is a good export market for the copper products at present andit is likely to continue for some time.

Justification

The plant could benefit Yugoslavials balance of payments both by

providing foreign exchange from exports and by saving imports. The valueof the 17,000 tons of copper wire and cable available for export is esti-

mated at $18,48O,0O0. These products, however, contain about 12,500 tons

of copper and lead valued at about $6,900,000 wihich could be exported ifthey were not consumed in tlhe plant. The net value of the exports would

therefore be $11,580,000. The imports saved by the production of the plant,estimated at $2.5 million, bring the total balance of payments benefits to

about the equivalent of $'14 million annually. This is more than double the

foreign exchange cost of the plant.

January 28;, 1953

_- 82 -

VI. INDUSTPY

ii. Chemical Industry - Sabac Fertilizer Project

Location

Sabac is a sizable industrial city in Serbia about 70 miles(airline) west of Belgrade. It is on the Sava River and also on astandard gauge railway line. It is connected with Belgrade by good high-ways. The fertilizer project is a part of the Zorka Chemical Wlorks atSabac.


The Zorka Chemical Plant was constructed in 1937 by a Czech-Yugoslav combine Imown as Zorlca for the manufacture of agriculturalchemicals. The plant was located at Sabac to be near the market for itsproducts rather than near its raw materials. The present annual produc-tion of the plant consists of about 20,000 tons of sulphuric acid (98%strength), 15,000 tons of copper sulphate crystals, 3s000 tons of hydro-chloric acid, 6,000 tons of technical and pharmaceutical chemicals and5,000 tons of insecticides and pesticides, including 2,C00 tons of D.D.T.Less than half of the sulphuric acid is used in the plant; the remainderis used for militai3r purposes, chiefly explosives.

The sulphuric acid section of the plant is in the process ofbeing expanded to add 20 to 21,000 tons of new capacity. The total 98%sulphuric acid capacity will then be 40 to 41,000 -tons annually. Thisaddition is completely financed and it is scheduled for completion earlyin 1953, but most of this new production is already earmarked for militaryuse.

A completely new electrolytic zinc plant is also being erected atthe Zorka Works. The Bank is participating in the financing of thisplant under the first Yugoslav loan by providing $2,480,000 equivalent inforeign exchange out of a total cost of about $4,100,000. It will pro-duce 12,000 tons of electrolytic zinc and 40 tons of cadmium annuallyfrom zinc concentrates produced at Trepca in Serbia. This plant wasoriginally scheduled to be erected at the Trepea zinc mines, but thelocation was phanged to Sabac after the loan agreement was signed asfurther study indicated more economical operation at Zorka in combinationwith other chemical works. It is scheduled for completion about the firstquarter of 195h.

About 2 years ago, facilities for the production and storage ofsuperphosphates (a chemical fertilizer) were constructed, but neverfinally completed as the supply of sulphuric acid intended for this pur-pose was diverted to military uses. As the facilities stand today,they are about 90% completed. They consist of rock crushers and equip-ment with a capacity for the production of 60,000 tons of superphosphateannually, and also grinding and bagging equipment and storage spacesufficient for handling 120,000 tons of superphosphates.

- 83 -

Already available at the site are the necessary industrial rail-road tracks, roads, water supply, repair shops and housing.

Proposed Additional Installations

Plans have been made to b.ing the superphosphate production capaci-ty up to 120,000 tons annually to match the existing grinding, bagging andstorage capacity and to provide the additional h7,OO0 tons of sulphuric

acid (78% strength) required annually for this production. The gasesgenerated from the roasting of zinc concentrates at the electrolytic zincplant would be used, according to the plan, to produce 22,000 tons of thesulphuric acid and 25,o00 tons would be obtained from roasting pyrites ina rotary kiln to be installed at tihe plant. This kiln, which has beenused for burning magnesite at Goles, Serbia,. is now surplus and would betransferred to Sabac. The gases obtained from the roasting of zinc con-centrates and pyrites would, after proper purification, be converted tosulphuric acid oy the Poettersen tower process. Mlost of the towers,tanks and piping required for this process could be fabricated domestical-ly, although it wTould be necessary to import some equipment. Other equip-ment necessary to be imported would include machinery for unloading andconveying phosphate rock, rqck crushers, sulphuric acid plant equipment

and accessories for an additional unit for treating phosphate rock withsulphuric acid.


