Sidenor: Exports sustained us during a difficult period

Monday, 09 October 2017 14:42:57 (GMT+3)   |   Istanbul

Mr. Mariou, your company has a long history in the Greek steel industry. Can you tell us about how your operations have grown through the years?

Sidenor is the steel segment of Viohalco holding company. Viohalco is a major European metallurgical group listed on the Euronext stock exchange in Brussels, with plants in many countries dealing with production, processing and sales of steel, copper and Aluminum, and also active in real estate development.

Sidenor was established in 1962 with its first steel mini-mill in Salonica in northern Greece. In 1999, we started production at our second mill, the Sovel plant in Almyros, Central Greece.

In 2001, we acquired the third mill of the group, Stomana Industry in Pernik, Bulgaria, and in 2006 a rolling mill in Nikolic, F.Y.R. Macedonia, i.e., Dojran Steel.

At the same time, implementing our strategy for the expansion of our activities in the Balkans, from 2006 up to 2011 we invested in sales and distribution facilities in major Balkan countries like Bulgaria, Serbia, Albania, F.Y. R. Macedonia, Romania, etc.

Today Sidenor, Stomana and their subsidiaries have a liquid steel and rolling production capacity of 3.6 million metric tons annually.

Given the fact that Greece has faced a major debt crisis in recent years, how do you view the current economic conditions in the country and how does this affect your business?

Greece entered a major debt crisis as of 2010, soon after the international financial crisis in 2008, and this has resulted in negative GDP growth every year since then and in the shrinkage of the domestic rebar market from more than 2 million metric tons in 2007-2008 to just 350,000 metric tons today! Private sector building activity is minimal and consumption is only driven by some infrastructure works which are already in their final stage. So the Greek market was no longer able to ensure sustainability for our operations. The strategy to expand our production, sales and distribution activities in the Balkans since 2006, before the crisis, gave our company the critical consumption to sustain its operations during this very difficult period.

This year seems to be a turning point for the Greek economy with marginally positive GDP growth and some signs of development. However, steel consumption will remain low for a few more years.

How has 2017 been so far and what is your expectation for the near future?

This year was the best year since 2009, as we have increased our exports even further to all major markets, and we have started to obtain the first results from a major investment plan implemented from 2014 up to 2017.

Following this plan, we innovated by installing induction furnaces on line with continuous casting at both Greek plants (Sidenor and Sovel), switching off the RHF and reducing costs, as we can achieve 100 percent hot charging without having to use natural gas in the RHF. During the daily peak times, electricity is too expensive and we stop our operations.

In addition, we installed a vacuum degasser in Stomana to produce value-added special round steels (SBQs) for various applications. Finally, in May this year we finished the first phase of revamping the rolling mill of Dojran steel, to produce a wide range of merchant bars, transfer merchant bar production from Sidenor to Dojran Steel and allow Sidenor to produce more and higher value wire rods.

For the near future, we expect to further establish our presence in the Balkans, the MENA area and selected European markets by further reducing our costs and improving product quality and range to meet customer demands. The key concept to achieve this will be the digitalization and integration of many manufacturing, planning, logistics, financial and sales operations.

You are continuously expanding in the international market. What are your investment plans in Greece and elsewhere? What is the average distribution of your sales between the domestic and export markets?

As I already said, there is no other option but to expand in the international market with the low consumption in Greece. However, with the investments we have implemented during the last decade in almost all Balkan countries, we regard and serve all these countries as our main - domestic - markets.

At the same time, we are expanding our business to major Mediterranean countries like Israel, Lebanon, Egypt and other selected African markets, mainly with rebars and wire rods.

For quarto plates and SBQs, we have already established sales in Germany, Italy, France, the US, Austria, and other European and CIS countries.

Assuming as export sales the share of products exported from the country in which they are produced (Greece, F.Y.R. Macedonia and Bulgaria), we export almost 80 percent of our production.

Do you experience any issues with your raw material supply? How do you see the sustainability of your scrap supplies?  

The supply of raw materials, especially scrap, has been always a key issue for our group, as the regional scrap we collect in not enough for our production.

So we always import scrap from major exporting areas like the US, the Black Sea, the UK and continental Europe.

The fact that we keep long-term relationships with key scrap suppliers helps us not to have major issues.

What is your opinion on the short-term future of scrap prices?

After the recent downward correction of international scrap prices, I think that short-term price stability is very probable.

The current supply shortage of electrodes is foreseen to continue into 2018. How does it affect your operations since you have three melting plants?

We have secured the quantities needed for production at our facilities. Of course, with very high prices versus the historical ones for electrodes. We continuously try to pass this surcharge on to our pricing, explaining to our customers that the traditional price driver is no longer only the price of scrap, but also the prices of electrodes and ferroalloys which have increased very much.

We hope that the international supply of electrodes will be restored next year and we will not face further supply issues.

Also, I believe that the long-term excellent relationships we have with the major electrode producers will help us cope with the problem.

How do you think the strengthening of the euro against the US dollar will affect your exports?

Although we import a big share of scrap in US dollars, and this is a hedging on our production costs, we are negatively affected by the strengthening of the euro. Further strengthening may reduce our competitiveness to some markets, but I strongly believe that product quality, service and the relationship with customers are the key parameters for long-term competitiveness.

How do you see the current demand situation in the markets you serve?

Both the EU-28 and the Balkans have been developing well this year and this is also our outlook for next year. The Greek market will remain at very low levels and only the start of key projects will provide some incremental quantities.  Algeria, which for many years was the traditional export market for all southern European steel producers has gradually moved out of the market and new Mediterranean and African markets will emerge as political issues settle.

You have achieved reduction of emissions through your environmental management program. Considering the emissions targets set by EU climate policies, do you have any further plans regarding environmental measures?

Sidenor has recognized that environmental protection is a key parameter for its operations and a cornerstone of its sustainable development.

Investments, like induction furnaces at the Sovel and Sidenor facilities, ConSteel operation at Sovel for continuous feeding of the EAF, as well as a number of many other improvements have made a critical contribution towards reducing the energy required as well as our direct and indirect carbon footprint.

EU climate change targets are very ambitious with the potential to create unfair competition with installations based in third countries with less aggressive goals. We have a strong culture of continuous improvement and we are always looking for technologies and practices that can help us improve our energy and environmental footprint.

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