Column number 75 – 2020

After two months of lock-down, European economy and industry are rebooting, trying to understand which will be the best way to normality. Not so easy, since also before the pandemic they were running at two speed, increasing differences among countries: northern economies were as always running fast, southern ones were steady, at risk of stagnation in Italy, better in Spain and Greece.

The pandemic obtained the result of stopping them all, leveling to bottom: in ma- machine tools sector, Cecimo, the European Association of producers, esteems a 25% decrease year-to-year. The forecast of a 20% rebound is only a part a good news for all European economies, if not even at a larger scale, for world economies.

The rebound is certainly, as correctly underlined by Cecimo, a proof of strength and capability of the sector to adapt itself to the new boundary conditions due to plants’ re-organization, new rules in supplying assistance and technological advi- sory, new obstacles in transportations and customs; in brief, facing a world where, after the pandemic, circulation of goods and people will be more dif cult, many companies will need to re-think their operative mode and to  nd out the way for supply their customers despite the difficulties. This is particularly evident in after sale services and machine tools assistance, where the possibility to act by remote is still limited and restricted to newer machineries already developed on Industry 4.0 standard.

This to say that rebound maybe more difficult than prevented and can involve unexpected sectors: industry, and above all machine tools producers, need imme- diate measures, if possible at a supranational level, to defend European economy, that is different from defending single states’ economies.

European Union seems to have failed the challenge to face the pandemic as one: the topic of solidarity between states and subsidies to enterprises, workers and families seems to be the rock against which the fragile European boat will drown. The efficiency and effectiveness in developing an environment that will sustain all economies in their effort to reprise will be the great possibility to demonstrate that European dream is still actual and achievable.

Column number 74 – 2020

Now that we have ceased to feel like the characters of an Hollywood’s production, we must deal with the need to foresee the moment in which economy will restart and we will begin our path to normality. What is clear is that the roadmap to normality will not be easy and immediate, we shall proceed step by step, restarting economy per grades. What is clear is that the roadmap to normality will not be easy and immediate, we shall proceed step by step, restarting economy in grades. It is still not possible, at this moment, to understand if the restart will be made by politics authorities by production chains, but surely it will take some months. It is easy to predict that it will take place not before the autumn, with some differences from country to country, according to the moment of the pandemic peak. Whatever are our thoughts and our aims today, it is sure that they will not be the same tomorrow, as conditions change so quickly more than we can manage to make programs for the short and medium terms. Some optimistic speakers predict a wide resumption after the lockdown, since consumption will resume worldwide as the people returns spending money and enjoying life after the long period of isolation and fear. From this point of view must be intended as very inspired the choice of holding Tube 2020 in December: it could be the right moment to take advantage of the will to restart of companies and insiders. What we know for sure is that the decision to postpone the exhibition in late February was very timely and appropriate, and cou- rageous, especially because it was assumed in a moment in which pandemic was not so clearly recognized at all levels and here in Italy we all were worried more to be excluded from all international events than they were delayed or cancelled. The recommendations issued by Cecimo to National and European decision ma- kers to avoid dissolvement of European Industrial potential are clear and strong:tax relief, credits, extraordinary nancial aids, payment facilitation framework, in- frastructures, reprogramming of structural funds. The question is if these counter- measures, when applied, can be enough. The sensation is that the only way to get out of this incoming world economic crisis is completely think over the industrial and economic structure of our times: without a complete palingenesis of our eco- nomic framework it is hard to think how our companies can come out from the global lockdown. It is not the moment to think on our own, but to create relations that can aid everyone to restart: companies, governments and people must meetthe idea that we must preserve the markets, and preserving the markets means rstof all preserve employment that means in turn preserve companies, productive ca- pabilities and commerce. No other way out than imagine a year or two of coope- ration between Countries and companies worldwide in a sort of new globalization aimed at common protection.

EMO Hannover between the drop in orders and the need for investments

Orders falling, both for the foreign market and for domestic demand. The numbers of the second quarter, which came out amid the third quarter, right at full recovery after the summer break, generated a global shock. In Germany as in Italy, two of the leading nations in the machine tool sector, braking is abrupt and obvious. In Italy, 31% less than the corresponding period of the previous year, with -43% on the domestic market and a less dramatic -28.5% on the foreign market, represent indicators of a situation that is just under a fifth lower than 2015, not exactly a record year in the Italian manufacturing industry. As far as Germany is concerned, the drop is decidedly smaller, around 20%, mainly focused on non-European markets, while in Europe the decrease in orders is around 5%. Part of the picture is the fact that for Italian manufacturing companies, Germany, especially car companies, represent a large part of foreign orders and are therefore largely a party to the drop in orders by more than a quarter.
The reasons for the decline, largely expected, but certainly surprising in proportions, especially after a generally positive 2018 and in Italy far more than positive, are varied: on the one hand the political instability weighs, which penalizes the machine tool market on a global level, to the point that in Asia and the Far East they are certainly not faring better than in the Old Continent; on the other hand, instead, the decline in the orders of the automotive industry, influenced by the conversion of the plants towards new engines, to which is added a general difficulty of the automobile market, decisively influences.

