An unprecedented CHALLENGE in the sector
The 2016 financial year evolved in an extremely unfavorable market environment for TUBACEX. In the last two years, the Oil & Gas sector has faced an unprecedented crisis.
For the first time in history sustained very low Brent prices have forced the Oil & Gas sector to face major investment cuts in Upstream for two years in a row; with a reduction over 58% between 2014 and 2016, dragging results in all the sector companies and including TUBACEX.
Several voices on the market have sounded the alarm regarding the medium-term damage caused by this investment reduction. The International Energy Agency (IEA) and petrol companies have started to warn about the potential dramatic rise in oil prices in 2020, given the lack of investments and growing demand. The IEA estimates an investment of $600 trillion is required to offset the decline rate and meet growing demand; however, investment in 2016 only amounted to $380 trillion and is expected to be $450 trillion in 2017. As a result, the most logical scenario would be a gradual recovery of investments in forthcoming years.
In addition to the current Oil & Gas situation, a general drop in the price of raw materials used
In addition to the current Oil & Gas situation, a general drop in the price of raw materials used by TUBACEX in our production process, such as Nickel, Chrome, Molybdenum and scrap, has caused a widespread demand weakness, as well as a price impact typical of a very weakened market in a clear down trend in the prices of lower added-value products due to the arrival of new players to the market. This pressure has been reduced in higher added-value products due to their high level of requirement and in 2016 represented 70% of TUBACEX sales.
Thanks to this firm commitment to Premium products, Innovation and geographical diversification, with commercial reinforcement in key regions; and business, towards new sectors with higher growth potential such as power generation, where turnover has doubled in relation to the previous year's already high levels, TUBACEX was able to maintain good results without reducing key strategic investments. These investments will have a high impact on the profit and loss account in a more recovered market environment.