TMK-Artrom is a world-renowned industrial pipe producer located in the southern Romanian town of Slatina. The company is an autonomously public listed company, related with the larger TMK Group, a leading global manufacturer of steel pipes and which has a presence that stretches across Russian Federation, Europe and the United States. TMK-Artrom has a long history in Romania, and has grown into one of Europe’s top producers of industrial seamless pipes, with sales offices in Germany, Italy and United States, as well as in Romania. Here, the company’s president and CEO, Adrian Popescu, talks about how the company has developed into a global powerhouse, its strong relationship with Germany, and what trends have been shaping the industry.
As someone who has been with the company since 1985 and its president and CEO since 1992, what would you say have been some of the most crucial business decisions that you’ve made to bring the company to the point it is at today?
I’ll start by giving you some historical context of the company. TMK-Artrom was born in the period of 1982-1989 as a general pipes producer. However, at that time the company didn’t have a clear policy or strategy about our specialization. At the beginning, the company thought pipes would be related to oil and gas, but that’s not the case today. We came to understand that in the oil and gas sector, we were a small boat in a little ocean that already had giant vessels who would have crushed us. We had to find another way while still doing something with high added value. We had been working in Germany and were lucky to have professionalized customers who taught us a lot. Even when we were basically unknown, they saw our potential and taught us to produce things for the automotive industry, which was like science-fiction for us. So after gaining that experience, we found our specialization in mechanical pipes, which had nothing to do with oil and gas, but were mostly used for the automotive and machinery sectors. So after 2001, when the company became private, the management team really started developing this specialization while also differentiating ourselves to be flexible and able to deliver tailor-made products. Still, that was really a dream until the company joined the TMK Group in 2002, which is one of the largest pipe producers worldwide and a major player in oil and gas pipes. With TMK’s support, we developed an ambitious investment program of about €175 million for modernization. It enhanced our efficiency, enabled the delivery of high quality, high precision and premium products, and we are now able to deliver a custom order with just a two-week turnaround. There are only a few companies in the world that can do what we do.
Another key to the company’s transformation was vertical integration. In 2004, after many discussions, the group bought a steel manufacturer, which allowed us to “cook the soup” ourselves and become more flexible. Now, we have also diversified our client base. Today, we serve almost 400 active customers, and our top 10 clients do not make up more than 25% of sales. We don’t stay in three or four niches because it’s dangerous. In industrial pipes there are hundreds of applications, so each year we enter new niches and develop new products.
As the head of the TMK-European Division for the TMK Group, expand a little on the importance of TMK-Artrom within the group structure.
TMK is the biggest steel pipe producer worldwide in terms of capacities. The group is mostly orientated to oil and gas pipes, but after the acquisition of Artrom and since developing its strategy as an industrial pipes producer oriented to customization, flexibility and premium products, TMK-Artrom became the industrial pipe hub for the group. The TMK-European Division was created initially to manage and develop TMK’s European business and was structured on Artrom’s body and activity. Later, when TMK-Artrom became highly specialized in industrial pipes, the TMK-European Division extended its activity in the Americas. So, in 2016, TMK-Artrom created its 100%-owned subsidiary in Houston, Texas named TMK-Industrial Solutions as a distribution channel for its productions, and to be the exclusive sales channel in the Americas for the industrial pipes produced by the TMK Group. From that moment, with four commercial entities, the TMK-European Division led by TMK-Artrom, became the main sales channel in Europe and the Americas for TMK’s industrial pipes.
TMK-Artrom purchased the steel producer TMK-Resita from its parent company TMK Europe GmbH and did the same for TMK Italia in February. How do these strategic moves enhance the competitiveness of the company?
TMK-Artrom was the first publicly traded company to be listed on the Bucharest Stock Exchange when it opened in 1991. Therefore, TMK-Artrom, even though part of the TMK-Group, is conducting its business autonomously. While TMK-Artrom became the most specialized company in the TMK-Group for industrial pipes, it was the shareholders’ GSM decision to let the company integrate itself and directly own and control the entire production and distribution chain – from steel production to marketing and sales. By acquiring the high-quality steel billets producer TMK Resita and TMK-Italia – a very specialized sales company in industrial pipes – TMK-Artrom became fully integrated. The end-users of our pipes are mostly manufacturers with multiple non-standard technical conditions, requests and needs when they order mechanical pipes. So, by controlling the steel production for its billets directly, TMK-Artrom can respond very quickly to any customized demand with a very high level of flexibility in production and delivery terms. We can melt and cast the steel we need to reach the mechanical properties requested by the manufacturers using our own steel billets, so we have a short delivery term (usually even inside the ordering month) with a high level of customization.
