Wire mills in 2019: the point of the situation with Pietro Spina (ITA Spa)

End of the year, time to draw a line on the budget and come to terms with this challenging 2019. We do it with Pietro Spina, Sales Manager at ITA Spa (Steel Group), which produces carbon steel wire for springs, mechanical components, ropes, cable reinforcement and other applications.
Let's get the worst things over straight away, let's talk about automotive.
"A slice of our production is for the automotive industry. The European automotive market, you know, is frozen. Not so much the first months of the year, but especially from June onwards, there was a sharp decline. European policies to reduce CO2, with consequences on the type of fuel used by cars, have generated a great deal of uncertainty in the microeconomics, more specifically in families who don't feel like facing the cost of buying a car, not knowing what type of fuel to choose - therefore they prefer to wait. This uncertainty is entirely shared by the manufacturers of the sector, and this results in a contraction in demand and production, which - in my opinion - will continue at least throughout the first half of 2020.
The world scenario does not change, given the import taxes introduced by Trump towards some countries, which have contributed to further slow down the automotive industry."
How did the company fare in terms of production compared to 2018?
"As ITA Spa we have exceeded 50 thousand tons this year, so we have grown slightly compared to 2018. We managed to achieve this goal by focusing heavily on differentiation and the search for new and alternative markets. At the moment, 25% of our production remains in Italy and the rest is export. Unfortunately, we have lost marginality this year, especially considering the increase in production costs."
How is the price of wire rod, your raw material for wire, going?
"From the point of view of raw material prices it has been a very complicated year, where the predominant theme has been "collaboration". In this respect, unfortunately we have tried several times to collaborate with domestic producers, but the tendency has always been to pursue a policy of price and not of cooperation. During this year, local producers have been quite reluctant to negotiate on prices and, despite our efforts, we have recently been forced to turn increasingly to foreign producers for the purchase of raw materials. Some Italian steel mills, citing price uncertainty as a reason, have recently practiced for several days a "stop to quotations", a choice that is counterproductive in my opinion, because in this way, unfortunately we are only facilitating the entry of foreign suppliers. Faced with similar situations, we have instead chosen the path of continuity: trying to maintain constant quantities and cultivating relations with customers, rather than squeezing the market when conditions are positive and stopping activities when profits are meager."
How will the prices be in 2019?
"For the first quarter, the producers of wire rod go towards a more or less justified increase (given the rising cost of scrap). The demand will presumably remain low, so it's not clear how the two things can reconcile. In general, there is a lot of insecurity."
Apart from the automotive sector, what has happened to your other market outlets this year?
"The non-automotive springs sector has been quite constant; the rope sector as well, with the exception of the last quarter, which has seen a certain downturn. The electricity and telecommunications sectors did not go very badly. All in all nothing striking, but we can say that by exploring markets in which we were not present, and with a good dose of commitment and sacrifice, we managed to raise the quantities a little and to close the year with lower margins, yes, but with the confidence of having built something for the future."
What about the future of the automotive industry? The most pessimistic analysts talk about three years of standstill, others say that the crisis is only a momentary setback.
"One of the alternatives for the future of car propulsion could be hydrogen, but we are still a long way behind. Electricity has major sustainability problems. We are in a transitional phase. If there are no major changes, there is no basis for generating an increase in demand in the automotive sector in 2020."
What is the recipe for overcoming situations like this?
"Seek the collaboration of the entire industry: customers, manufacturers and transformers should work in harmony and in full transparency, leaving aside avarice, for some time. Steelgroup has chosen this philosophy, which is also reflected on the internal side. The Beri family has established a far-sighted business climate based on the idea of the group: from the truck drivers to the managers, serenity and cooperation in the workplace are fundamental to us, in order to offer the best possible service to our customers."