STEEL COLOMBIA

Colombia 2018 | INDUSTRY | B2B

Construction and infrastructure development has the potential to boost the local steel sector, though the country has challenges to overcome in the meantime.

Rafael Laporta De Castro
RAFAEL LAPORTA DE CASTRO
General Manager
Gerdau Diaco
Mauricio Restrepo Fleisman
MAURICIO RESTREPO FLEISMAN
General Manager
Gonvarri Colombia

What has been the evolution of the company in the country, and what is the importance of Colombia for the group?

RAFAEL LAPORTA DE CASTRO Gerdau is currently present in 13 countries; in 2016 we sold our operation in Spain and in 2017 we confirmed the sale of the operation in Chile as well. Gerdau Diaco is an acquisition we made in 2005, and it was a combination of companies over the years. Besides the industrial operations, we have cut-and-bend facilities. We have 11 facilities over the country and have a commercial branch that we maintain under a second brand name (Cyrgo) that is present in 16 municipalities in the major states of the country. We are present countrywide and produce steel, collect scrap, and distribute all over Colombia.

MAURICIO RESTREPO FLEISMAN Gonvarri came to Colombia three years ago through the acquisition of Industrias Ceno (IC). IC had been in the Colombian market for more than 60 years and is a well-recognized company in Colombia. With Gonvarri's acquisition, accidents have fallen by more than 80% even though tons produced by one employee have been increasing steadily. This is the result of all of the manufacturing know-how of Gonvarri along with a continuous investment in the infrastructure of the factory. Revenues have grown at a pace of 15% YoY. We closed 2017 with revenues 5.6% higher than 2016. The budget for 2018 has a 30% increase in sales.

What is the potential for Colombia to develop a strong steel industry?

RLDC There is significant room for investment because it is healthier for the economy to develop a strong industry. We can invest in rolling and steelmaking capacity and regain the space of imports. It will generate more jobs, taxes, technology, and wealth in the country as well as increase foreign capital. The associated problems that we have to overcome are the lack of competitive energy, deficit of scrap or substitutes, infrastructure, and a plain competitive field with imports. The country does not consume the proper quantity of steel and does not generate the proper quantity of scrap. The obsolescence index of cars and appliances is still undeveloped in Colombia.

MRF The economy currently has been a factor as it has slowed down dramatically. We expect the Colombian economy to grow around 2.8% in 2018. We are slightly cautious about 2018 because it is an election year. Another challenge is the country's infrastructure, which hits us in two ways. We plan to export 40% from our plant in Medellín and it is expensive to transport from Medellín to the Colombian ports. Because of the products we sell, transport and freight are relevant in our cost structure. Furthermore, because of the delays in the 4G projects, our road steel business unit struggles to reach its target in Colombia.

What are your goals and priorities for the company in the next year?

RLDC Currently, we are focused on digital transformation and are implementing logistic tools and GPS to have absolute control of our transits and deliveries. We are putting a platform in customer services and offering our customers the opportunity to get there and understand where the products are and when they will arrive among other services to enhance customer experience. We are optimizing assets and all our plant. We are using a mixed strategy where we produce and distribute products where we are more competitive and in the other regions we complement with imports. We are also keeping the flow of investment in security and environmental initiatives.

MRF We have a program around the world called Emotional Driving that focuses on the safety of our employees. What we do with this program is to highlight the importance of driving and being safe while doing so. This program has been extremely successful in Europe and Asia.In addition, we have an aggressive budget that will result in the consolidation of Gonavrri Colombia as a main player in the Latin American steel industry. For 2018, Gonvarri Colombia plans to export 40% of its total revenues. Gonvarri is taking advantage of the strategic location of Colombia and from our Medellín plant, we serve markets such as Chile, Paraguay, Uruguay, Mexico, Costa Rica, and Bolivia.