With the creation of a performed integrated management system between steel production, pipe rolling and sales, distribution and logistics, we can satisfy our customers’ needs very quickly and to high standards, as well as being able to offer pre- and post-sales services at a highly technical level.
What would you say are the competitive advantages of being situated within the EU?
The EU is the most important market globally for industrial pipes and one of the most dynamic. It is estimated that Europe represents half of the worldwide industrial pipe consumption. Being inside this market without customs restrictions or trade barriers gave us the possibility to develop long-term strategies largely dedicated to this market. Now, about 78% of our production is sold inside Europe, 21% to the Americas and 1% to other countries. We have three sales locations in Europe – in Dusseldorf, Germany; Lecco, Italy; and Slatina, Romania. This allows us to cover the European territory and North Africa entirely, as our sales staff are located very close to customers and can visit them quickly after their first call. Since our trading and distribution companies are located in the core European markets, we can deliver custom orders to Europe in under two weeks. Though we are well positioned to serve clients worldwide, a custom order in the Americas takes a maximum of two months.
What are the trends and demands you are seeing coming from clients?
European and North American markets are clearly the most important markets for our products. Usually, they have a similar evolution and cycles. Yet, industrial pipe markets have a very large number of niches, and we’ve made sure that we diversify so the waves of this market are not so big or violent. Until 2017, the communication between these markets was very open and clear. But after the US applied import custom taxes – the famous section 232 – on all steel imports, the needs of the markets began to differentiate. However, after three good years, actually both markets in Europe and the US have difficulties and some niches have suffered, such as automotive and mechanical application, while other niches have remained relatively stable. We believe that in the fourth quarter of the year, both markets should start to grow.
As you are also the chairman of the board of TMK Europe GmbH in Dusseldorf, what is the extent of the company’s connections with Germany?
We always say that in Germany, we feel like we’re at home. We started selling there in 1995 when we were a completely unknown company, and, step by step, we’ve learned how to adapt ourselves to this rigorous market. I can say that the German market taught us to become a sophisticated industrial pipes producer, and gave us the most important hints in terms of our strategical decisions. Today Germany, alongside Italy and Romania, are our home markets and where we have the most developed projects with customers and the biggest volume of business. In Germany, we have very long partnerships and a very stable customer portfolio, the majority of whom have become not only customers, but our partners, teachers and friends. Additionally, in TMK Europe, we developed another business that trades industrial equipment for metallurgical processes. Mostly, we buy and export various types of equipment, spare parts and consumables from Germany for TMK’s metallurgical plants and not only.
What do you consider as areas for improvement when it comes to Romania’s image abroad and attracting more investors to the country?
Well, in recent years Romania has been subject to some controversial headlines – some true, some not true – but which have all affected the country’s image. Behind these headlines, however, Romania is a spectacular country with high economic growth, dynamic industry and very friendly people. However, our country needs to significantly improve its infrastructure. Companies look at many aspects when deciding where to invest. Romania offers strong local industry, access to the Black Sea, easy access to important resources and raw materials, local industrial demand, highly skilled staff and managers. Still, even with all that, companies often say the infrastructure is a bottleneck.
What would you say is the secret to TMK-Artrom’s successful evolution?
Many times in my life, I’ve been asked about this. Each time, I saw people looking for a sophisticated answer with numbers and analysis. But each time my answer was this: the management team. We have created a very professional and stable management team, and the senior core has been with me, unchanged, from 1992. That says a lot. Around 10-15 years ago, we did add a few experienced managers in our companies, as well as younger management, to secure the future success of the company. Our team is stable and works together in the same direction, like a real family. That’s why we often say around here that Artrom is not our job; it’s our home. I always say that a stable management team can make or break the company. And I believe more stability creates more devoted workers.