IWork on the additional superphosphate ficilities is scheduled tobegin in April, 1953, and to be completed about one year later. Procuc-tion is expected to start about mid-195a.

Raw Materials

The raw materials for the production of superphosphate fertilizerconsist of phosphate rock and sulphuric acid. The phosphate rock wouldhave to be imported, probably from North Africa, but the sulphuric acidwould be produced at the plant.

Power

Electric energy for the operation of the superphosphate equip-ment will be obtained from the Serbian network through a substation atSabac. The energy requirements will be relatively small.

Management and Labor

The management of Zorka will provide the necessary staff for theoperation of the superphosphate section from its owm personnel. Bothskilled and unskilled labor for operation is available in Sabac andvicinity. Very little training wrill be required.

- 84 -

Consultants

The only part of the new installations that will require the ad-vice of consultants will be the Poettersen tower process for the produc-tion of sulphuric acid. The German firm which will supply the drawingsfrom which the items (such as tanks, etc.) to be domestically producedwill be fabricated, will also supply the necessary consulting advice, asthis firm will also supply some equipment.

Cost of the Superphosphate Facilities

The additional facilities planned to be installed for the super-phosphate section of the plant are estimated to cost the equivalent of$5,577,000, of which $997,000 is estimated to be in foreign exchange and$)4,570,000 in domestic currency.

The expenditures on the superphosphate facilities up to the endof the third quarter of 1952 are given below:

Expenditures Expressed in Thousands U.S.$:Equipment

Period Construction Doimiestic Imported Total

To Third Quarter, 1952 817 50 330* 1,197To complete 1 620 2 093 667 4,380

21T 473 5,577

* Rotary furnace imported for magnesite project.

The Bank has been requested to provide all of the foreign exchangerequired to complete the project.($6 6 7,000).

List of Goods to be Imnorted

The goods to be imported will consist of:

Department Amount

Pyrites RoastingAccessories for rotary furnace $ 40,000Electric filters with transformers and rectifiers 32,000

Sulplhuric AcidAcid pumps, valves and accessories 22,000Acid cooling equipment 60,000riefractory materials 113,000Equipment for burning a=monia gas 23,000Switchgear and measuring instruments 25,000Blowers 10,000

SuperphosphateRock crushers 94,000Pneumatic pumps 15,000Conveyor belting 14,000Handling equipment 27,000Equipment for removing fluoride 33,000

(List of Goods - continued)

Department Amount

Transport Equipment, including electrically drivenlift trucks, monorail hoist and buckets, equipmentfor handling pyrite wastes $ 58,000

Engineering and Supervision 101 ,000$ 667,000

Markets

All of the superphosphates produced at the plant 'rill be consumeddomestically.

Justification

The additional superphosphate production would contribute sub-stantially to overcoming the deficit in the supply of this type offertilizer in Yugoslavia. In 1951 the consumption of superphosphates wasabout 37,000 tons; in 1952 the consumption is estimated at 30,000 tons.The drop in consumption in 1952 reflects a decrease in domestic supply

due to a lack of an adequate supply of sulphuric acid as imports werenegligible. No figure on the optimum consumption of superphosphates is

available but the use of about 5 times the prescnt consumption is thetarget of the Government in 1955-1956. The project is entirely justified

as its entire production would not meet even the minimum needs for

agriculture.

January 29, 1953

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VI. ITDUSTRY

iii., Non-Nietals - Pancevo Glass Plant

Location

Pancevo is a town of about 25,000 population located in Serbia ona standard gauge railway about 16 kilometers northeast of Belgrade. Theglass plant is situated in the town.


The plant was constructed in 1932. Its original capacity was2 million meters of flat glass. Since tihen the capacity of the plant hasbeen expanded by the addition, in 1939, of installations for the productionof cast and reinforced glass; in 1949, by a department for the productionof ampullae and medicinal glass and in 1951 by the expansion of flat glassproduction facilities. The total capacity of the plant in 1952 was:

Flat glass 4,200,000 square metersCast glass 50,000 square metersReinforced glass 150,000 square metersAmpullae and medicinal glass 500 tons

In 1952 a new cutting room, a warehouse for finished products, astorage room for boxes and packing materials and 3 magazines for rawmaterials were completed, except for 5 heavy duty lifts to be installed inthe new cutting room. Nlew rail connections and roads were also being con-structed.