In Italy, then, industrialists complain of an intermittent policy of investment cuts, first blocked and then relaunched by the Growth Decree: in conclusion, companies are asking for stable policies with regard to hyper-depreciation and super-depreciation, practically calling for stabilization of incentives, which, by nature, would also be positive from the point of view of increased orders and purchasing power, while on the other it would establish the principle that Italian companies fail to develop the market without state aids, a principle indeed dangerous. If structural changes are to be introduced, then more than on incentives to purchase it would be advisable to intervene on tax wedge and taxes on labor.
In short, it is in a climate of substantial uncertainty, also linked to the need to introduce technological innovations relating to Industry 4.0, an action that is not easy in a period of declining orders, that we are going to Emo Hannover: an edition not among the best, both as far as the climate in the corridors is concerned, both for the actual interest of the visitors, but certainly a fundamental moment to take stock of the economic situation and the initiatives to be taken.

Stagnation is the threat for European Companies in 2019?

What is happening to European production and commerce of machine tools? After a record-breaking 2018, forecast for 2019 are widely worrying, because they predict substantial stagnation, as you can read inside this issue of the magazine where you can find reports following general Assembly of CECIMO, European producers’ Association, and its Italian counterpart, UCIMU.

Just like a rollercoaster, numbers paint for 2018 a high-rate growth, and for 2019 a steady calm: during its General Assembly in Rüschlikon, CECIMO announced a turnover for 2018 of €27.5 billion, which is 9% higher compared to 2017. This secures a 35% market share in the global machine tool production. But slowing global trade and weakening business sentiment are heavy downside risks for the European machine tool manufacturers: for 2019 is expected a flat growth.

In Italy the situation is the same: starting from the highest level of ever, the fall is even sharper. The 2018 results of the Italian machine tool, robot and automation manufacturing industry are, by far, the best ever achieved: double-digit increases were registered with regard to almost all main economic indicators, thus extending the largely positive trend started in 2014. Ranking fourth among manufacturing countries, the Italian industry of the sector confirmed its third place among exporting countries, also strengthening its fifth place in the consumption ranking, as a testimony to the dynamism of domestic demand that took advantage of the incentive provisions for competiveness (Industry 4.0/Enterprise 4.0). On the other hand, the forecasts for 2019 show a setback, for the first time after 5 years, mainly due to a situation of uncertainty and instability, both in the domestic and in the foreign markets.

How can you read and evaluate these results? Difficult to say, because the coin has always two sides. On one side, in fact, we cannot say that these forecasts are electrifying, stagnation or steady growth are always scaring words. On the other side, however, the international situation is so difficult and unpredictable that also stagnation can be evaluated as a positive output from all the factors at stake, since the general situation is longer more complicated than some months ago.

Companies are at a decisive turning point: investments to meet requests of Industry 4.0 are huge and the need of skills by technicians and workers is everyday more significant, in a way that is difficult for them to match requirements with availability. Is justifiable, indeed, a stop in front of the turning point, just to see where the path could bring us in the short term. The matter is not only up to companies: producers and industries must follow the technological progress, but improving the skills of workers and creating new is not only a task of employers. If they must help their employees in acquiring new skills, the training of new generation of workers is in charge to educational system of the different countries. And, if the labor market now is at least continental, if not global, training and educational systems are still fragmented between Countries and regions, making impossible to find a common level of workers in Europe. Some Countries, such as Italy, are still breathlessly chasing in training of new generation, teaching matters that are old by decades.

And, as you can read in CECIMO report published forward, this is the crucial point for the future of manufacturing in Europe.

A Manifesto for steel industry and foresight on the market from three giants

At Made in Steel the Italian steel world meets and talks. For a while, competition leaves room for a common vision and teamwork. One of the old warhorses of the patron Emanuele Morandi – “in today’s market it makes no sense to talk about the steel of Cremona or Bergamo and not even of Italian steel, but of European steel” – returns to the scene from the first day of fair, when at the opening conference Morandi himself called together all the associations in the steel world: “I address not only Federacciai and Assofermet, but also all the other important trade associations, Assofond, AIM, Centro Inox , Fondazione Promozione Acciai, Ricrea and all the other users’ associations because in my opinion it is not so much the participation in the capitals of Made in Steel as much as the participation in moments of reflection that put us together ”.

