January 26, 2010 Steel Advantage

Volume 13 | Issue 1

Faced with challenges caused by the global crisis and rising real, after years of global expansion Fundição Moreno has changed tactics. As M

After close to 50 years in operation, it seems as if Fundição Moreno is coming full circle. Founded by Gentil Moreno in 1962, in the town of Sertãozinho, São Paulo, the small foundry whose original name was Fundição São Jorge, started out manufacturing forged iron and bronze castings for Brazil’s traditional sugar and alcohol industry. Over the next two decades, the company steadily expanded, investing in technology, infrastructure and labor that enabled it to create more complex heavy (pesado) parts and justified its change of name to Moreno Equipamentos Pesados.

It was in the late 1980s, however, that the company’s fortunes really took off as a result of the acquisition of two state-of-the-art induction and heat treatment furnaces. João Marcos, the company’s general director recalls the impact that the purchase had on the company’s operations. “Suddenly, we had this production capacity that was so great that there was no way that the sugar/alcohol industry could absorb it all,” he explains. “We decided that we had no choice but to branch out into other market segments that we had never before tapped.”

COURTING NEW MARKETS
The timing for this diversification strategy was perfect. At around the same moment, a providential event occurred: Zanini, a large steel foundry located right next to Moreno, closed down as the result of a fusion, leaving Moreno as the only player in the region and releasing a considerable number of well-trained and highly qualified professionals loose on the market. “I was one of them,” confesses Marcos whom, along with many other suddenly available commercial and technical experts, was snatched up by Moreno in the belief that this experienced crew was essential for its courtship of new markets.

“In the beginning, it was difficult,” concedes Marcos. “Moreno was completely unknown in other markets, and we had to conquer both credibility and confidence of our clients. We started off selling parts on an individual order basis. Growth was initially slow, but by the mid ‘90s we were already achieving good results.”

REFOCUSING ON THE HOME FRONT
As a result of these obstacles, Moreno has shifted its priorities and is now focusing increasingly on the domestic market. And since the local market wasn’t large enough to absorb the foundry’s output (20,000 tons of product a year, with parts that range in weight from 100 to 20,000 kg), Moreno decided to create the means to go after an entirely new and very lucrative market that, ironically, was the very first segment that it started off supplying to: sugar and alcohol.

“Of course, we never stopped making small parts for the sugar/alcohol industry,” says Marcos. “But a sugar mill is comprised of many separate parts. And originally, we only made a few of them because we didn’t have the conditions to make heavy pieces, which only two other manufacturers in Brazil possess.” Although over the years, little by little, the company had been investing in technology and equipment, a major milestone occurred in 2006 when Moreno entered a strategic technical and operational partnership with the Brazilian company Moex to manufacture the entire range of high tech parts necessary for sugar mills.

The timing was perfect since the market for sugar-cane based ethanol was growing enormously. “Due to rising environmental concerns coupled with increasing oil prices, there were so many new groups and investors with big projects entering the ethanol sector and so we made lots of sales. Due to the high volumes involved, along with the very high added value of the products, this became very lucrative for us,” notes Marcos. “In fact, over the last three years, it’s been by far our most important project. Even in spite of the current financial crisis, which has seen sales drop, it’s still a very interesting activity because it occupies all the disposable equipment at both of our plants (aside from the foundry, Moreno has a 23,000-square-foot machining shop). Because of the parts’ complexity and the many steps involved, we end up using all of our production capacity as opposed to when we just produce spare parts.”

Although its renewed focus on the sugar/alcohol industry has definitely given Moreno an important boost, if the company has learned anything in the last few years, it has been about the importance of diversification. As such, as it refocuses its attentions on the domestic marketplace, the company is also aggressively seeking out new markets for its forged parts – which continue to represent the bulk of its business – extending beyond its traditional clients in the mining, steel, hydro-electric (turbines) and mechanical equipment (presses) segments. Despite the financial crisis, Marcos is optimisitic about the future, pointing to the fact that the Brazilian economy is already recuperating more quickly than many others.

“When it comes to forged components, you aren’t dealing with units manufactured in series, but specific orders for individual parts. So ultimately, these are products that entail an artisanal process. Well, when you get into such a process, you’re susceptible to variations in quality. Defects can occur, which is a normal characterisic in the forging process. As such, quality is paramount. Our clients know that our products are among the best on the market – not because we can make one piece that is really good, but because we have a level of quality that is renowned throughout the industry. In the end, the best thing we can be is consistent, and this is our biggest challenge: to make good pieces not just every day, but day after day after day.”

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