Prewar and Postwrar Production

The production of the plant prewar and postwar is given in thetable below:

Finished ProductsProduct 1939 1946 1948 1950 1951

Flat glass 1,000 M22 1,679 1,597 2,098 1,757 2,854Cast glass, 1s000 M2 (Average 50,000 so.m.)Reinforced glass 1,000 i2 (Average 150,000 sq.m.)Ampullae and medicinal glass (Average 500 tons )

The cast and reinforced glass is measured on a basis of a thicknessof 2 million meters, although it is produced in varying thicknesses. Asthe new furnaces for flat glass installed in 1951 began operation in 1952,the production of flat glass for 1952 was expected to reach 4 millionsquare meters.

Expansion Program

Ihe expansion program which the Bank has been requested to assistin financing consists of adding a new department for the production of40,000 to )L5,0o0 square meters of safety glass, the expansion of the

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medicinal glass department, and the installation of a small (350 krfY) dieselgenerating unit for a standby power supply. The layout and design of thetwJo new departments were provided by the St. Gobain Company, Paris, France.The safety glass will be used in automobiles, trucks, buses and railroadcars. None of the trucks, buses or railroad cars manufactured in Yugo-slavia are at present equipped with safety glass as no foreign exchange hasbeen available for such imports. The medicinal glass will consist of vialsfor penicillin, etc., test tubes, beakers, etc. The number of units to beproduced will depend on the sizes of the itEms, but on average size itemsthe number would be about 1 million units. The power unit will replace thesmall obsolete unit now at the plant which will not be adequate for theexpanded works.


No construction had been started on the new buildings for thesafety glass and medicinal glass in the last quarter of 1952 as it wasplanned to complete the new cutting room, warehouses, etc., before start-ing on the new buildings. About 200 worlcers were engaged on constructionwork in 1952 and these will be used on the newi buildings in 1953. Orderswere placed in June and July for delivery in .ay, 1953, for about 90% ofthe glass making equipment required for the expansion program and for thelifts for the cutting room. Installation, which will be supervised bySt. Gobain, will require a year to complete and about 4 more months willbe required to reach full scale production. Production from the new de-partments is therefore expected in the last quarter of 1954. The wholeplant is expected to be closed for repairs in the summer of 1954.

Raw r'aterials

The raw materials and other materials required for the plant afterexpansion has been completed, assuming 300 working days per yearp areestimated to be:

Platerial Tons Source

Glass sand 20,000 SerbiaLimestone 6,0oo SerbiaDolomite 8,ooo SerbiaSoda Ash 7,C00 BosniaFeldspar 250 SerbiaSodium sulphate 250 SerbiaZinc o.Lde 40 SloveniaBrown coal 55,000 Bosnia

About 50 tons of borax, 10 tons of selenium, 5 tons of sodium and2 tons of feldspar +-Till be imXported.

Water

The small amount of water required will be obtained from theexisting water supply system of Pancevo.

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Electric Power

Power will be obtained primarily from the $erbian netwyork throughthe transformer station at Pancevo. The small standby station will beused only for emergencies to keep critical machines operating so thatmolten glass will not harden in them.


At present the staff employed consists of 12 engineers and tech-nicians, 288 skilled workers, 300 seri-skilled workers, 400 unsldilledworkers and 70 administrative employees. About 60 additional slilled andsemi-slkilled workers will be required for the two new departments and per-haps a few more administrative workers. The top management is adequate ,and competent to handle the expanded operations. A few technicians will besent to France for training in 1953, but most of the training will be inthe plant under the supervision of the St. Gobain Company which wqillguarantee the production from the equipment wnich it will install.

Cost of Production

The cost of production at Pancevo should be reasonable and certain-ly below the cost of imported glassware of the same quality. As the planthas been operating since 1932, skilled workers have been trained in glassmaking and -will be available for the new departments. Practically all ofthe raw materials required are available within a reasonable distance ofthe plant and the transportation costs should therefore be low. JWith thenew cutting room and the facilities for the storage of raw materials andfinished products, the flow Qf materials through the plant w;lill be muchmore efficiently handled and should result in lower costs, particularlysince some of the materials and products handling will be mechanized throughthe installation of a monorail system and acquisition of electricallyoperated trucks and trailers.

