Hellenic Halyvourgia: Shortage of electrodes supports margins

Friday, 06 October 2017 10:37:24 (GMT+3)   |   Istanbul
       

Mr. Korkovylos, we know that Hellenic Halyvourgia is the first steel plant built in Greece and is of huge importance in the Greek steel industry. You are also a very well-known figure not only in the Greek steel industry but also among the IREPAS community and the wider European steel industry as well. Could you please tell us about Hellenic Halyvourgia - about the company’s growth, the problems faced during the crisis years, the current state of the company and its production range?

Τhank you very much for giving me this opportunity.

Our company is the result of the merger in 2004 between Halyvourgia Thessalias which was established in 1963 and Helliniki Halyvourgia which was the first steel plant in Greece, set up in 1938. The company has two mills, one in Athens and one in Volos, and both locations have steel plants, rolling mills and wire mesh plants. During recent years, the Athens plant has substantially reduced its production due to the economic crisis and the company has focused on production at its Volos facility.

Greece has been through a 10-year recession. This is a world record. Domestic demand for rebar and wire rod collapsed, falling by 85 percent due to the slump in construction activity. During these unprecedented times, we have had to change many things in our company and to restructure in order to become more flexible and extremely efficient. We are operating one of the most efficient steel plants in the world and this has enabled us to succeed. The company has become much more export-oriented and this is the way we are planning the future. We are producing billets, rebars, wire rod and wire mesh.

What can you say about the prevailing economic situation in Greece and its impact on your company?

As we said above, the economic situation is terrible. We expect that there will be some growth in the future, mainly coming from foreign investments - especially in the hospitality sector, due to the big wave of tourism that Greece has been experiencing.

How do you evaluate 2017 so far and what is your expectation for the rest of the year?

The year has been tough for European rebar producers since Algeria was absent for eight months. In addition, scrap prices have been firm and that depressed margins. We expect a good fourth quarter due to Algeria issuing some licenses and demand picking up. In addition, we believe that the shortage of electrodes will curtail production and this will support margins. Scrap prices have been too high for too long.

How is the recent change in the euro/US dollar exchange rate is affecting your business? What is your expectation for the currency going forward?

Since we operate in the euro zone, we obviously prefer a softer euro. We believe that a ratio of 1.1 is more logical. At 1.2 we have a harder time competing. My expectation is that we will be at around 1.2 for the next 12 months. But of course this can change very quickly.

Hellenic Halyvourgia has multiple production facilities. Could you briefly describe your raw material procurements? What would be the average distribution of local versus import supplies?

We buy scrap from the Greek market but most of the scrap we use is imported. We import mainly from European countries (northern and southern Europe), the Balkans, the Black Sea, and whatever we can find in the Mediterranean Basin. We buy about 400,000-500,000 mt of scrap annually.

Are you experiencing any difficulties due to the electrode shortage in the market? The current supply crisis situation is foreseen to continue into 2018. What is your prediction?

We are not experiencing a shortage, but we cannot increase our production further. So in fact yes, this is like a shortage. We believe the electrode situation will persist in 2018 and that is why transformation costs will increase substantially.

What are the main markets for Hellenic Halyvourgia? What percentage of your sales goes to the domestic market and what percentage is for exports?

Most of our markets are currently export markets due to the disastrous situation in Greece. We are exporting mainly to the Mediterranean Basin, North Africa, the Near East and the Balkans. We are now also looking further afield for potential export markets, but it is too early to say more.

We understand Hellenic Halyvourgia supplies long steel products to construction and infrastructure projects. Could you tell us more about these projects?

We have established links with most major contractors in Greece and we have been serving them in past decades, in all respects. These projects include roads, bridges, tunnels, ports, etc. - whatever has happened in Greece during the last 50 years.

Considering the general consensus that China’s exports have been decreasing, do you believe that the effect of China on the global steel market is really diminishing in a sustainable fashion?

I think that this is circumstantial. China this year has had incredibly strong local demand and that helped them and also helped the rest of us. On the other hand, we all experienced high scrap prices because suddenly the billets coming from China disappeared. So the drop in China’s exports increased our costs!

I believe in the free markets. So I think that protective measures are a difficult game to predict. In any case, China has  a huge and efficient steel capacity using iron ore and producing steel at a good cost. So the China effect will always be there.

There are many different approaches to protectionism in the steel industry worldwide. What are your thoughts on protectionism in general, and in particular on implementations in Europe and the US?

A level playing field is crucial for trade and for the progress of economic development. If one country starts with protectionism, then of course all others will follow. That will not be good in the end.

Any final words for our readers?

We believe that the steel markets will do better in the coming years. The electrode shortage, the Chinese self-restrictive policy, US local demand and European demand should be able to support better margins. Of course, as always, self-restraint from steel companies around the world is also a prerequisite in order to have a sustained period of profitability.


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