Metallurgy and scrap metal recycling, the sectors with problems in Iasi

The financial crisis makes businessmen reconsider their calculations

Revised sales in fall, reduced orders, dismissal of personnel, these are only a few of the effects which the crisis has in Iasi. More and more companies from Iasi say that they follow to reorganize their activity, as a result of worsening the economic conditions. The first signal was drawn by the metallurgy and scrap metal recycling industry.  The owner of the companies Remat and Pieta was among the first ones that have operated reorganizations within the group of companies which he controls, after the iron’s price has suddenly fallen.  The auto dealers appreciate that the sales recorded a drop, while Antibiotice has revised in negative sense the sales. The metallurgy segment, metallurgic junks and also the pharmaceutical one, all are affected by the current world crisis. While the Government has confronted with the problem of rise in salary in the public sector, the private companies are trying hard to resist on the market in the current economic conditions.

Outputs are halving

The first signal of the crisis was drawn by one of the companies that operates in the metallurgy area, namely Arcelor Mittal Tubular Products (AMTP) Iasi, which announced that will reduce its activity till half due to the lack of orders. Still from last month, half of those 650 people are send home by turns. Each employee stays at home 10 days and cashes 75% of the wage plus service increments. The integrated iron and steel work has already started to work at reduced capacity. Of those three sections of the unit from Iasi, only one operates at full capacity, and other partially, according to Constantin Rotaru, the trade union leader. Moreover, one of the sections is closed for maintenance and repair services. On these terms, the monthly production has reduced from 9.000 -- 10.000 tons welded or laminated pipes, to about 4.500 tons, due to the lack of orders.

Recycling, in free fall

The collapse of the price for scrap iron has also determined the companies of scrap metal recycling to restructure their activity. “We have noticed the first signals in August. On terms in which the price for iron decreased almost three times, we had to reduce the expenditures by closing some working units.  That’s how any company operates in time of crisis, restructuring the activities that aren’t profitable and developing the profitable ones.  We continue on buying and selling scrap metals, but with another structure of staff. In October we’ve recorded the same results with 40% of the employees as with 75% the employees against the ones in September. I’m starting to believe that the dismissal of staff was quite necessary”, Constantin Comanescu, owner of the group of companies Pieta says. He sustains that the recycled paper market is also in collapse. “At the moment I don’t receive the paper not even for free, on terms in which at the beginning of the year I paid 1.200 lei/kg. The cost of working and sale process doesn’t cover anymore the recycling costs. I’ve kept only a few contracts with the large chains of stores, but the other scrap papers  we’ll find from now on in the garbage pit or on the street”, Comanescu says. However, the businessman says that he is in the situation in which with “an eye laughs and with another cries”. “On the construction segment, things go well, at least for the moment, because there are contracts signed for two more years. Many of the works are connected by projects with European funds and I hope that there won’t turn up syncope for setting up displeasures in this sector”, Constantin Comanescu, owner of the company Combeton states.

The businessman believes that the fall in price of the iron, even if it has discouraged the scrap metal recycling companies, it has been in the advantage of the constructors. “Here the prices have recorded a significant drop. The iron and steel works from Targoviste and Hunedoara have already announced us that they’ll stop their activity for a few days, during November and December”, Comanescu adds.He considers that the authorities should quickly adopt a set of measures to support the business environment, on terms in which “2009 could be even worse”. “Germany has already announced that it had elaborated a plan for supporting the productive area that will assure jobs and will guarantee redressing the economy after the  recession.  The main concern of the Government remained the public sector, the private one being neglected”, the owner of the Combeton Company said.

Revised sales at Antibiotice

The crisis didn’t avoid one of the most powerful companies in the market from Iasi. Recently, Antibiotice Iasi has announced that will revise in fall the estimations related to the sales for 2008. The check of the indexes related to the sales will support the company for diminishing the drug stocks and of increasing the cash-flow, by reducing the immobilizations. The situation was determined by the decrease of generic drug market with 3% in the first nine months, the international financial crisis being felt through the increase of costs with credits previous contracted and of the ones with raw material.  There have also turned up a set of novelties in what concerns the legislation related to prescribing of a drug brand and of the acquisitions in hospitals.

Car sales are dropping

Neither the auto segment is in a better situation. The last statistic data published by the Automotive Manufactures and Importers Association (APIA) indicated the fact that the auto market has dropped in October by 30% against the similar period of last year. “At Iasi, starting with October was noticed a small drop of the car sales but I can’t precise exactly a percentage. The major cause is limiting the access to financing, in terms in which the most part of the new cars are bought by contracting a credit or in leasing”, Bogdan Pitigoi, president of the  Group Tester Casa Auto Iasi stated. The businessman considers that it is a temporary situation. “Things can’t be on long term, especially in terms in which the motorization level in Romania is still reduced. Both the dealers and the importers have started to offer extraordinary promotions for keeping an increased interest of the buyers. I really consider that it is the perfect timing for purchasing a vehicle, taking into account that the prices are very attractive,” Bogdan Pitigoi stated. The representative of the auto company says that the market recorded a general decrease, not only on one segment. “It wasn’t affected only the segment of the luxury cars or family ones. All were usually purchased through diverse financings forms, that now are limited”, Pitigoi says.

The most vulnerable domains during the crisis

For the next year, the analysts consider that the much debated financial crisis will affect domains such as real estate, constructions, stock exchange, insurances and also the banking system. There won’t be avoided the areas that are already facing problems such as syderurgy, auto industry, textiles or transportation.  The agriculture and also the tourism will face a more difficult period, the experts in domain appreciate. All the domains that are financing through banking credits will also confront with difficult moments.