Cost of the Project

The cost of the project, including the construction work completedin 1952, is estimated at about the equivalent of about $7.8 million. Abreakdowi' is shown below:

Expenditures Expressed in Ihousands U.S. DollarsEquipment -


To Third Quarter,1952 20394 1,093 673 536 4l,696To complete 369 139' 483 116 1 108

Total 7 1e32 1,156

The Bank has been requested to finance the balance due on equip-ment to be imported for the plant expansion or about 42% of the totalforeign exchange cost.

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List of Goods

Contracts for about 90% of the equipment required were placed inJune and July, 1'95, for delivery in May, 1953. The types of equipmentordered which would be paid for from the proceeds of a loan from the Bankare:

Type of Equipment Amount

Equipment for safety glass production $ 100,000Refractories 101,300Ilachines for shaping refractories 29,300Diesel generating unit 40,000Monorail tracks 6,000Electric trucks 10,300Cqmpressors 10,000Lifts for cutting room 61,700Electrical equipment 9,000Control and measuring instruments 31,000Laboratory equipment 4,,oooIMIachine tools 10,000Spare parts and miscellaneous 67,300

$463,000

Markets

All of the new production of safety glass and medicinal glass willbe consumed domestically. About 16% of the production of the other itemsproduced is exported principally to the Uiddle East.

Justification

The nea production at the factory will supply much needed safetyglass for Yugoslav plants manufacturing transportation equipment and thuseliminate the future necessity for imports. The medicinal glass willsupply the increased domestic demands for these items. The plant is tech-nically sound and economically justified as it will supply items which inthe future would otherwise have to be imported.

January 27, 1953

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VI. INDUSUZY

iv. Agricultural Processing Industry -

Zrenjanin Starch Plant

Location

The starch plant is being constructed adjacent to the sugar factoryat Zrenjanin, a towmn of about 25j000 population in Serbia, about 100 kilo-meters north of Belgrade. It is located on the Begej River which is atributary of the Tisa River, which in turn flows into the Danube 15 kilo-meters below Belgrade, The critical or controlling depth in the riversbetween Zrenjanin and the Danube is 2.2 meters (7 feet). Zrenjanin isconnected with Belgrade by a standard gauge railway and good highways, andis served from the northeast by a narrow gauge railway which taps a grainproducing area in the Vojvodina (in the northern part of Serbia).

Description of Plant

Zrenjanin was chosen as a site for the starch plant because of itslocation in one of the best grain producing regions of the country andalso because of its good transportation facilities. Plant officials esti-mate that about 25% of the corn to be consumed by the plant will bebrought in by barges from points along the Danube, 55% will come in by high-way transport and 70% by railways. Wharf facilities for handling cornfrom barges and concrete silos with a total storage capacity of 30,000tons of corn, 63% of the plant's annual consumption, are being constructedat the site. A thermal power station which will supply process steam toboth the starch plant and the sugar plant is being constructed between thetwo plants. The beet sugar factory, which has a capacity of 28,000 tonsof refined sugar annually, was constructed in 1911 and its boiler plant isnow worn out and obsolete. Steam from the power plant will save replace-ment of its boilers. The starch'plant is designed to produce annually30,000 tons of corn starch and, as by-products, 14,600 tons of corn wastesuitable for cattle feed and 1,600 tons of corn oil. In a few yearsequipment for the manufacture of glucose and corn syrup will be added tothe plant. No expansion of the beet sugar plant is planned at present.


The construction of theB starch plant was started in 1947 and thepower plant in 194 8 . In November, 1952, the buildings for the starchplant, which are constructed principally of reinforced concrete, were 80%complete, the railway sidings 98%J, the silos 76,', the wharf facilities 95%,and the power plant 97%. The installation of equipment (both imported anddomestic) at the end of November, 1952, was 40% complete in the starchplant, 89% in the power plant and 92% in the silos. The power plant andsilos are scheduled to begin operations in the second quarter of 1953.The starch plant could begin operations early in 1954 provided the importedequipment required for its completion can be ordered early in 1953.

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Rawr Materials

The principal raw material required for the plant is corn, theannual consumption of which is estimated at 48,000 tons. About 755 of thecorn will come from points within 90 kilometers of the plant. The remain-der will come, principally by barga, from more distant points. About80,000 tons of coal w,,ill be required for the power plant. It will comefrom brown coal mines about 350 kilometers by rail from Zrenjanin.

