GENERAL NEWS / 05-03-2024
We are facing a “change of era” characterised by environmental sensitivity, technological advances and the evolution of sectors strategic to steelmaking such as automotion. But the Managing Director of Arania, Juan Ramis, is very clear that steel and the processes that have made the company a European leader will maintain its leading role in this new cycle. Testament to this is the acquisition of Lamincer, a subsidiary of Thyssenkrupp, which has made Arania the third largest company in precision cold rolling in Europe. Ramis credits “passion” for the activity as one of the key factors in competitiveness, and insists that the “confidence” of stakeholders is the valve that has made it possible to overcome past challenges and face those of the future.
Question. Arania has gone from a small local business created almost 85 years ago to the parent company of a large industrial group focussed on internationalisation. What were the key factors for this growth?
Answer. I would sum it up as the passion for work well done because in 85 years there have been very different moments and it has evolved over several generations. Arania began in 1940, fruit of the passion of two people, Mr Arana and Mr Estefanía, to set up a stamping workshop and develop a business. In the 1990s this passion was channelled towards production efficiency. Coinciding with my joining in 2006, the new CEO of GRUPO ARANIA gave us a new direction, more towards the customer and added value, and in recent years we have made a commitment to sustainability. I believe success not only depends on being good at something, because everything changes, but also on building a company that is passionate about its activity: that's what keeps us competitive.
“The acquisition of Lamincer supplements our activity, gives us a joint production capacity of 150,000 tonnes and places us as the third largest in precision cold rolling in Europe”
Q. The recent acquisition of Lamincer, subsidiary of Thyssenkrupp, is an indicator of your growth strategy. What does the purchase of this company imply for Arania the terms of competitiveness and market positioning?
A. Our precision cold rolling market has undergone a transformation that has seen it lose a significant amount of production in recent years, around 20% of the total volume: we're talking about going from 2 million tonnes to 1.6 million, approximately. And that means there must be a move towards concentration, simply because it's a very demanding sector with significant investment that needs a certain critical mass to be able to face the market and maintain competitiveness. These concentrations are slowly appearing in the three steelmaking countries in Europe, Germany, Italy and Spain, to be able to maintain the value proposition, profitability and competitiveness. With this acquisition, we consolidate an offer consisting of joint production capacity of 150,000 tonnes, which positions us as the third largest in precision cold rolling in Europe and enables us to maintain our competitiveness. The purchase of Lamincer is the ideal complement to Arania's product range because the geometric characteristics of their facilities enable us to take on the small batch sector, while Arania produces larger-volume batches that compel the customer to place larger minimum orders.
Q. Earlier, you spoke of a 20% global drop in productivity, probably caused by the recent years of changes and international uncertainty. How have you managed to face these challenges without losing strength?
A. We understand where we are in the value chain, we focussed on our value proposition. European companies cannot contend with a market like Asia because China alone produces more than 50% of world steel, and Asia as a whole nearly 70%. Therefore, they need to find their place and not get involved in wars that cannot be won to consolidate their business. The companies in the sector that know how to identify this will defend their position and come out ahead, even in difficult times. But companies that aren't so clear on their value proposition and want to fight in every war, so to speak, well, good luck to them. It's the same thing that happened with automotion: in 2023 China manufactured 26 million passenger vehicles when Europe went from producing 22 million in 2018 to 16 million after the pandemic, and last year we finally got back up to almost 18 million, which was seen as a great achievement. But it's clear that a lot of volume was lost along the way. We have to identify our value proposition, that has a place on the market and work on that.
Q. How have you managed to overcome these challenges?
A. Through the confidence of our stakeholders. Even if a company has a great value proposition, if its stakeholders, in other words, the owners, the workers, the customers, the suppliers, etc., don't have confidence in the project, being good doesn't matter. We have managed to overcome all these challenges because we have generated confidence; a project nobody has confidence in will die. For any project to be successful, it must have a vision, leadership and resilience. We already have the vision and the leadership, and confidence is essential to be resilient and rise above the delicate situations that cause problems.
