Manager of Izar and member of the Board of AMT a: Carlos Pujana, Director interview

Carlos Pujana expressed in this interview the concern of the sector by the exorbitant increase in the prices of raw materials, basic steels and alloys, that it is delaying the departure of a situation of weakness that the industry comprising AMT (Spanish Association of exporters of accessories)(, Components and cutting tools for machine tool) drag since 2002.

AMT is a very practical partnership which gives us much that we are integrated in it, especially to the exporter, we are seeing very useful. To the extent that you you implicas, that forms part of trade missions and other activities, you can take you much advantage. In 2004 AMT participated in six fairs and made 8 direct trade missions. For 2005 is expected to attend the most important fairs, such as EMO, Hanover, Feimafe (Sao Paulo) and Tecma (Mexico) and make fair trade missions to India, Czech Republic, Mexico, Taiwan, China, Hungary and Slovenia, Brazil and Chile, Korea, Poland, Canada and USA and Japan.

Since 2001, an important year in which the associated companies checked almost EUR 242 million, there is a clear downward trend, with a 2003 reached 226 million and a 2004with the newly closed data puts us in 232 million euros, clearly over 2002 and 2003, although still below 2001. From the point of view of export, the situation is similar. A good year 2001, with exported EUR 92 million, gave way to a weaker stage, with a 2004 in which 85 million euros have been exported. With some variations, this applies also to the number of employees, telling the companies associated with a total of 2,302 employees in 2004. This trend of the decline in recent years, accompanies the weakness of the machine tool sector, that it begins to change its cycle.

Our Association has two aspects: the accessories and components directly associated with machine tools, and the cutting tool, also related to the situation of macroeconomic, but dependent on other cycles as consumable product. In fact their ups and downs are not as strong as the machine tool. For example, in 2002 the cutting tool was still a positive trend.

21 AMT members are manufacturers of accessories for machine tools, 22 manufacturers of components, 15 manufacturers of cutting tools, auxiliary equipment 3 and 1 of abrasives. Most of them are in the community of the Basque country, where are located 41 companies, but we also have nine companies Barcelona, two of Navarre, two in Madrid and one of Aragon. This responds to the reality of the sector, with a high concentration in the Basque country.

One of the intentions of AMT, with a clear vocation of grouping companies throughout the Spanish, is precisely expand and grow to other sectors whose activities have a meaning in this Association. Also, with its new facilities, AMT wants to provide more services and more influence in the formation, especially on those issues with a low in the market offer. As an example, we have recently delivered a course of international staff.

One of the intentions of AMT, with a clear vocation of grouping companies throughout the Spanish, is expand and grow to other sectors

In my opinion, clearly, the increase in the price of raw materials. As we said before, we still do not see to go to the time of recovery, in large part because we are immersed in a difficult environment in which the increases in the prices of raw materials and energy are absolutely disparatados. These are two issues that concern us much, and I don't even know if the market is aware of this. We belong to a highly atomised sector, difficult coordination, thus hindering the competitiveness in international markets. What is happening with the raw material is real nonsense. At least what I more closely, I know that they are special steels and the surcharges for alloy in special steels, prices have increased more than 100 percent in the past two years.

Yes, this situation varies depending on the different types of steel. The least alloyed suffer also from this situation, but to a lesser extent. But in the special steels, are those used in the field of the tool's Court, the total price consists of the base of the steel and the surcharge price by alloy. In the early 1990s these materials providers began to offer prices which depended on the two aforementioned concepts. Thus, each kind of steel is a charge depending on the type of alloy to integrate this steel. For example, in January 2003 had a surcharge of 0.26 EUR / Kg on the base price of the steel M-2. This had a quarterly period, and the trend was more or less stable. Today, in March 2005 and following the same example, the additional fee is 3.80 per Kg, with a few dramatic increases since April 2004. This represents more than 100 per cent of the total cost which is the raw material for a manufacturer of tools. Another aggravating circumstance that brings more instability is that these prices varied on a quarterly basis. But seeing these fluctuations, providers have changed the rules of the game and variations are now per month, so that each month changing prices and the uncertainty is absolute.

We have reached a point where the alloy surcharge represents more than the base price... crazy.

The price of the steel base has also risen, but more reasonable amounts and each customer it negotiates with its supplier prices and increases, to the extent possible. This, of course, does not affect only the manufacturers of tools but also the components.

