We’ve already arrived at the end of 2006. Between leaps in productivity and profit-making, the new global giants and the desire for competitiveness, Federacciai (Federation of Italian Steel Companies) president Giuseppe Pasini weighs up the year experienced by the Italian steel industry and traces the possible development trends for 2007.
An initial assessment of 2006 from the producers’ standpoint?
-Without doubt, the market in 2006 was good, and is not to be considered as a period that will go down in history solely on account of the tonnage quantities spewed from the mouths of the national steel furnaces. Italy plays an important role within the European steel industry and has been showing exceptional results since the end of 2004. In the last two years, in fact, our country is the one within the EU’s borders which has registered the greatest productivity. The positive signals, which can be perused also in the profit-and-loss accounts, are of an importance of higher significance. Indeed, 2006 was very close to the annus mirabilis of 2004, after the more ‘reflective’ year of 2005. In that year only the special steels saw a different trend, producing better results than in 2004. Nevertheless, we are now face-to-face with an important change: China is ever more present in our European markets. This is especially true with regard to coils and wire rod. In long products, however, Italy has become a good exporter – evidence that there are new markets which may be approached. I am referring in particular to North Africa where growing infrastructure is generating plenty of orders.
What will 2007 be like?
-It’s difficult to say, even if the signals seem positive. Perhaps there will not be such a trend of growth, not even on a global scale. China, and Asia in general, may see a slowdown in domestic growth, but gauging these movements is always a difficult task. We will also have to wait and see how the merger processes between the big global players evolve. One thing is certain; with an iron ore market that is now oligopolistical (three group control 75 percent of the global market), it’s impossible to expect a reduction in raw material prices. As regards scrap, on the other hand, we don’t have the necessary conditions to be in a position to make predictions. This market is more fragmented. The fragmentation in Italy is even at an excessive level, which may have a negative effect on price stability.
What effect will the global mergers have on Italy?
-One of the points on which we must reflect is the size of our enterprises in a world in which the principal players are getting bigger and bigger. In Italy, indeed, we have just a single ‘heavyweight’ (the Riva Group), while many businesses live in a regional reality and are medium or medium-to-small in dimension. However, many of these can continue in their given realities while also seeking to be domestic leaders who place the emphasis on niche products.
What are the difficulties which hinder the Italian steel industry?
-Among the most serious factors to be faced is without doubt the cost of energy, which is 30 percent higher than that of our competitors to the north. There’s also the total absence of an energy policy, and the negative effect of the EU directive which aims at implementing a drastic and unsustainable cut to Italy’s quotas for CO2 emissions.
On the other hand, what are the strengths of the Italian steel industry?
-The ability to remain competitive in spite of having to work within a difficult national context. In order to be able to do this, the Italian steel industry has had to invest significantly. We have done so in particular with a view to innovating our products (this is the case with regard to anti-seismic products), and also our production processes. We invest less, however, in research. We have to mention the efforts carried out in the area of the environment; in recent years, we’ve spent something like Euro 900 million in this field, 200 million of this in 2005 alone.