Will these be the new price standards? How do wire mills position themselves in the debate that sees steel mills on one side and finished product manufacturers on the other? How did this 2021 go, and how will we face the months to come? I spoke with Pietro Spina, Sales Director at ITA Spa of Steelgroup—a brand that brings together several companies involved in the production of steel wires, bars, and strands.
How would you define this year?
Complicated and two-speed. The first part of 2021 (until August) was characterized by sustained demand in all sectors. From September onwards, however, there was a settling down. Q1 and Q2 saw prices rise exponentially—a trend that was maintained in the second half of the year. If we were to take stock now, at the end of 2021, I can say that the price of high-carbon steel has almost doubled since July 2020. These increases were generated first and foremost by increases in raw materials, such as iron ore, scrap, and coal. Steel mills – which have been in distress for multiple years – used these reasons to realign their prices. The increases were justified, in my opinion, for the first part of the year. After that, I think a speculative aspect took over in some cases.
So I guess you had to pass on the increases you experienced to your customers.
The application of the increases on our part has been delayed by one to three months. Such an imbalance can have important consequences on margins. In 2021, almost every quarter has meant new increases, which is why I say it has been a complicated year! In terms of quantity, we are at +15% compared to the previous year, which has offset significant decreases in sales margins.
The prices of some raw materials are falling.
Yes. For instance, iron ore has returned to 2020 levels. However, the energy costs are now cascading down to our production costs and those of both our suppliers and customers. We are talking about an increase of 80-180 €/ton. Clearly, together with energy, there are the increases in methane and fossil fuels, which have a critical impact on transport costs.
What is the scenario, in your opinion?
On the one hand, I don't see a decrease in prices happening soon. On the other hand, considering the important increases in energy and methane, further increases in raw materials are to be expected in the next quarter.
Steelgroup touches a variety of fields: construction, automotive, telecommunications... Are there more promising markets than others at the moment?
All sectors are developing, except one: automotive. Construction is getting back on track; the electrification caused by the increasing importance of networks and telecommunications is driving the demand for electrical conductors; the shift from fossil fuels to green energy is also going in this direction. The automotive sector is and remains a major unknown.
The last time we had a chat – in March this year – you talked about a "physiological freeze" on your investments; has something unblocked?
Very much so! From the beginning of the year, ITA went from occupying an area of 45,050 sqm to 70,000 sqm; we are preparing the ground for a major production expansion; new areas are ready for the storage of materials and for workers (changing rooms, canteen and recreation areas, etc.). The common denominators of this operation are: attention to the customer, to the quality of the goods, to the operators, and to the environment. We have recently purchased two new drawing lines – we have bought 7 of them in the last 5 years – to expand our production range. The maximum diameter of our wires has thus increased from 14 to 18.5 mm: a request we have received directly from some of our customers belonging to the spring sector and other fields.
An investment that came at a critical time!
True: not a time of contraction of demand, but of unexceptional gains due to the incidence of raw material. The project aims also at optimizing internal flows and costs. So yes, certainly the phase is delicate, but this investment was truly strategic, and we must give credit to the courage of the owners—particularly Mr. Andrea and Mr. Gianni Beri.
More news from Steelgroup?
MAB is also in turmoil. Two new lines will be active by 2022: a combined drawing line to increase the production capacity of round bars from ø13 mm to ø25 mm and a new line for marking ø11 mm to ø75 mm hexagonal products. These will allow the company to keep pace with the demands of customers and to acquire new portions of the market by increasing production volumes.
What is your export share?
Around 75%. We can say that we are reaping the benefits of our previous work. Many foreign customers have recognized the efforts we have made and are rewarding us with new orders.
In your opinion, what effect will the abolition of duties on steel made in the EU by the United States (see EU and US hit the pause button on their steel and aluminum trade dispute) have?
The feeling is that it will open the doors of the US to lower quality products and producers. Previously, Americans used to buy only prime-quality steel products in Europe, as a 25% duty was absorbable and somehow justified. With the fall of the duty system, a bit of everything will set foot on American soil. There may be an influence on prices, but I don't think it will have a great impact on European dynamics.
We expected a quieter Q4, but...
But no! Energy increases came to add to the problems of scrap shortages; then, the lifting of US Section 232 duties... This end of the year is more eventful than expected. From our side, I can only say that we are prepared to face the future with realism and passion: our aim is to acquire an increasingly important position on the European market without ever neglecting the quality of our product. This is our mantra.