Enrico Fornelli: “The merchant bar market will continue to suffer in 2011.”

Friday, 03 December 2010 14:37:56 (GMT+2)

49-year old Enrico Fornelli started his career in the steel business in 1987, as rebar seller for the Turin-based company Acciaierie Ferrero, now called Siderurgica Ferrero, where he became the manager for sales in the Northern Italy and, then, CEO of some Siderurgica Ferrero's subisidiaries abroad. In 2001 Siderurgica Ferrero was acquired by Gruppo Beltrame, where Mr Fornelli is currently holding the charge of Sales Manager.

Dr. Fornelli, could you define the Gruppo Beltrame core-business? What are the reference markets of your company?

Gruppo Beltrame, founded by the Beltrame family in 1896, leads the European production of merchant bar and hot rolled  products which are mostly used in the mechanical industry, in the metallic carpentry in the shipbuilding and in the construction industry. Our equipments, with an output capacity of over 4 million mt, consist in four electric mills and fifteen rolling plants, which are based in eleven plants spread in Italy, France, Belgium, Switzerland, Luxemburg and Romania. Gruppo Beltrame currently employs about 3,000 people. Concerning the key markets, they are mostly represented by Europe - with a share of almost 50% (65-70% in Italy) - and MENA, along with a fair presence in the CIS area. Speaking of spot business, our activities are worldwide.

What do you think of the earnings and the financial results the company achieved in the last two years?

2009 was certainly a negative year, in line with the very bad period that the global steel markets had to face, with exception of the emerging countries. Our company saw a 40% loss in sales. Nonetheless, we kept on investing and, in the meanwhile, we pursued a policy of cost containment, including production cuts. In 2010 our sales performance is on the last year levels (even if the turnover increased due to the higher prices) and the profit and loss account should break even. Of course it will be hard to return to the pre-crisis levels.

How do you think the role of Gruppo Beltrame is going to evolve in the global steel market? Have you got any investment plans, are you looking for new markets or going to launch any new products?

Diversification, both on products and on the geographical distribution of the production locations, is a necessary condition so that Gruppo Beltrame is able to maintain the leadership in its market. This is the only way to divide the risk and to gain the much-needed flexibility to adapt to market changes.
Regarding investments, we recently made our debut in the beam market, commissioning a new rolling mill in Gerlanfingen (Switzerland). We are counting a lot on this operation, also because of its good geographical position, in the heart of Europe.  Meanwhile we are upgrading all the other plants, including Marghera, whose production is mostly directed to the shipbuilding sector. Talking in general, we aim to improve the quality of our materials, in order to reach new markets and extend our presence. Last but not least, Gruppo Beltrame gives values to the human aspects, such as team spirit and sense of belonging, qualities that must be present within anyone who contributes to the company's business results.

What are the structural characteristics of the merchant bar business in Italy?

The Italian steel industry traditionally has a strong family connotation, especially in big companies. Gruppo Beltrame is no exception: the Beltrame family has been running the company for five generations. This brings crucial benefits: decisions are taken with velocity and efficiency, and there is a higher harmony among the several management centres of the group. Gruppo Beltrame is an international top player in the merchant bar business, still we have the goal to broaden our view and be able to answer with alacrity to the business impulses.
Another sore point is the sector configuration concerning the distribution, where we have an overwhelming number of subjects and an extreme fragmentation, which finally leads to a market distortion. Against this situation, I think there must be a sort of natural selection in order to get a sector that is more clear, as well as more organic and efficient.

Under the structural aspect, what has been the historical evolution of the sector? What will be its characteristics in the future?

In the last years the Italian (and European) merchant bar sector saw a process of producer-concentration, with a sensitive reduction in the number of subjects. In a 20-year period (1986-2006) Beltrame made a series of important acquisitions that allowed it to absorb the main competitors and, as I stated before, led the group to grant its indisputable leadership within the European merchant bar market. As far as possible, this trend will likely continue in the next years, both for Beltrame Group and for the other top competitors that are still on the stage.

Could you give us a brief analysis on the current phase of market activity? What is your general sentiment about the next year?

In this post global crisis phase, it is rather difficult to make reliable predictions. The market is hysterical, with a constant price volatility, but the focal point is the final demand. Much will depend on how it performs, and the predictions for the next year do not leave much room for optimism. Furthermore, another main concern relates to the chronic condition of overcapacity: in Europe the current annual demand of merchant bar amounts to 4 million metric tons, while the output capacity reaches 5-6 million metric tons. This gap is way too large. In addition, the emerging countries are investing a lot to improve their capacity (out of all, the MENA region is the most emblematic), so European steelmarkers will have less and less room for exports in those regions. On the contrary, we will have to face an increased pressure on imports. To make it quick, the merchant bar market will probably continue to suffer in 2011, even if, after the collapse of 2009, a process of recovering has started and will probably go on in the next years, in line with the Beltrame Group's philosophy to go towards the future with a bag filled with optimism.

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