“Our decarbonisation plan contemplates a reduction in emissions of 15% for 2026, 30% for 2030 and 100% for 2040”
Q. And what are your challenges for the future?
A. One of them is decarbonisation and sustainability, and the other is the transformation of the automotion sector. Our decarbonisation plan contemplates a reduction in emissions of 15% for 2026, 30% for 2030 and 100% for 2040. We're closely linked to the decarbonisation of the iron and steel sector. We're cold-rollers and we begin with a hot-rolled coil, which is what generates around 90% of the emissions of the product we sell. The challenge consists of reducing the emissions of that hot-rolled coil. Nevertheless, in Europe almost 95% of the production model of that spool is based on the blast furnace process, which is focussed on the use of iron ore as the raw material, while a small part is based on the electric furnace process, in which the raw material is mostly scrap metal. Nowadays, scrap metal has a limited availability and it's a case of 60-year cycles to integrate the steel produced today into scrap metal. Therefore, decarbonising European steelmaking is directly related to the ability to manufacture steel based on iron ore in a zero-emissions process. The problem is that reducing that iron ore as the blast furnace raw material produces a very high level of emissions, around 2.2 tonnes of CO2 per tonne of steel. The only technology on the table today to produce steel based on iron ore with zero emissions is a technology that reduces that mineral with hydrogen, instead of coal or natural gas, thus avoiding CO2 emissions. Producing this hydrogen, and making the process sustainable, requires electrolisers that use water to produce hydrogen, while the electricity has to come from a green source. Producing zero emissions steel also takes into account continuing to use the scrap metal available to cast the mineral in an electric furnace that will also have to use renewable energy. All of this means that to transform the industry and produce, for example, six million tonnes of steel, investment of approximately 5,000 million euros would be needed, and the transformation of the sector in Europe would require an incredible investment, perhaps more than 70,000 million euros. Today the chosen process requires public and private investment of between 7,000 and 10,000 million euros by 2030 to start up new installations able to produce steel that would begin as low emissions and would end up with a 100% reduction. This is the key for this decade for the transformation of steel production to make it sustainable in Europe.
Q. And what scope for action does Arania have?
A. Arania is signing contracts for this type of projects to guarantee that 30% of its raw material will be produced based on low emissions models by 2030, while just 10 to 15% of steel production in Europe will be produced based on this type of processes by then. We are offering our customers guarantees of origin, with their respective certifications, based on different processes that reduce emissions, we store those emissions, and we offer customers that want to begin a decarbonisation process certified low emissions steel based on a model that accumulates these low emissions and highlights their value.
“If the low emissions market gains strength, Europe will be in a very good position compared to Asia but if this is not the case, its position will drop.”
Q. What about the transformation of automotion sector?
A. There are two aspects to note. Vehicle electrification has led to a significant loss of parts such as the engine, transmission and exhaust components. They are parts with precision steel which, if only 100% electric vehicles are made after 2035, would entail a reduction of 25-30% of our automotion market, which makes up around 70% of our turnover. And then there is Europe's loss of leadership in this sector, in both manufacture and technology. China currently leads world vehicle production and has acquired the technologies that have caused European exports to Asia to fall dramatically. These are two significant challenges, to which we have to add a type of protectionism and regulations that put European companies at a disadvantage. There will be things such as the CBAM, Carbon Border Adjustment Mechanism, a border tax for imported steel based on its level of emissions, aiming to compensate the lower production costs compared to European steelmakers that either produce using clean technology or are forced to pay for their emissions rights, but that can cause companies on this continent to have to pay more for steel and to move out of the European Union, to avoid these additional costs. If the low emissions market gains strength, Europe will be in a very good position but if this is not the case, its position will drop. Electric vehicles are seeing something similar: in 2018 we thought they were already firmly established, but six years later the reality is that their integration into the European market is just 14% due to a lack of competitiveness, regulation and infrastructure… In the steel sector, something similar could happen. Being sustainable costs money and significant investment, and there is the risk that the market will slow.
“Our commitment consists of establishing logistics warehouses in Italy, Germany and France to be able to provide a standout service”
Q. To what extent are logistics important in competitiveness? What initiatives have been deployed to reinforce it?
A. Today, logistics are essential, strategic for any factory. We want to be very close to the customer, and our logistic model includes service warehouses on the customers' doorstep. One of Arania's strengths is its level of exports, 65% of what we produce, destined for countries such as France, Italy, Germany, United Kingdom, Scandinavia, etc. Our commitment consists of establishing logistics warehouses in Italy, France and Germany to be able to provides that standout service.
