During the last Quarters there has been a definite change in the market place. In the latter part of 2008 until mid 2009, the overall Industrial market worldwide experienced a dramatic fall and as a result Eldon suffered a substantial sales reduction. This trend stabilized during the latter part of 2009 and now, in 2010, we are starting to feel that the winds have changed as sales are growing day by day. During the downturn in the market place many companies have struggled, some have disappeared and others have gone through substantial restructuring in order to adapt to the new environment. I am proud to say that Eldon belongs to the latter part of companies.
At Eldon we have during the last 2 years worked very hard with our overall cost structure and we are now at the right level. As a matter of fact I do not think that any other company in our sector have done their homework as well as we have during this period and going forward we are now very well prepared to face the competitive landscape.
During the last 20 years the Steel market has undergone some substantial changes, on one hand side the consolidation of suppliers, both in the mining sector and in the steel mill sector, have been very strong, leading to fewer and larger players. On the other hand side, the raise in the tremendous weight of Chinese steel consumption has lead to the fact that most of the Sea-born iron ore, the part of iron ore shipped from one country to another, is now going to China, approx. 500 million tons of the total of approx 800 million tons of iron ore shipped per year, now goes to China (more than 60% of total). This can be compared to a level of less than 20%, 15 years ago.
While most of the developed world have experienced recession during 2009, China has continued to grow with healthy numbers. In 2010 most economies in the developed world have started to perform better and the combined growth of Industrial Production in both US and Europe is in the range of 4% (The Economist, Q1 2010 data) and China has increased the Industrial Production with a starkling number of 18 %. The price levels of steel, the main raw material in our products, have therefore experienced a dramatic price increase. Currently the steel price levels have increased with some 33% compared to the beginning of 2010 and the indications from the market is that this will continue during the coming months (up to 50% more than beginning 2010), source MEPS April 2010.
Due to increased efficiencies, at Eldon, we will be able to absorb most of these cost increases but as announced some price increases will unfortunately also have to happen.
Yours sincerely,
Fredrik Wikstrom
CEO
Eldon Group