At the SteelOrbis Annual Italian Steel Industry Meeting held recently in Brescia, Tommaso Sandrini, managing director of Italian flats producer S. Polo Lamiere, provided interesting insights on the problems facing the flat steel sector in Italy.
Turkey as an opportunity for Italian market players
Mr. Sandrini began by underlining the difficult time that the Italian flat steel market is facing, with the lack of encouraging data regarding demand from service centers and end-users. After the deep crisis of 2009, trading volumes indeed observed a recovery in 2010, but the figure has remained 20 percent lower compared to the performance in the pre-crisis period. Sandrini added that in 2011 the results are not expected to show any big changes compared to last year. This is the new normality, he said, and there are few chances of returning to the 2008 levels. Speaking of emerging international realities and new market challenges, the general manager of S. Polo Lamiere stressed that Turkey should be considered more as an opportunity than a threat, both in terms of supply by Italian service centers and the fact that a greater vitality of trade in the Mediterranean can offer new business opportunities, although this can sometimes be accompanied by an increase in market volatility.
Structural problems in Italian flat steel distribution
Mr. Sandrini then focused on the structure of the Italian distribution of flat steel products, highlighting that there are few service centers which are integrated with steel producers and few large national groups, while there is a myriad of entities of medium-to-small size. He said this constitutes a very diverse landscape, excessively fragmented, which has done nothing but amplify the effects of the crisis, particularly with the contraction in volume, low profits, high volatility of performance and increasing financial tensions. Sandrini pointed out that among the Italian distributors of flat steel products an approach often emerges that is too short-sighted from a commercial point of view. This implies undoubted disadvantages, including low profit margins and high costs (labor, tax, transportation, financial, etc.). To remedy this situation, Sandrini continued, it would be necessary to restructure the sector through a policy aimed at reducing the number of players in the market, which would benefit the process of customer loyalty and would make competition between service centers less ruthless compared to the competition seen nowadays. Easy to say, he concluded, but much less easy to do.