This is also the point of departure for the final conference, which takes its name from the theme of the fair, Steel Human, in which the steel world proposes a manifesto for politics, in particular aimed at all candidates for the European Parliament and during which a round table sees the confrontation of some of the largest steel producers in Italy and the world: Antonio Marcegaglia, president of Gruppo Marcegaglia, Alessandro Trivillin, CEO of the Danieli Group, and Alessandro Banzato, president of Federacciai and CEO of Acciaierie Venete, interviewed by Andrea Cabrini , director of Class CNBC.

In his introduction to the final conference, once again Emanuele Morandi put the accent on collaboration and team spirit: “Even if you are big and strong, without the team and the collaboration the matches are not won. We would need more collaboration even among the associations that make up our supply chain, even if the term chain is too old, it must be enlarged, because the platforms are the new frontier, so the supply chains must also be extended to wider collaborations with the institutes of credit, research centers, universities and even the policy that is currently lacking ”.

From these considerations, gained in two years of commitment to modern Made in Steel and shared with all the actors, the idea of ​​a manifesto was born, mainly aimed at politics, but addressed to all the parties involved, as a guideline for a development path made up of four milestones.

The four theses for a European steel manifesto start from the assumption that steel is the basis for manufacturing and that manufacturing itself is fundamental for growth and development, to create work and well-being. Steel and technologies are important, but they remain a tool created by man for his sustenance and his well-being: in this reasoning the great themes of the environment and sustainability enter.

Morandi again: “Platforms make sense if we can talk to the market: if data makes the difference and if the relationship with the market makes the difference, then more and more our customer must become our partner, the market then turns from a place of confrontation to a place of relationships ”.

Here are the four points of the manifesto:

  1. Defend and relaunch the European project: there is a greater need for Europe but this Europe is in danger. The world is polarizing between the great Chinese power, the United States and some emerging countries such as Russia, so Europe must be cohesive and able to present itself unified to the challenges of the market.
  2. Rebuilding Europe: not only on the human level and in cohesion, but also in its human, infrastructural and above all formative dimension. A nation that does not study, cannot grow.
  3. Innovation and sustainability: only an innovative and sustainable steel can be a growth engine.
  4. Centrality of man: culture and education as the first investment on young people, a great plan is needed to re-establish the whole educational path, from primary school to university. We need a more educated Europe in order not to reduce complexity to the trivial, which is simple, but to analyze and fully understand the complexity.

At the end of his speech, Morandi announces a series of tables which will include all industry and platform associations to make their contribution to the growth of the sector, of Italy and of Europe.

Instead it was Andrea Cabrini, director of Class CNBC, who whetted the top three managers of the three Italian steel giants, Banzato, Trivillin and Marcegaglia, helped also by direct questions from the audience through SMSs or whatsapp.

The first mandatory question is about the fair and the general situation of the market. For Alessandro Banzato “the market in this period is a bit more reflective and a generally positive trend of the fair is part of a confused picture, starting from Brexit to get to the issue of American duties”; according to Marcegaglia “the dominant element of the last few months, a little everywhere, is the uncertainty because in the end the money, even if it exists, does not turn, does not create positivity. Recently I understand that the sentiment of the experts is more negative than the reality: on closer analysis everyone admits that the volumes of turnover compared to last year are at least equal, if not higher. Certainly, uncertainty is a theme, but I wouldn’t feel like talking about a crisis”; for Trivillin “compared to last year there are fewer margins, but last year it was excellent, this year we could not expect the same volume. Of course, the horizon is more limited, but now we are used to this”.

A vision that Marcegaglia also confirms: “Of course, the order book has shrunk, we need to be more ready, more responsive, but overall today’s prices in Europe are the lowest in the world and are destined to rebalance in the near future”.

“Almost all producers this year are about -2%, 3%, but we are not in the situation of 2008-2009, far from it, certainly if last year we had orders for six months, now we look at the two following months and nothing more. – confirms Banzato -; as for the market, the closure of the American one has diverted many quantities over Europe: the safeguard clause has worked relatively well, then there is the question of Turkey, both on flat products, and on long products, such as rounds for reinforced concrete and wire rod, there have been shifts of products destined for other markets ”.

