The situation of wire rod and wire drawing companies: we take stock with Caleotto

Recently we had the opportunity of interviewing Alberto Lombardi, commercial manager of Caleotto rolling mill, based in Lecco, Northern Italy.
It has been an interesting opportunity to know something more about the moment that the wire rod manufacturing and wire drawing companies are living, according to the opinion of a protagonist in this field.

During a recent meeting about wire drawing companies, which took place in Lecco, it emerged that in the whole Italian supply chain the wire rod producers are the ones which are doing harder time (-7,1% in 2016/2015). What is the point of view of Caleotto?

Generally speaking, we can’t do anything else than to confirm what's been reported. In 2016 we operated in a particular market, influenced by the instability of raw materials and by complex international dynamics which hit the quotations and the margins. As regards our company, we have to consider that Caleotto officially started its industrial activity in 2015 and 2016 has been the first complete year of activity operating in unusual markets for the historical company of Lecco. Today bolts production, cold forming, high carbon are relevant sectors in Caleotto’s production, but they were very marginal in the past. So in 2016 we paid all the charges connected to opening a start-up - this is what it's about. Considering the contest, Caleotto entered the market in a difficult moment and the results we had in 2016 prove it. Anyway, the investment plans confirm the will of the stakeholders to continue along this road, rising up the technological level of the plants to operate with more and more competitiveness on the national and international market.

From your privileged position what’s your opinion about the wire drawing market?

Looking at the supply chain and considering the analysis showed in the above-mentioned conference it emerged that after the wire rod producers the ones that are having hard times in Italy are the wire drawing companies. For this reason Caleotto and the wire drawing companies can be considered allied in challenging a more and more dynamic, complex and demanding downstream market. From this point of view, being located in the center of an important market square for the wire industry, Lecco, strengthens our bounds, changing sometimes the relationship “customer-supplier” in a true long-time partnership. In a so particular market situation, we saw how during these months the wire drawing companies find themselves in the cross-fire between the producers, which are often obliged to rise prices (due to the rising costs of scrap, electrodes, refractory materials) and the customers that are not able to absorb these price increases from one month to another. This inevitably leads to reduced margins.

How much has the instability of prices in the raw material market affected your activity lately? What do you think will happen in the future?

The instability of prices in the raw material market (in our case mainly scrap) deeply affects internal cost components. It is important to know that there are also “new” cost components, or should I say, components that have always been there, but that today have a greater weight than in the past. I refer to energy, that in a cyclic way and depending on international issues affects the costs of production and transformation. But we talk also about the renowned electrodes and refractory materials that have increased their cost from few € per ton to 30 or 40€/ton in few months. In the future, assuming that this situation will last also during next year, we will face a probable growth of scrap on the international level which, combined with a high demand for steel and with the absence of some Chinese production, will contribute in spreading the tension through the market.