Fornelli (AFV Beltrame Group): 2021 was good, but now exploding energy costs are worrying

Monday, 25 October 2021 14:39:10 (GMT+3)   |   Brescia

Rising energy costs, sustainability, investments, and the market situation were the main topics that SteelOrbis discussed with Enrico Fornelli, chief commercial officer (CCO) with Vicenza-based Italian steelmaker AFV Beltrame Group.

Can you briefly tell us how 2020 and, so far, 2021 have gone?

2020 was a difficult year, unfortunately, not only on a corporate level but, of course, also on a human level. For 2021, I think no one expected the flare-up in prices and the consumption we have witnessed. I think this originated from the unstoppable improvement in the flat product sector, which, being a predominant part of the steel market, led to an upward effect throughout the sector, at least until May this year. In general, fear of lack of supply pushed buyers to buy material at any price, and even more than they needed. This fear was perhaps experienced less in our sector, that of merchant bars and long steel in general. In July and until September, we experienced a moment of reflection: perhaps people realized that there was no lack of material anymore and the destocking of part of the surplus began; partly also due to the drop in the price of scrap, a decline that has stopped recently. Given the strength with which prices had surged, most players expected a collapse which, however, did not happen. In conclusion, the year remains good for us both in terms of volumes - which are level with and perhaps even slightly up compared to those of 2019 - and in terms of margins. We can only be satisfied.

Which are the factors to watch out for in the coming period?

I would like to emphasize something that everyone is talking about, but perhaps not yet with the right importance, i.e., the explosion of energy costs. Today, we all enjoy satisfactory margins, but the recent surge in the price of energy has led to appalling production costs because we steel companies are energy-intensive companies. This circumstance gives us a lot to think about, especially for the end of the year and the beginning of 2022. The price of scrap has stopped falling and, if it were to reverse [as already happened in Turkey, ed.], the explosion of costs would have an even stronger impact. Our customers need to take this into consideration, because it will be a major problem in the near future. Then, without a doubt, the lack of drivers and trucks is also one of the hot issues of the moment. To overcome the challenges of the future, it will be important to be able to better manage everything that is contained under the term logistics: transport, warehouse management, etc.

Like other steel producers, in the face of rising costs, AFV Gruppo Beltrame Group has decided to slow down production for a few weeks. Was this decision also dictated by the "moment of reflection" you mentioned?

It is useless to continue producing if the market is tired and if there is an increase in costs. Essentially, the goal of the stoppages is to restore tranquillity for customers and recreate a balance between supply and demand. Instead of lowering prices for no purpose, we prefer to adapt production to demand, while suffering a significant increase in costs. We have made and will make stoppages in October both at our rolling mills and at our steel mill.

After the collapse of 2020, according to some of your colleagues in the industry and various experts, a new "super cycle" for steel has begun, i.e., a period of strong growth that has not been seen since before the 2008 crisis. Do you agree?

I don't know if we have entered a new super cycle for steel or not. What I think I can say serenely is that governments have taken important measures by injecting significant amounts of liquidity into the markets, in Italy and in Europe in general. Therefore, I am convinced that this will lead to a good couple of years for the steel industry. How good they will be will surely vary from product to product. Since such measures concern a lot of construction and large public works, I believe that we will benefit from them.

Looking at a much shorter timeline, i.e., from now to the end of this year, what do you foresee?

For the period up to the end of the year, I expect a certain restart of the market, because the significant destocking activity has come to an end. For us, it will be a question of "bringing the ship back to port". This year, as I've already said, was satisfactory.

The group has grown a lot abroad in recent years, particularly in Romania, where it owns the Donalam plant and where it has announced that it will build an eco-smart factory for rebar and wire rod. Can you give us some information on your next investments?

I prefer to answer you like this. There are certainly big opportunities in Europe that we are considering. Ours is a world that cannot stand still; therefore, for the foreseeable future, we are not ruling out operations in the segment we know best, namely that of long products. Ours is one of the most international Italian groups and has the peculiarity, which I always like to point out, of being the longest-lived steel group in the hands of a family, which is important for us in terms of values - this year marks the 125th year of its foundation!. The Beltrame family is in its fifth generation and this is a cause for pride for all of us. Young people certainly want to move forward, so the company will not stand still. The family has every intention of continuing to invest.

Speaking of sales, how is the situation at a European level? Are there any significant differences from country to country?

At the market level, the situation in Europe is rather uniform. There are some areas where there is great competitiveness, but that is a part of the game. Clearly, there are markets like northern Europe that have always been more stable, but in general it has been a good year everywhere.

As for other steel players, sustainable development represents a fundamental value also for AFV Beltrame Group, so much so that the group presented its first sustainability report this year. Can you tell us something about your approach to sustainability?

For us, two fundamental points are our attention to everything we call the environment and our attention to employees at the group level. One of the objectives is to be able to convey a sense of belonging to the company, so that our collaborators are happy and proud to work at Beltrame. All this is achieved with policies aimed at the growth of our people both in terms of welfare and professional development. It is not an easy task, especially when you have companies abroad, because you are confronted with different cultures. As regards attention to the environment, we have greatly reduced energy costs, cutting them by five to six percent at our plants in the past year and in terms of CO2 emissions we are among the lowest compared to the European average. For years, we have been careful to cultivate dialogue and collaboration with our stakeholders. We steel companies have spent too much time without communicating and letting the world judge our sector without having knowledge of it, without explaining who we are, what we do, how much we invest in making our production cycles more sustainable and how much we are a real circular economy. I always love to say - we start with the scrap, something that the world throws away.

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