Water

Water for the starch plant and power plant will come from theBegej River.

Power and Steam

The steam requirements of the starch plant and sugar factory willbe in the order of 25 to 30 tons per hour. It will be generated in theboilers at the power plant. The steam will be used in a steam turbine togenerate electricity before it is used in the two plants for process steamor for space heating. To generate electricity, four units of 2,500 k*weach have been installed at the plant. They are expected to produce50 million kwh annually. As the electric energy requiroments of the plant

are estimated at only 6 million kw-ih, the plant will be able to supply the

Serbian netwrorlc with 44 million k-wh.


The starch plant will require about 400 workers for 3-shift oper-ation or about 133 workers per shift. The key skilled workers are beingtrained at an existing Yugoslav starch plant at Jabuka in Serbia. Thetechnical director for the plant has already been appointed; he has hadconsiderable experience in the starch plant at Jabulca.

Cost of Production

The cost of producing starch at Zrenjanin is estimated by theplant's director to be considerably under the import price at the Yugoslavborder which is equivalent to $152.50 per ton. This estimate appears

reasonable because the principal raw material, corn: grown in the vicinityof the plant, should be obtained at a fairly loW cost and process steam aswell as power should also be available at reasonable costs from the powier

plart at the site.

Cost of the Project

The project is estimated to cost the equivalent of $13,358,000,33% of which will be in foreign exchange. A breakdown is given below;

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Expenditures in Thousands U.S. DollarsEquipment


To Third Quarter,1952 4,371 1,902 3,889 1,070 11,232To complete 972 395 493 266 2 126

3lT34 2,p297 s,3b2 1,336

The Bank has been requested to finance all of the foreign exchangecost remaining to be paid, the equivalent of $493,000. This representsabout I1$ of the total foreign exchange cost.

List of Goods

The proceeds of a Bank loan would be used to pay the balances duein foreign exchange on equipment w-xhich is all under contract for both thepower plant and the starch plant. The type' of equipment and balances dueare:

2rpe of Equipment Amount

Power plant

Boiler accessories including pipes, pumps,electric motors, etc. e 231,000

Starch plant

Separators 27,000Automatic scales 12,000Rubber belts 11,000Drying machines 7,000Packing machines 26,000Pumps and pipe 47,000Electrical equipment 13,000Silo equipment 81,000IMiiscellaneous and reserve 38,000

Sub-.Total 0 262,000

Grand Total $ 493,000

The equipment will come from France, Austria, Germany and Holland.

Markets

Until additional equipment for the further processing of thestarch into glupose, dextrines, etc., is installed, the starch will bemarketed both domestically and abroad in the crude form. About 20,000tons of the starch is to be consumed domestically and 10,000 tons exported.All of the by.products,* 1,600 tons of oil and 14,600 tons of cattle feed,would be used within the country. Of the 20,QOO tons of starch for thedomestic market, 2,000 tons are scheduled to go to textile and paper

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plants and 18,090 tons will be used in the food industry as an additiveto wheat flour and, as such, would substitute for imports of this quantityof flour. As Europe consumes about 500,000 tons of carn starch and potatostarch annually (the proportion of each used depends on the relativeprices of tlhe two starclhes), the 10,000 tons expected to be exported wouldnot have much effect on the supply. Assuming that the price would beattractive, there is little doubt that the proposed exports could beabsorbed in Europe or perhaps in the Middle East.

Justification

The production of the plant would not contribute anything to Yugo-slaviats balance of payments, as the foreign exchange earned by exportsof starch and saved by the elirination of im5oorts of wheat flour andvegetable oil wrould just about offset the foreign exchange that could beearned from the export of the 48,000 tons of corn consumed in the plant.This is shown in the followsing tabulation.

Exports

Starch l0,D0 tons @ $152.50 per ton $1,525,000

Imports Eliminated

Wheat flour 18,000 tons @ $160.00 per ton 4$2,880,000Vegetable oil 1,630 tons Q $400.00 per ton - $ 652,000

Total $5,057,000

Raw Material Used

Corn 48,oco tons @ $105.00 per ton $5,040,000

The domestic benefits however, will be considerable. In additionto providing starch and oil for domestic consumption, the investment willprovide Yugoslavia with a processing plant wtnich,' with a relatively smallamount of additional equipment, could process starch further into raorevaluable products such as crystal glucose, corn syrup, dextrines, etc; itwill also provide annual feed valued at about l1 400,000 save the instal-lation of new boilers at the sugar factory and produce 4 million knwh ofelectricity for general consumption.