Q. What are the mainstays of all these processes?
A. These processes are based on the confidence of our stakeholders. This fight involves customers, workers, suppliers, directors, financial entities, local governments, etc. and confidence is what makes everything move, of course with a clearly defined value proposition. To this we add excellence, which is not just a words that sells: today due to where we're located, being in Europe, etc., the niche must be a niche of excellence, excellence must be sought in the value proposition.
Q. One of your strategic mainstays is people. How has Arania been able to become a magnet to attract and retain talent?
A. We have to be clear on what we expect of people. For us it's important to know that people look for excellence, a drive to improve, professional development, that they enjoy the projects, people, etc. Once we explain that, we offer them a professional career, an international project, a setting and an environment with a very important human value… We're not a high technology company, we're a steel production company and we have to do a lot of work on that other part of the internal projects and professional developments.
“Our factory must promote jobs with a cognitive value contribution in an attractive environment that is, above all, safe for people”
Q. You say that Arania is not a technological company but it has set up the Smart Factory. What does this concept entail?
A. It's true that we're not a technology company but we do value our technology with concepts such as the Smart Factory. To give an example, in the last century a vehicle was defined by the design, the bodywork, the exterior finishings, the chassis, the propulsion system and the electric system. Basically those were the main components of a vehicle. Nevertheless, the challenge in the coming decade is to incorporate new information systems and the ability to connect, and learn by substituting human interaction in points where safety, comfort and driving efficiency can be improved. In a plant it's more or less the same: the production process had a number of characteristics but now we're going further. Arania has taken a big step with the automation of the central load moving system, which has a self-learning capacity and online automatic control systems, as well as computer vision to detect defects and the sophisticated measurement of geometries. It is clear to us that our factory must promote jobs with a cognitive value contribution in an attractive environment that is, above all, safe for people. In the end the factories of the future cannot be like those of yesteryear, where it was physical effort that got the work done. Now people must have a more cognitive role, through observation, intuition and proposals for improvement. Arania is very clear on this and is a step ahead, not only due to the conviction itself, but also because, otherwise, the industry will not attract qualified profiles.
“Arania's objective is that any plant worker should have the same risk of suffering an accident as a person working in an office”
Q. Is this commitment to automation based on safety?
A. Of course. One of the reasons we are committed to automation is safety, and we have had three consecutive years with no serious accidents in the company, when these incidents are, unfortunately, relatively common in the industry. Arania's objective is that any plant worker should have the same risk of suffering an accident as a person working in an office, and I'm not going to stop until I achieve it.
“Today, with the different economic cycles, the diversification of Grupo Arania is a necessary guarantee for investment”
Q. What are the benefits for the company of belonging to a large industrial group with diversified activity?
A. As our Vice-President, Carmelo Bilbao, says, in a group like this, that is a model of diversification, it's not easy to ensure all the companies to do well, but it's unlikely they'll all do badly. Today, with the different economic cycles, diversification is a necessary guarantee for investment. Before the pandemic, for example, anyone would have gone for investment in aeronautics, in airlines, and just look what happened. Grupo Arania has steel as its backbone, but it is part of various sectors with each one of its four companies: Arania has 70% of the automotion sector, others are involved in various sectors linked to construction, we are involved in the logistics and consumption sectors… This strength of being linked to various sectors enables us to give our investors confidence.
“We have added environmental and social welfare to our safety, quality and efficiency requirements.”
Q. What are your main goals for the future?
A. We are in a change of era rather than a era of change. As well as our usual requirements of safety, quality and efficiency that we have always had, we have added environmental and social welfare. The future is going to call for emerging technologies and new metals for the manufacture of batteries or to reduce weights, as has always been required, but steel and production process with different technologies through precision shaping of sheet metal will continue to play an important role and dominate in various sectors. We have confidence in our sector and we are sure that it will continue to be relevant in the industrial scope in this change of era. From there our objective is to be in that value chain. We have to develop products, develop suppliers, develop efficient and flexible factories in a safe and balanced setting. And we must create interconnections that begin with client orientation and are transferred to all our stakeholders, where people are part of this great ecosystem and can feel fulfilled. #proudtobeacoldroller
