When he joined Gerdau SA in May, 2008, Peter Campo was looking for a challenge.
In hindsight, he got just that and a whole lot more. In less than a decade, the 54-year-old steel executive has risen to the top of Gerdaus North American business.
In April, 2014, Campo was named president of Gerdau Long Steel NA and took the reins and responsibility for overseeing the companys U.S. and Canadian operations. Just over a year later in July 2015 to be exact a restructuring jettisoned him onto a larger stage, where as executive vice president for Gerdaus entire North American segment, he assumed responsibility for operations in Mexico, Guatemala and the Dominican Republic.
As part of that restructuring, Campo was also named to Porto Alegre, Brazil-based Gerdau SAs powerful, seven-man executive committee, which oversees global strategy for the the worlds 17th largest steelmaker. Campo holds distinction of being the sole U.S. executive on the committee, other members of which include Gerdau SAs chief executive officer and three members of the Gerdau Johannpeter family, which holds a major stake in the company.
Campo didnt begin his career at Gerdau with a roadmap tracing the quickest route to a C-suite office, he told AMM in a recent executive interview. Its not that Im not ambitious, or dont want to build on career success, he said. But I never had a specific roadmap delineating position A to position B or C.
Im gratified by the trust that the company has put in me, he added. I hope I can live up to their expectations . . . Theres a lot of hard work still to do, and Im eager to get at it.
Having joined Gerdau on the eve of the deepest economic downturn since the Great Depression, Campo got a taste of the U.S. steel industrys high-speed rollercoaster hey-day, as well as the sobering years that followed.
Euphoric may be too strong a word, Campo paused, searching for the right word to capture the heady period from 2006 to 2008 when rebar prices hit $1,056 per ton, as domestic mills couldnt pour steel fast enough.
The business was expanding. We were consolidating acquisitions, we were hiring people. We were, frankly, making a lot of money, and so was everyone else in the industry, Campo recalled. It all came to a screeching halt at the end of the third quarter.
In 2002, Gerdau counted some 6-million tonnes of North American steelmaking capacity. By 2010 and through a flurry of mergers and acquisitions, capacity had more than doubled, jumping to 12.6-million tonnes, according to a 2014 Gerdau presentation.
Today, Gerdau, like steelmakers the world over, has started to review and prune assets, seeking the best returns on capital. Major new acquisitions are no longer the theme of the day although they havent been ruled out, either. Gerdau executives announced a strategic portfolio review in August 2015, and raised $420 million in asset sales in 2016 alone.
Gerdaus more disciplined approach to capital allocation marks a major shift in the steelmakers global governance, Campo noted, sharing a perspective gained through his work on the executive committee, the mission and focus of which spans continents.
Gerdau spent much of the 2000s building an impressive global footprint, but market conditions have clearly changed since then, he elaborated. Still, Gerdau continues to make sensible targeted investments, such as in its flat-rolled steel business in Brazil or successful new structural mill in Mexico.
Changes in the market and Gerdaus corporate strategy and objectives have meant a change in focus for Campo, who is now tasked with figuring out how to add value, expand profits, and cut costs. Its rewarding in a different way, he allowed, noting that the emphasis on strategy is different and distinct from the first, more operational" jobs he held with Gerdau.
Sometimes I have to wear two hats, Campo said. One: . . . Whats the right strategy to deliver good results in North America? The other: What are the needs of the business on a global basis?
In 2015, North America accounted for the largest single slice of Gerdau SAs net sales, underscoring the pivotal role Campo and the position he holds play in the organization. As a member of the executive committee, he must navigate and pay close attention to all of Gerdaus moving parts, and how they interact. Simultaneously, he has full responsibility for bottom-line and topline results in North America. The assignment is broad-based and involves global travel, among other activities.
Wherever you set up shop, competitive pressures in steel mean that cost structures tolerate nothing less than excellence in execution, Campo emphasized. In North America, theres no shortage of well-trained rivals, he pointed out.
Its a very tough business. If you dont have good execution, youre not going to make money in this industry, Campo cautioned. The best operators enjoy a good living, and poor operators probably suffer. . . . The bar is set very high.
The steel industry is certainly a stern teacher, Campo said, speaking via telephone. He expressed the same sentiment three years ago, in his first executive interview with AMM, and that aspect of the industry hasnt changed one bit, he said.
Trump, NAFTA, and the U.S. economy
Perhaps surprisingly given the geography of Gerdaus North American holdings, Campo doesnt lose much sleep over the fate of the North American Free Trade Agreement (NAFTA).
The company melts steel in the U.S., Canada and Mexico. Besides overseeing those operations, he manages dozens of downstream and scrap operations across the three countries.
Even so, Campo is reasonably confident of a positive outcome, a denouement where NAFTA essentially stays intact. Talk of an explosive breakup of NAFTA is perhaps an instance where rhetoric runs hotter than reality, he suggested to AMM.
Real challenges in U.S.-Mexico relations like immigration or problems within Mexicolike corruption or crimearent relevant to the efficient and functioning NAFTA steel industry, he said. In the final analysis, people should recognize that these social issues are separate and shouldnt be stirred in with the real economic benefits of NAFTA, he argued. Such benefits flow to U.S. steel companies and North American steel consumers, among others.
The U.S. steel industry is a net steel exporter to Mexico, Campo noted, referring indirectly to the 2.9-million tonnes of steel the U.S. shipped into Mexico in 2016.
I actually think its in our (U.S.) interest, as partners, to help them, Campo said, outlining the benefits of positive relations with Mexico. Its in our interest as the U.S. to see economic growth in Mexico, because they are a (steel) customer. . . . The economic interests here are a much more positive story, than some of the social issues.
