Steel prices, raw materials, prospects. A word with P. Spina (ITA Spa)

To say that the latest period was tense for all sectors, including the steel wire market, would be an understatement. Rising steel prices, shortage of raw materials, high expectations for the upcoming months; the entire industry is in turmoil. We had a conversation regarding these issues with Pietro Spina, Sales Manager at ITA Spa (Steelgroup), an Italian company specializing in the supply of drawn steel wire for cable reinforcement, lifting and transport ropes, off-shore applications, and spring production.

What's behind this price increase?
There are actually multiple reasons. First of all, there is a general shortage of wire rod, while the demand is high, especially for low-carbon steel, which is driving up prices. This situation also pushes up the prices of medium/high carbon steel. In addition, there are other concurrent reasons. Steel producers, who are upstream, have closed 2020 not in a positive way; this is because the global demand has experienced a strong contraction (in March-May 2020), coupled with an increase in the cost of raw materials such as iron ore and scrap.
The drive toward decarbonization is pushing steel companies to reorganize their production cycles, forcing them to make new significant investments. China has started to grow and to “consume” steel once again, thus considerably decreasing its export share, especially of low carbon steel. This has also contributed to disrupting the world balance and has caused a lower availability on the European market. In short, all these factors have contributed more or less equally to the price increase we are witnessing today.

Is there possibly some speculation too?
In part, yes, although for the moment it seems - at least 80% - justified by what I was saying earlier about steel producers.

How is the cost increase of wire rod affecting your prices?
Many customers are aware of the underlying context, so they are more willing to accept some tweaks on finished wire prices. Unfortunately, since Q4 2020, the cost of wire rod has been increasing steadily. However, our prices remained more or less unchanged in that very time frame. As a result, we are late on price raises, and we are no longer in a position to postpone the issue in the negotiations with our customers. We understand that some of them have financial problems, because they are not adequately supported, but today we see ourselves forced to apply all the increases at the cost of giving up some orders, because otherwise margins would be too low.

Million dollar question: how long will it last?
Historical analysis would tell us that prices should decline or settle around the summer vacations, considering the current growth curve; but unfortunately the pandemic has turned the table. Let's take automotive, for example, which was already coming off a down year. With regulatory and economic uncertainty looming over, registrations and manufacturing activity in this field dropped significantly in 2020. However, it seems that efforts are being made to revitalize demand and, I must say, production numbers appear to be very positive today. Well, the same cannot be said for new registrations.
The picture is largely the same in the construction industry as well. We all know that a big machine is being set in motion in relation to European funds. Sixty structural public works will have to be completed by 2026. This means that we will be able to live a few booming years, with the construction industry inevitably driving other sectors, such as electricity and telecommunications. All this suggests that prices will not come back down anytime soon.

Given the scarcity of material on the market, have you made any changes in the choice of your suppliers?
Certainly the intention is not to change the relationships with our historical suppliers, although at the same time there have been new openings. We are striving to increase our reliability and quality even more.

We haven't talked about it yet: but how did 2020 go for you?
It's been a special year for everyone, but if we pull the strings, we can say we are satisfied with the work we have done: in terms of quantity, as ITA Spa, we have almost broken even in 2019, reaching between 50 and 60 thousand tons produced. For this result we have to thank both our Italian and foreign customers who have supported us. The relationships with some historical customers have been strengthened even more, making up for what was lacking in terms of general demand. We have been rewarded because we have always been able to guarantee the supply chain. Working for the medical, electrical, and other essential sectors, we had the opportunity to continue production without virtually ever stopping. The owners, Andrea and Gianni Beri, always present in the company even in the hardest moments, have supported the production activity at all times, giving a great example of dedication to work. And a special thanks also goes to our workforce, for responding positively even in the darkest moments, showing a great sense of responsibility and belonging to the company.

What was your export share?
Around 80%. Our figures have increased a lot in everything that is extra-EU, such as Russia.

Any projects for the future?
Currently, the biggest project is to face the day-to-day reality in which we are all living. Of course, we look to the future, which always leads us to treasure our defeats and overcome our limits, so as to accept the new challenges coming our way.
There are many projects, but unfortunately their development has been frozen to a halt, because of Covid-19. Let's say that we plan to expand production, giving an increasingly efficient service to our customers. In any case, service and quality are and will be the two cornerstones at the base of all our choices.