January 28, 1953

VII. M IODERNIZATION OF TRANSPORT! TION

The Project

The Bank has been requested to finance equipment for railways,harbors and airports. The total requested is the equivalent of $1,950,000..This is a small amount relative to the over-all needs of various types oftransport equipment in Yugoslavia, but the imports for the program ofimprovement are being held to a minimum; consequently the items includedare those of the highest priority. The items are:

i. For Railroads Amount

Electric locomotives, sub-station equipment,signaling equipment, wheel tires and springs $1, 800,000

ii. -For Harbors

Tractors and trailers 100,000

iii. For Airports

Very high frequency radio equipment 15O0,00

Total 52X050,000Details follow:

ie Rail Transport

In July, 1952, there were 11,652 route kilometers (7,224 miles) ofrailways in Yugoslavia. Of these, 8,5('9 kilometers or about 74% werestandard gauge (1.435 m or 4 ft. 8-1/4 in.) and the remainder narrow gaugeprincipally 760 mm (2-1/2 feet). In 1939 Yugoslavia had 10,521 kilometersof railway, or 1,131 kilometers less than in 1952. This difference is anet figure resulting from the construction of 1,087 kilometers of new lines,the acquisition of 368 kilometers of former Italian lines with the newterritory and the abandonment of 423 kilometers since 1945. The railroadsand their rolling stock w-iere sevcrely damaged during the war. Practicallyall of the damage to the road beds and bridges has been repaired, includingthe replacement of most of the temporary bridges, and the inventory ofrolling stock per kilometer of line is slightly better t'han in 1939. Effortsare now concentrated on converting the narrow gauge lines to standard gauge,constructing new standard gauge lines, and increasing the amount'of serv-iceable rolling stock.

In the first loan $504obco was provided for railway workshop eouip-ment, transfer and loading equipment, maintenance of way equipment and20 narrow gauge tank cars. About 60% of this equipment, except the tankcars1 was scheduled to be delivered in 1952 and the remainder, includingthe tank cars, was scheduled to be delivered in 1953.

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The expansion of Yugoslav'.industrys mining and forestry since the

war has thrown extra burdens on the railways. buring the last few years

(1949-1951) they have handled more than double the tonnage and ton-kilometers of traffic handled in 1939. Still greater demands are in pro-

spect. Plans to meet these demands call for a stepped up production of

steam locomotives, freight cars and passenger coaches from Yugoslav rail-

way shops and the importation of electric locomotives, portable sub-station

equipment, and steel wJheel tires and springs rhich are not nowr produced in

Yugoslavia. In addition, some netr signaling equipment is to be importedto increase the capacity of one heavily used section of line in Bosnia. The

amounts of imports required for each of the above are:

Quantity Equipment Amount

2 Electric locomotives and spare parts $ 48o.,ooo2 Railway mounted, sub-stations and

spare parts 24o,0oo

4,700 tons Wheel tires and, sp'rings 580,000Signaling equipment, including

the necessary cable 500,000r4o 800 v °°°

The dinar costs of assembling the sub-stations and mounting the

signaling equipment are estimated at the equivalent of about ~'3,000,000.

Justification

On the electrified section of the railways, Rijelca to Sezana at

the Italian border, where the density of traffic is very heavy, there are

only U electric locomotives available. All are about 20 years old and

there are generally 2 or 3 und.er repair. The daily work requirement on the

electrified section, which traverses rough terrain with steep grades, is

3,500 'ocomotive-kilometers of between 390 to 40 kilometers for each loco-

motive. Frequently steam trPction must be used to supplement the electric

locomotives. Two stean locomotives are required to do the work on one

electric loconotive as the steam locomotives provide less tractive effort.

The addition of 2 more electric locomotives is considered essential to

provide for the increasing work load and to permit the proper maintenanceof the existing equipment, particularly since the electrified section is

being extended by 21 kilometers of new line.

