The atmosphere of high volatility and risk will persist in the Mexican steel industry and around the world, mainly due to a lack of commercial discipline and production stability, said Armando Lozano, CEO of Villacero’s Steel Sector, in an exclusive interview with SteelOrbis.
The executive—who has 38 years of experience in the steel industry—noted that “in recent years, both national and global steel industry has been operating in an extremely difficult environment; facing a severe crisis that observed during the economic turbulence of 2008 and 2009.”
Lozano added that weak global demand from end users of steel has led to excess capacity in the market of between 25 and 35 percent, which has depressed profit margins for those involved in the supply chain. However, despite how dark the outlook might seem, Villacero as a whole trusts that countries most affected are “working hard to address these challenges and find solutions.”
In recent years, Lozano said, “industry players have been facing a number of structural and market challenges, partly caused by the fall in demand from China and the devaluation of the ruble and yuan, as well as other currencies of emerging countries, coupled with the lack of discipline in managing the supply of steel products,” which is causing a decline in prices and market distortions on a global, regional and local level.
In this context, Lozano quoted the World Steel Association (worldsteel), which estimates that global demand for steel will remain stagnant, declining 1.7 percent in 2015 and increasing only 0.7 percent in 2016.
“It's a global problem caused by the lack of commercial discipline and a stable, productive system, which cannot be determined overnight; so it is difficult to predict short term increases in global steel demand and price improvements.”
Faced with the unprecedented severity of the challenges currently facing the world's steel industry, Villacero has been implementing cautious commercial programs favoring the protection of their assets and profitability in the medium and long term, according to Lozano.
Villacero has operated in the Mexican steel industry for 60 years, dedicated to the distribution and processing of a wide range of flat, long, special, coated and tubular steel products and a wide variety of services to meet the requirements of customers in the construction, distribution and manufacturing sectors.