Is the bending industry on the brink of a new era?
Mr Sülzle, a few words about the current situation on the steel market?
With the outbreak of the war in Ukraine, the energy and raw materials markets have exploded. The prices for reinforcing steel, bearing mats and wire rod have risen by more than € 500 per ton. That is more than 60 percent. At the same time, supply has been massively disrupted. Such a situation is unique and presents us with enormous challenges.
The word disruption is circulating through many industries. Is the steel world now experiencing a turning point?
Definitely, we are experiencing a turning point at the moment. Many classic business models have been replaced by revolutionary changes in recent years. Think of retail and online shops like Amazon and Co. or the hotel industry and Airbnb’s. Also book and music shops, which were already replaced by Spotify and Audible a long time ago.
What does this have to do with the bending industry?
The bending industry is also going through a change in its traditional business model, which is however not yet on a digital platform. In the past, the purchase prices for reinforcing steel, although sometimes very volatile, moved in a fixed corridor over many years, so that with a little more or less skill and luck, you were able to make your business positive despite low margins. Over the last 20 years, the price of reinforcing steel has been below €600 per ton for 90 per cent of the time. Today we pay more than double that.
What is the trigger for a turnaround?
When prices started to rise at the end of 2020, our industry thought that – as in the past – the sharp increases would be followed by a crash in prices. Now that the hope has not been fulfilled from quarter to quarter, the industry must seriously consider whether the rules of the game of the past still apply in the future. In retrospect, we realise that the Corona pandemic, coupled with the challenges of climate change, heralded a turning point that has now changed everything that has gone before with the war in Ukraine.
And suddenly the old rules of the game no longer work?
There is a lot to be said for this. The steel industry itself is facing enormous challenges. Reducing CO2 emissions will require exorbitant investments, which will be reflected in significantly higher production costs. The raw materials needed to produce steel are also limited and have risen enormously in price. Energy costs, whether gas, coal or electricity, have also exploded. A shortage of skilled workers and logistics costs as well as transport capacities complete the overall picture.
And when viewed critically, can we only conclude that the approaches of the past no longer apply to the future?
Exactly. That’s why we informed about our view of things and the changes with a customer letter at the end of January 2022.
Why did this letter attract a lot of attention in the market?
That is a good question. We were surprised ourselves at the way our letter was distributed and discussed in the market. We probably addressed things that people had not dared to communicate openly before. However, our concern was to take stock openly and honestly. The events of the last few weeks confirm what we said.
What impact do the price increases have on existing orders?
That is our biggest challenge at the moment. Together with our customers and partners, we have to look for solutions in these difficult times. The events and the consequences of the war were not foreseeable for anyone and thus the existing orders have been deprived of their basis, so that it is no longer reasonable to continue them without adjustments. We thought very carefully about whether and how to approach our customers. In the end, we opted for an open and honest dialogue, knowing full well what reactions this would trigger. From our point of view, however, there was no alternative.
The SÜLZLE team is available for a transparent exchange in partnership.