With much difficulty. We have already done in the past, but I think that this year so we will have to do again. We are all in the same boat and this is precisely one of the roles of the Association, understand the problems we have and see how to pass on to the market which, despite the fact that historically it is a sector in which rarely we have uploaded the pricesWe are faced with a completely atypical situation which will force us to affect the price if we do not want to bid farewell to the viability of our companies.

No, it is very difficult, because it is practically an oligopoly and the factors that are raising the prices vary widely, although some only citing the enormous current consumption of steel from China. First, that the steel sector has been streamlined and many public companies have passed to be private to the consistent pursuit of profitability. Also, it is true, it is the factor of mass consumption of China steels and alloys, very important. Thirdly, the alloys are in the hands of very few countries and only very few companies allowing them to control the price.

They are these three factors which make me think that we must get used to working in an environment of expensive raw materials, at least in the medium term.

It is one of the issues that concern us, although the absurdity does not what we discussed about the surcharges for alloy steels. The prices that we have mentioned earlier were in euros. In the field of energy, dependent in large part of the price of oil, the barrel has risen much in his quote in dollars, but the appreciation of the euro is a bit masking the impact. However, both the price of energy and raw materials, will have a significant influence on the economy and will delay the recovery.

Yes, Yes, no doubt. We have very neat and very tight, companies with a highly advanced business organization that can withstand this situation. The recovery that we anticipated in 2004, ripe, although more timid way than anticipated. This recovery will continue, but the high prices of raw materials could endanger her.

They are coming to major changes in the materials with which the tools are produced. It is a trend that will continue to grow because the demand for customer productivity increases

Without a doubt, Europe is our main market, with major countries such as Germany (17 per cent of exports), France (16%), Italy (14%), United States (5%) and then Switzerland (4%), United Kingdom, Netherlands and Portugal. German atony, European economic locomotive, is also reflected in the difficulties of the sector.

It is true that the sector is made up of small businesses and is where, again, AMT can provide much: joint actions, commercial actions, joint exhibitions at trade fairs... Activities to small businesses posed them a difficulty to perform individually. But this small size also gives us more flexibility and a greater proximity to customers. We are very efficient companies.

Of course that it affects us, however, products arriving from the far East still van aimed mainly for the consumption of low quality, for this market segment, sector which in our case, requires a drill bit sporadically. Professional things change and we do not see a very worrying competition still of Asian products. And let's not forget that the service and flexibility are essential. It will be a differentiating factor for many years and here the Asian countries have complicated.

It also must be said with regard to Asia, while it is true that they are addressing Europe with special dynamism, the growth of the economy china also is an opportunity for us. We are, in fact more and more members of AMT that sell our products in China.

Of course here we compete, lest we forget, with the Europeans. We have to be as good as the best in terms of performance, innovation, design and quality, and at the same time be able to compete for the pressure that comes down. And, no doubt, we still have to fight in all foreign markets with an image of the Spanish industry probably not corresponding to the level we have. This is a message that costs us transmit.

For the types of businesses, small size, we have a very high rate of exports

Yes, I believe that in this we are pointers. If you visit the companies that compose AMT you can see the high level of our companies. An example is our own, at Izar, which we are well advanced with the design of a new plant, but also of others, or either they are in the same process or have already created new production facilities. I believe the Association has made an important job, even with its new facilities, where we are prepared to respond better to our expansion plans.

I believe that we are very dynamic and enterprises very active all over the world, which contrasts, for example, with companies such as the French, very receded. For the types of businesses, small size, we have a very high rate of exports. Customers we perceive as a flexible, dynamic, modern business tailored to the markets. We easily adapt to the customers and they see us as agile companies. Contact with us is easy, not so with companies from other countries.

I think that they are taking major changes to the materials that are produced tools, for example. Rapid steel it passed to the hard metal and now polycrystalline materials... It is a trend that will continue to grow because the demand for customer productivity increases. Another theme in boom is the field of organic production, which requires tools with geometries prepared in order to work in dry, without drill and oils.

It is also mentioned that relocation and all trends already targeted before in international markets, are leading us to stay with the customers more special, more service requiring, which for us is a major challenge which requires us to keep track of the latest technologiesmaterials and geometries.

See also...

• From the sea to the tool