Steel is one of the key elements for a developing economy, as it is used in industry and the construction sector.
“The first quarter was very weak in terms of steel consumption against last year. Unless a miracle happens, we estimate that this year steel consumption will continue to decline, to 2.5 million tons. This is the lowest level since the crisis began. The consumption decline was gradual and from 4.2 million tons in 2007 it reached 2.7 million tons last year,” said Petru Todoran, general manager of the Romanian Association of Metal Distributors (ARDIMET).
Sales of the 22 leading companies in the steel sector last year fell by 5.9% against 2011, to EUR3.5 billion, according to ZF calculations and the company posted total losses of EUR70 million because most facilities operate at below capacity due to lack of demand.
In the last four years the Romanian steel industry has been loss-making. Those same companies had made profits of EUR207 million in 2008, the last year before the start of the international crisis.
Last year companies in the steel industry laid off around 2,100 people amid sales declines. Since 2008 over 10,300 steel industry employees have lost their jobs, i.e. a third of the total.
Industry specialists say under normal circumstances companies in this sector will not make further layoffs.
“I think we have hit the bottom and cannot go further down unless a catastrophe happens at Sidex [Arcelor Mittal Galati],” says Petru Ianc, general manager of the Romanian Metallurgy Company and former manager within the Economy Ministry.
He says the decline in Romania is stronger than in Europe.
“I think the government needs to intensify its ties with the owners of major groups and find solutions so the latter don’t cut production further, and so that closures occur in other countries, not in Romania,” Ianc added.
The total turnover of the 22 steel companies is 16% lower than the peak reached in 2008, but the performance differs from one group to another.
So, while Tenaris and TMK, two of the world’s largest pipe manufacturers, have significantly boosted their turnovers on the Romanian market since 2008, companies within ArcelorMittal and Mechel groups recorded declines.
The largest steel producer, which owns one third of the market, ArcelorMittal Galati, boosted its turnover 10.5% last year, to EUR1.2 billion, but sales are 38% lower than in 2008.
Mechel Targoviste (COS.RO), the third largest producer on the market in 2012, also had lower sales against 2008, a 28.2% decline to EUR216 million.
On the other hand, Tenaris Silcotub Zalau, controlled by the Rocca family of Argentinean-Italian origin, has seen an 80% sales increase since 2008, becoming no. 2 on the market with turnover of EUR374 million. Tenaris last year obtained a record-high profit of EUR51.9 million, double as high as a year before.
Russian TMK plants in the Romanian towns of Slatina and Resita boosted their sales by 10.8% and 33% respectively since 2008 and last year reported profits of EUR9.5 million and EUR8.2 million.
One explanation for this performance is that ArcelorMittal and Mechel mainly address markets that have contracted significantly since 2008 – the shipyards and the construction sectors – while Tenaris has capitalized on the rising trend in oil and gas exploitation and from the shale gas effervescence.
“TMK makes pipes for engines and the auto industry. This market has not grown since 2008, but Romania has been used by the Russians as a gateway for sales to the international market,” Ianc also said.
(English version by Daniela Stoican)