Zsuzsanna Ortutay: Declining but not disappearing supply chain disruptions will slow economic recovery in 2024.

Although it may seem that the global economic situation is stabilizing, that inflation is easing, the business world still feels the ‘tails’ of the recent peak of the crisis in its operations, and the war in Ukraine continues. Unfortunately, we do not know when it will end, so besides human casualties, it still creates uncertainty in the global market.

In such an environment, we are in full swing preparing for the largest Lider conference, the Day of Big Plans, which is being held for the 15th consecutive year, and this year it will take place on September 27 at the Westin hotel in Zagreb.

This year, we expect leaders from various industries in Croatia, representatives of the public sector and state institutions on stage, from whom we will learn firsthand what awaits the entrepreneurial scene and the Croatian economy as a whole in 2024, how all economic stakeholders are facing existing challenges and preparing for upcoming ones, and what their forecasts and predictions for the next year are.

One of them is the CEO of INA, Zsuzsanna Ortutay, who took the helm of the company on July 1 of this year, and it is worth emphasizing that she is the first woman to take on this always challenging position. In addition to oil price movements, which interest not only entrepreneurs but also all those who have their metal pets, Ortutay will speak at the Lider conference about the plans and challenges facing the oil sector.

What do you consider to be the key challenges for the oil sector in the upcoming period and how is INA preparing for them?

– The global oil market is largely determined by demand. Specifically, the deterioration of economic prospects after the Covid-19 pandemic, the reopening of China, and the energy crisis that has hit the EU have kept prices surprisingly moderate, despite unprecedented cuts in production and exports from oil-exporting countries and allies (OPEC+). In such an environment, the current balance of supply and demand remains very fragile. Nevertheless, Brent prices have fluctuated in a narrow range of $80 to $90 per barrel, which is within the five-year price range, although very close to previous seasonal records. When it comes to prices, we currently see a greater risk of their increase than decrease. Also, even with slightly higher economic activity than expected, the oil market in Europe could easily become undersupplied in the short term.

Unlike European refineries without access to the sea, which have found themselves in a very difficult position due to diversification from Russian supply, INA’s access to oil from the sea significantly reduces its vulnerability. Regarding domestic supply, it is important to know that Croatian fuel demand is extremely seasonal due to the strong tourist season, but the demand itself is otherwise subdued. Despite the decline in real incomes due to high inflation, the desire to travel after the pandemic, state price regulation, and the recovery of air traffic have kept fuel demand in transportation at a record high level, but with an uncertain outlook.

INA as a company must readily accept prices in the global oil market and cannot influence them, therefore maximizing domestic production, ensuring uninterrupted supply, and hedging market positions are the pillars of our market strategy.

Do you expect stabilization of procurement prices and supply chains and the impact of falling inflation rates on your business in the next year?

– In the future, we expect a continuous normalization of price growth along with other eurozone countries. Thanks to the introduction of the euro and disciplined fiscal spending in 2022, Croatia’s inflation rate has so far outpaced that of the Southeast European region, despite a strong tourist season that has fueled inflation in domestic services.

The predictability of supply security will not return soon, but what can be seen in the market is that financial losses due to supply chain disruptions have already fallen, by more than 50 percent on average in 2022 compared to the previous year. Work and raw material restrictions, as well as unforeseen interruptions, remain obstacles to the supply chain. We expect a similar development in Croatia and the rest of Europe. Declining but not disappearing supply chain disruptions will slow economic recovery in 2024. Unfortunately, INA bears the consequences of these events; we are recording a significant increase in investment implementation costs, which is why we must be smart and reassess them before making business decisions.

Do you expect revenue growth this year and next, and what will it depend on the most?

– Although road fuels, especially diesel (and heating oil), are becoming increasingly limited in Europe, the refining margin cannot be fully realized due to state price regulation that burdens profitability. Production costs could remain high as energy costs, particularly natural gas and electricity prices, are still adjusting to the new market conditions of limited supply caused by the war conflict in Ukraine. Additionally, labor market restrictions are forcing employers to accept demands for real wages, creating pressure on costs. Therefore, the outlook for demand is much more favorable than in 2022, but the year itself will be far from exceptional when viewed in a historical context.

What are INA’s priorities and which projects will mark this and next year?

– Ensuring a secure supply for our key markets remains INA’s main priority. The realization of our large investment cycle that will ensure a sustainable future for INA’s business – such as the Rijeka Refinery Upgrade Project, wisely selected investments in oil and gas exploration and production, further development of our retail network, and ‘green’ transformational projects, are among our main business goals.

As we can see, a challenging period lies ahead despite the apparent calm. Therefore, it will be interesting to hear what the new CEO of INA, Ortutay, has to say about all this at the 15th Day of Big Plans, which will be held on September 27 in the crystal hall of the Westin Zagreb hotel. Don’t miss the opportunity to network with the most successful entrepreneurs, register in time to participate. More information can be found at the link.