Even if the 23-year-old agreement could benefit from relatively minor improvements, thats a far cry from scrapping or overhauling the trade zone entirely, Campo reasoned. Calmer U.S.-Canada negotiations is one hopeful indicator pointing to an intact NAFTA, he added.
For pure economic and data-based reasons, I think NAFTA will survive, Campo said, speaking in March. The idea that NAFTA in its current form is going to be massively changed is not very likely. So I dont worry too much about it.
Although Gerdau doesnt perceive or posture itself as the voice of the domestic steel lobby, Campo is no novice in the political arena. The company doesnt field massive public affairs teams, or spend millions in lobbying dollars, and only founded its U.S. political action committee (PAC) in August, 2014, coming relatively late to the game.
Still, Campo, an executive with a careful and well-respected voice, is a regular presence at Steel Manufacturers Association(SMA) meetings, The D.C.-based SMA convenes mini-mill executives, to formulate collective political strategy and advance steelmaking interests in Washington.
It should come as no surprise then that Campo has some well-chosen and thoughtful words for and about President Donald Trump. Given its major policy promises, the Trump administration, could well be a game-changer for the U.S. steel industry, Campo said. But it isnt yet, he cautioned.
Its an interesting administration. They talk a lot about a lot of things, Campo said in a typical understatement. But with such broad priorities, this government, will be limited in what it can implement.
They should be careful and choose wisely, he advised. In the long term, what they actually do, will be more important than the rhetoric.
The challenge: delivering on even some of those plentiful promises. That will define the legacy of the Trump administration, as well as the economic environment over the next five years, Campo summarized.
Still, Trump has already shown incredibly important support for U.S. industry and American manufacturing. The rhetoric so far is nice, as Campo said, or, put another way, constructive and positive.
Trumps challenge to entrenched thinking on U.S. trade is worth real intellectual consideration, Campo suggested. To some extent, North America had seen itself as the leader on free trade, as a philosophy, Campo told AMM. Cynics might term that unilateral disarmament, or the pre-emptive lowering of trade barriers, in the mere hope that trading partners will do the same.
Trump points out that, in some cases, weve been taken advantage of, with that strategy, Campo pushes the argument a step further. There can be very real distortions and exploitative behavior, by certain trading partners, thats not necessarily good, or should be tolerated.
Although many people, including Campo, recognize the true economic benefits of trade, even forums such as the World Trade Organization (WTO) could benefit from some healthy self-examination, he suggested. Thats a 30-year-old agreement, he said, sharing his thoughts on the WTO. Should there be some tweaking? That might be a very healthy discussion.
On infrastructure spending, as with much else in politics, it pays to be bold, Campo insists, in words intended for the ears of public officials. Lawmakers and policymakers must combat the misguided notion that public construction dollars are wasteful spending because dollars spent now improve the national economic system for decades to come, he argued.
Look back at the interstate highway system, and the value relative to its cost, said Campo, who has championed public project spending in the past on projects such as Californias high-speed rail system.
People made some bold decisions, 50 years ago, to build that highway system. And its been transformational for the U.S. economy, he noted.
Smart investments on that scale and yielding that sort of return must be considered, Campo argued. Any progress there, especially with raising the requisite funds, is a major positive change, he said.
At the same time, infrastructure remains somewhat of a a political curiosity to Campo even though his leadership roles send him to D.C. more frequently these days, both on an opportunity and an obligation basis. There, he both pow-wows with and educates officials, lately empowered with sizeable sway over the fate of manufacturers.
Everybody supports infrastructure...Its just: nobody wants to pay for it. Campo echoes a familiar refrain:
The long game
While he makes sure to keep abreast of the legislative twists and turns playing out in Washington, Campo is tightly focused on the long-term future of both Gerdau and the American steel industry.
Over the next decade and absent some major unexpected opportunityCampo sees few immediate signs that Gerdau will radically change its product portfolio, or diversify into other steel product lines. Still, its difficult, to say the least, to anticipate what may transpire in ten years, which is no small stretch of time, Campo noted wryly. I think the last ten years has taught me that ten years is a long time, he quipped.
Looking ahead, he expects long steel demand to experience gradual growth as the U.S. is a long way from a cyclical peak in construction or industrial production. It could easily be five or six years before we reach the peaks of 2007 or 2008, Campo allowed. It is my expectation we will go back to those levels.
When the next peak does arrive, Campo expects it to be greeted by a much more efficient steel industry, one characterized by higher capacity utilization rates and healthier returns. Campo deems this the most likely scenario for the U.S. steel longs marketplace in coming years.
For Gerdau, a company that has produced steel for decades, the long term translates into horizons of fifty years or more. After all, iron, with all its wonderful properties, has been acclaimed for thousands of years and rebar wont be replaced overnight, Campo insists.
Campo is confident that fifty years into the future, people will still buy and make steel in North America, just as they do today. Thats the long-term vision and take he discusses and shares with those attending Gerdau employee meetings.
People will still produce and buy steel in the Americas, even then. And Im confident . . .at least a small number of people will make money, selling steel in those geographies, he said. But Im not sure there will be more than a small number of people (making money).
And that, in a nutshell, is the challenge: trimming costs and beefing up returns to ensure the future. Thats really our aspiration: to be the top-performing, long steel player in the Americas, Campo said. Were not there yet. Weve got work to do. But our team is really energized.
Although the day-in, day-out optimization and fine-tuning of steel operations in a highly competitive environment, isnt always as much fun or as exciting or showy as big acquisitions or capital deployments, its just as important, Campo emphasized.
Given where we are in the cycle now, I think its a very prudent posture to have, Campo said. Others have different strategies. It will be interesting to see how those play out.