M4ost of the sub-stations through which power is transformed and

rectified for the electr'ic locomotives are in poor condition and need

major repairs. There are no reserve sub-stations available so it has been

impossible to make repars without interruption of service. The new sec-

tion of the line wiUl also require a sub-station. Two railway mounted

sub-stations are considered necessary for the efficient maintenance of.the

electrified section and for the temporary operation of the newr section

until a permanent sub-station is installed.

Ihe lack of a supply of steel wrheel tires is holding up the re-

habilitation of about 300 locomotives and 1,700 freight cars wThich could

otherwise be put into service and there are many otlers which should,

96

according to the regulations, be put out of service because of insufficienttire thickness. Because of lack of springs, especially coiled springs,there are rmiany narrow gauge freight cars running without springs with thewheels attached directly to the frames. This results in many broken framesand increases the percentage of unserviceable cars. Tne imports of springsand steel tires would contribute to the reduction in unserviceable carsuntil such time as these items can be produced in Yugoslavia.

Because of thle very great expansion of industrial and forestryproduction in Bosnia and prospects of still further increases 1/, it isanticipated that the canacity of a very heavily used section o6 the linein Bosnia from Doboj to Podlugovi, a distance of 140 kilometers will bereached in 1953. The alternatives are either to double track the linebetween Doboj-and Zenica, which is estimated to cost the equivalent ofabout $17 million, or to install modern signaling equipment to replace therather primitive, manually operated equipment nowz in use on the Doboj-Podlugovi section. The modern centralized traffic control equipment forth-is section is estinated to cost the equivalent of about 3500,000. Itwould increase the capacity of the section about 125% or from 16 pairs oftrains per day to 36 pairs. The needs in the near future will be for 27pairs of trains.

ii. Water Transport

The only harbor for which imported equipment is requested is Rijeka,Yugoslavia's principal port. In the first loan $500,000 was allocated forthe purchase of a 30 ton capacity floating crane and 7 mobile cranes forRijeka. All of the mobile cranes were scheduled for delivery before theend of 1952 and the floating crane by September, 1953.

The equipment to be purchased for Rijeka under the current loanwould consist of:

10 Tractors 25-30 hp, diesel powJered, rubber tired $ 28,000.0060 Trailers - capacity 5-7 tons 72,000.00

2100,000.00

Justification

In 1950-and 1951., over 1,700,000 tons of traffic were handledthrough the port of Rijeka. BetwJeen 1,800 and 1,900 ,rIrcers were employedin handling this tonnage. For haulage in the port area animal drawn ve-hicles were used. If tractors and trailers were available, loading andunloading of vessels could be speeded up about 10% and about 40 less workerswould be required for handling cargoes. The annual saving in wagcs wouldamortize the entire cost oL the tractors and trailers in about 7 years.

1/ Iron ore from Vares, coke from Lukavac, iron and steel and coal fromZenica, also timber from the south.

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iii, Air Transport

None of Yugoslavia's airports meet international standards fortelecommunications, including the two principal airports in Yugoslavia usedfor international service, Belgrade and Zagreb. Ihese two airports areused by the Swzissair Lines for service between Belgrade and Zurich, and bythe Yugoslav Air Transport Company (Government owned) which provides aninternational service to Austria, Germany, France and Greece. Swissair atpresent is the only foreign line operating in and out of Yugoslavia.

Yugoslavia has been recluested to bring its airport communicationsequipment up to the standards established by the International Civil Avia-tion Organization, a spocialized agency of the United Nations, of whichYugoslavia is one of the 60 contracting nations. To conform to thesestandards and to provide better safety for air transport, the Yugoslav AirTransport, the responsible authority operating airports in Yugoslavia,proposes to install additional telecommunications equipment at Belgrade andZagreb, including approach control and to equip 3 of its planes whichoperate internationally with the necessary complementary telecommunicationsequipment. The foreign exchange required for such equipment estimated atthe equivalent of $153,000 is requested from the Bank. The items requestedinclude:

Items Estimated Cost

Very high frequency equipment for airports * 63,000Very high freauency equipment for planes 30,000Flight control tables 24b,000IHedium wave transmitting and receiving equipment 33 000

Total 150,000The estimated costs include spare parts

Justification

The equipment listed above wiould enable Yugoslavia to equip hertwo international airports with telecommunication equipnent sufficient tomeet minimum international $tandards.

January 27, 1953

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