Marcegaglia focuses on European competition: “For now there is a problem of realignment of stocks which should soon be resolved. Even the automotive sector should increase orders within a short time, rebalancing a slightly heated competition. ”

Alessandro Trivillin speaks openly about market regulation: “I have traditionally been favorable to the free market but, given some recent dumping phenomena, I believe that a regulatory intervention by the legislator is desirable. I believe that this situation of duties and safeguards can last for a few more semesters, but we must find within us the resources for the competition “.

On the different positions among the operators on some market regulation matters, the opinion is however common: “If we are a supply chain, we must have the strength to overcome divergences and find a common position”, says Banzato, supported by Marcegaglia for whom “today this is an interest of the supply chain, not of the individual, as far as safeguarding is concerned, as long as they are measures aimed at stabilizing the flows and not closing them, on the American model. Europe has an important role, beyond the volumes, for the development and quality of materials, so surely as Italy, seventh producer and seventh world exporter, we cannot abdicate our role in Europe. Certainly there are both production costs, such as for energy, and for the protection of the environment that put us in a delicate position that we must manage properly, for this we are too neglecting for me the domestic market for which the infrastructure are basilar”.

“From Europe we expect there to be a desire to see steel as a driver of development – says Trivillin -, also because without economy, without industry it is not possible to make social policies. Until recently we had the impression that steel was considered almost an enemy, something to do far away, but now sentiment is changing and we are returning to being considered a resource, not only economic, but also productive ”.

Speaking of energy, Banzato underlines the need to have “in Italy the price of energy at least equal to that of European competitors, if it is not possible for it to be minor. We are however in a moment in which already Brexit generates unknowns, both customs and on what will be the behaviors on the part of the British operators that will operate with different rules than the European ones: already now, for example, they ask the State for loans for operations on the territory European, something that any other company based in the EU is not allowed ”.

Innovation is a huge challenge, but it can create discontinuity. For Alessandro Trivillin “innovation in recent years is not disruptive. Certainly I do not see industry innovation 4.0 as an epochal change, but as a process that must be pursued little by little. Now the technology allows operations that previously were perhaps already performed, but by man in longer times: it is a more advanced way to satisfy attendance needs for years “.

At Made in Steel Acciaierie Venete presented an innovative factory: “The new plant presents technological innovations – says Banzato – that allow us to offer a product of absolutely superior quality compared to what could be produced with the technologies of twenty years ago”.

Marcegaglia’s vision goes a step further: “There is a product innovation that comes from a process innovation, but I believe that the real challenge of digitalization is of a wider scope, that is to govern an interaction between data that within company processes and outside of these, in relations with customers and suppliers, it can lead to greater efficiency and versatility, in quality and in processes, also for example in deliveries. Innovation starts from processes, translates into a product, but it must become a cultural factor that companies can factorize in offering to customers”.

One of the greatest difficulties in the steel supply chain arises from the problems of the automotive industry: a lot will depend on when the conversion of production plants to the new forms of power units will be completed and on which of the possibilities the producers will be oriented, at that point a resumption of orders. However, the case may arise where the orders do not go back to the levels of the previous years, because it is possible that the orders for the cars do not date back to the previous levels.

However, for Trivillin, “change is part of evolution. Once upon a time there was an epochal change in the transport systems, from the horse to the car and even then they feared enormous losses and they wanted for this boycott the advent of the car “.

What is needed, however, is clarity: “If I have a concern in the economic context – says Marcegaglia – it is on Italy’s ability to do what is needed, step by step, in issuing the appropriate laws at the time and in making fewer declarations and more facts “. As far as infrastructure is concerned, “the fact that the unlocking works have been talked about for so long, but nothing is actually done, without realizing that infrastructures are fundamental for companies, not just in the steel sector, means that we do not have the correct perspective, in Italy “is the thrust of Alessandro Trivillin who seizes the assist provided by Marcegaglia himself on the fly.

One last line on the role of man in steel. The perfect synthesis is that of Marcegaglia: “Without quality people, adequately trained, company development is not possible”. “Those who make steel cannot think of competing exclusively on machines. We need to make ourselves more attractive and show people that they could work in the sector the most attractive aspects, “adds Trivillin.

In conclusion, on what will 2019 be played for steel Italy? For Banzato “on the competitiveness of Italian companies, a peculiar feature of our entrepreneurial fabric”, for Marcegaglia three dry words: “Accessibility, agility, reactivity”. “Organizational and economic flexibility, that is the ability to react to the market with innovation and not just price, and reactivity”, Trivillin echoes.