Maurizio Calcinoni, a graduate in business economics at Milan's Luigi Bocconi University, is vice president with the marketing portfolio at Cremona, Italy-based steelmaker Arvedi Group.
What is Arvedi Group's core business? What are your current investment projects?
Arvedi Group, founded in 1963 by Giovanni Arvedi, produces state-of-the-art black, pickled and galvanized hot rolled coils, carbon welded pipes, stainless welded pipes for application in highly corrosive environments, and stainless precision steel strips with minimum thickness of 0.05 mm. Our business is mostly focused on the Italian and EU markets, although our products are progressively entering the MENA (Middle East and North Africa) markets and, more recently, Brazil and the USA.
On the investment side, the company is implementing a five-year plan focused on all operational divisions, aimed at enhancing the group's output capacity, and at expanding and developing its product range. We may remark that Arvedi has the advantage of its exclusive ESP (endless strip production) process for the production of hot rolled coils. This consists of a single plant which directly transforms the liquid steel into coils in thicknesses as low as 0.8 mm through a continuous rolling line composed of three roughing stands and five finishing stands. This technology requires minimal space - the whole line is only 590 feet long - and works at amazing speed, as it requires only four minutes for the whole process. Meanwhile, the ESP system, because it involves a continuous process, reduces energy consumption to minimum levels.
Considering the recent global crisis, how do you rate Arvedi's financial and operational results in 2010? Would you say the worst is over?
I would state that Arvedi Group has emerged from the most difficult period. Both operational and financial results in 2010 were satisfying. After 2009 the group has indicated a revival, showing a steady though slow recovery in its performance. Moreover, in the most difficult period the company managed to keep employment levels as high as possible. The outlook for 2011 is positive and Arvedi expects to continue on its way to full recovery.
The raw material market (coke and iron ore) has been characterized by significant tensions and changes. Has Arvedi's choice of scrap-based production been successful?
The international iron ore market has been witnessing strong tensions, especially due to the high demand coming from emerging countries, especially China. This has somewhat upset the previous equilibrium. Certainly, the situation in the coal and iron ore markets has indirectly influenced - through the trend of pig iron prices - the ferrous scrap situation, and scrap is the raw material on which Arvedi's steel production is based. Nonetheless, we are satisfied with our choice of production based on scrap, a material that involves lower CO2 emissions compared to blast furnace production.
The European Union is about to introduce new regulations concerning the trading of ferrous and non-ferrous scrap. What is your opinion on this issue?
By the end of the current year, the European Union is expected to enact a series of important regulations aimed at clarifying the classification of scrap. Specifically, ferrous scrap will be considered as a secondary raw material, rather than as waste. This is strongly desired by steel industry players, because a homogeneous regulation in Europe would ease trading activity for scrap and would make transactions less complicated on a bureaucratic level. The market would be more fluid, open and favourable for market players.
In the last few years, especially after the global crisis, some countries have adopted protectionist measures. How do you consider this phenomenon? How should the European Union react to this new situation?
Excessive protectionism leads to serious distortions in the global steel markets, altering the free trading environment. In addition to the traditional measures that may be adopted by customs authorities, I would underline the issue related to the rules for CO2 emissions control. In fact, there are big differences between the European Union legislation and the rules effective in other regions of the world. This situation creates a sort of veiled dumping in favor of those steel operators who are subject to more lenient environmental rules. In other words, the European steelmakers have to face much higher production costs compared to the other steelmakers around the world, and this results in a loss of competitiveness for EU steel suppliers. This is why we are calling for balanced EU policies, in order to achieve a decent level of competitiveness for European steel companies as well.
What is your view of steel industry overcapacity in developed countries?
It is without doubt a matter of concern. With regard to Europe, I believe that the steel market will need to cut steel output by 10 to 15 million metric tons, otherwise it will be difficult to reduce the gap between demand and supply. Turning to China, I think the authorities there are effectively implementing a program for cutting national steel output levels. However, in my opinion, most of the old plants will be replaced by modern eco-friendly plants, and so overall steel production will not decrease much.